SLD: eRate demand drops $1 billion in 2003

Requests for 2003 eRate discounts will total about $1 billion less than last year, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. announced April 3. The group, which administers the program, attributes this decline to its increased vigilance and warnings concerning waste, fraud, and abuse. “Our enforcement actions are starting to pay off,” SLD spokesman Mel Blackwell said.

Throughout the filing window for 2003, SLD warned applicants to make sure they adhered to the program’s rules, because it had identified a pattern among 2002 applications that violated the eRate’s competitive-bidding requirements. Many of these 2002 applications came from small schools and districts requesting internal connections at the 90-percent discount level.

Perhaps not coincidentally, the largest drop in 2003 applications occurred in requests for internal connections at the 90-percent discount level. Requests for these Priority Two services declined by $500 million (19 percent) compared with last year’s requests. Demand for telecommunications services shrank by $100 million (7 percent). The rest of the decline—about $445 million—occurred in applications requesting internal connections at discount levels of 89 percent or below.

In contrast to the overall trend, demand for internet access increased by $27 million (6 percent).

“Maybe people are looking at what you can apply for and heeding some of our warnings,” Blackwell said.

He added, “This is going into our sixth year, so applicants are getting smarter. They know better what will and won’t get denied.”

In total, applicants requested an estimated $4.718 billion, down 18 percent from the $5.736 billion requested in 2002. This estimate is based on the dollars requested in the 41,146 applications received or postmarked by Feb. 6, 2003, the close of the Form 471 filing window.

Despite the billion-dollar decrease, demand for eRate discounts is still high. For the third year in a row, applicants have requested more than double the $2.25 billion available. “It’s still more than we have [to give],” Blackwell said.

Applicants requested an estimated $1.745 billion for telecommunications services and internet access. Demand for internal connections at the 90-percent level is an estimated $2.116 billion. The SLD expects these figures to decrease slightly once it has weeded out duplicate, incomplete, and ineligible applications.

Although the dollar amount requested for 2003 is less than last year, the SLD received 14 percent more applications. “There were more applications sent in than last year because we asked people to break up their applications,” Blackwell said.

The SLD asked applicants to submit their funding requests for internal connections (Priority Two services) and telecommunications services and internet access (Priority One services) separately. The agency has not yet calculated how many unique entities applied. The number of applicants who filed online rose slightly. For funding year 2003, 92.2 percent of applicants filed online, compared with 85.7 percent in 2002.

Budget deficits, in addition to the SLD’s attempts to “weed out the bad guys,” might have contributed to the decline in 2003 requests, according to Sara Fitzgerald, vice president of communications for the eRate consulting firm Funds for Learning LLC.

“I was not necessarily surprised that [eRate demand] had decreased for 2003,” Fitzgerald said. “To be able to use eRate discounts you have to use some of your own money, and it may reflect that schools’ budgets are pretty tight.”

Also, in working with applicants, Fitzgerald said, she often hears them say they are not poor enough to qualify—so why bother. “It seems people have sort of given up, given the way the program has gone in the last few years, [just assuming] that they won’t be funded,” she said.

But that attitude sometimes can be costly. With its most recent wave of funding commitments for the 2002 program year, issued March 31, the SLD began fulfilling requests for internal connections down to the 81-percent discount level.

“Now that they’ve taken it down to the 81-percent level, so many school [officials] are saying, ‘Oh my God, why didn’t I apply?'” said Gary Rawson, infrastructure planning and eRate coordinator for Mississippi’s Information Technology Services department. Rawson is also chairman of the State eRate Coordinator Group, which is sponsored by the Council of Chief State School Officers.

eRate Task Force

In other eRate news, the SLD announced that it has created an eRate Task Force to identify areas where improvements can be made to combat potential waste, fraud, and abuse by both service providers and applicants.

The task force is a response to renewed criticisms of the eRate in light of recent evidence that some applicants and service providers having been stretching the program’s rules (see “Lawmakers query FCC about ‘troubling’ eRate abuse,”

“The eRate Task Force is one of the highlights going forward,” Blackwell said. “It won’t have an impact on 2003 because we’ll be working through the summer, and then we’ll have to report to the [Federal Communications Commission, which oversees the eRate] before any policies can be made.”

The task force will consist of 14 members representing schools, libraries, and vendors. Members of the task force will meet to review every aspect of the eRate program where waste, fraud, and abuse can occur—including the application process, application review and funding commitment procedures, and invoicing. They also will review publicly available documents to determine what changes could be made to help prevent waste, fraud, and abuse.

The task force will produce a final report of its recommendations this summer.

“I think it’s a good, positive step,” Fitzgerald said. “Hopefully some good recommendations will come out of it.”

The SLD created a similar task force a few years ago to find ways to streamline the application process.

Besides starting a new task force, the SLD said it would continue educating applicants, issuing warnings, and streamlining the application process. “It’s always a goal that we [make the program] easier,” Blackwell said.


Schools and Libraries Division

Funds for Learning LLC

Council of Chief State School Officers

Federal Communications Commission

eSchool News Staff

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