Forum: Simplifying eRate rules will prevent abuse

Simplifying the rules and educating applicants will strengthen the $2.25 billion-a-year eRate program and help prevent waste, fraud, and abuse, the Federal Communications Commission (FCC) learned at a public forum held May 8 in Washington, D.C.

FCC Commissioner Kathleen Q. Abernathy organized the forum to hear concrete suggestions for reforming the eRate, which has provided 66 percent of U.S. public schools with discounts on their telecommunications services, internet access, and internal wiring since its 1998 inception.

“While the program has been successful, like all government programs it can be improved,” Abernathy said. “Today we have the opportunity to discuss some of the harder questions that have been raised.”

Owing to increased publicity over instances of eRate fraud and abuse, the FCC recently has stepped up its efforts to improve the program. At a hearing in late April, the FCC adopted new rules, clarified others, and issued a Further Notice of Proposed Rulemaking to invite public comment (see “FCC moves to ban eRate ‘bad actors,’ approves wireless,”

At the forum, participants representing schools, libraries, service providers, and consultants shared their ideas about how to streamline the program so it can succeed in the future. Representatives from the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC), which administers the eRate program, also attended.


“The program must be made more simple,” said Greg Weisiger, eRate contact for the Virginia Department of Education, who spoke on behalf of the Council of Chief State School Officers’ eRate Alliance. The 31 members of the alliance met for three days in Washington, D.C., to make recommendations for this forum.

Each year, approximately 20 percent of eRate applications are denied. Many of these denials are for procedural errors or confusion over eligible services—not waste, fraud, or abuse, Weisiger said.

“Whatever can be done to simplify and streamline the eligible services list, the application process, and the rules on the SLD web site will go a long way to improving applicant participation and reducing confusion,” he said. He also suggested that eliminating the Form 470, eliminating Block 3 from Form 471, and allowing Form 486 certification on the Form 471 for certain services would help.

Orin Heend, president of eRate consulting firm Funds for Learning LLC, agreed. “Simplify the rules, make them less ambiguous, and don’t change them in the middle of an application year,” he said.


Participants agreed that applicants’ knowledge of the program and its rules is essential to preventing abuse.

“A lack of education on the part of applicants invites wasteful practices, because vendors come in with eRate expertise saying, ‘We know all about the program, you don’t understand it, let us take care of the paper work and just sign the bottom line,'” Weisiger said.

Informed applicants are far less likely to hand over the responsibility to the service providers, he said.

George McDonald, vice president of USAC, said SLD’s education and outreach efforts to date have included its web site, eMail address, toll-free number, fax number, and annual train-the-trainer workshops. Although SLD no longer provides annual training, applicants can download a free video of the workshop from the SLD web site.

“Disappointingly, only 54 people have [downloaded] that training after three or four months of when it first became available,” McDonald said. “We have to find a way to really reach people.”

Heend, of Funds For Learning, suggested that the SLD could use distance learning tools to educate applicants.

“I’m hoping USAC will be able to allocate a significantly larger portion of its budget to training and education,” he said. Unused funds could help pay for USAC’s increased education efforts, he added.

“USAC has projected in the third quarter alone it will earn $4.8 million in interest on undisbursed funds from the school and libraries program. Certainly some small portion of that can be designated to educational and outreach activities,” he said.

Heend also suggested requiring applicants to undergo training, such as downloading the SLD’s web-based training video, as a prerequisite to being entitled to funding.

“Applicants need to wake up and realize that there’s no such thing as a free lunch. If they are going to receive the benefit of this wonderful program, they have certain obligations, too,” he said.


Publicizing instances where vendors, applicants, or consultants abuse the eRate program would deter others from doing the same, forum participants agreed.

“Applicants will be well served if they knew that failure to follow program rules leads to negative publicity,” Heend said.

Last December, when eRate service provider Connect2 Internet Networks of New York was criminally charged with fraud in connection with the eRate, neither the SLD nor the FCC issued a press release. “We believe SLD staff should have been proud to make that announcement,” Heend said.

(See “New eRate tool IDs questionable vendors,” news/ howStory.cfm?ArticleID=4072, and “Follow up: Connect2 executives charged with eRate fraud,”

Furthermore, when the SLD currently releases information about the eRate, the focus is on numbers—such as how many applications were processed and dollars committed—instead of explaining how the funds were used. This sets a precedent for schools and libraries to do the same.

“We’ve seen many applicants gauge their ‘success’ by the size of their funding commitment and not by how far their money went or where they even used it,” Heend said.

Recalculating the discount matrix

The FCC asked for feedback on whether to change the discount percentage applicants receive to ensure that schools and libraries purchase only what is necessary. Currently, a school at the 90-percent discount level must pay only 10 percent of the cost of approved services. Funds for Learning supported a change.

“We agree: By increasing applicants’ co-pay, those applicants could become more careful shoppers,” Heend said. “We think it’s appropriate to adjust the discount matrix.”

The eRate Alliance supports reducing the maximum discount for internal connections to 70 percent. “What [this] will do is reduce the temptation, if you will, to ask for those gold-plated services, [if] applicants have to chip in 30 percent,” Weisiger said.

Funding in alternate years

The FCC also sought comments on whether to limit an applicant’s eligibility for internal connections to every other year, to prevent the same select few schools and libraries from benefiting every year at the expense of other applicants.

“I think we all expected that once a school was wired, it would not return again for funding,” said Margaret Greene of BellSouth Corp. “But because there are no current rules addressing this, we think either a useful life approach or something like an every third year funding rule for internal connections would be appropriate.”

Geoff Craven, of Central Susquehanna Intermediate Unit 16, which represents a consortium of 40 schools in Pennsylvania, said, “We support funding internal connections for up to two years in a row and then requiring schools to wait an additional three years before reapplying.”

He explained, “Since the average lifespan of network equipment is at least three years, this will ensure more districts will have an opportunity to secure discounts on that equipment.”

In contrast, Funds for Learning does not support funding every other year. “If the commission believes the poorest applicants should only be entitled to funding for internal connections every other year, then it must believe such applicants are requesting more than they really need, and that, we suggest, is where the commission should direct its attention,” Heend said.


Replacing the temporary workers that currently review eRate applications with full-time employees who would become intimately knowledgeable about the program would reduce program abuse, some participants said.

“These employees could be used as part of an enforcement team, for an applicant help desk, or other duties,” Weisiger said. “More importantly, they will significantly streamline the review process in future years with invaluable institutional knowledge.”

Setting connectivity benchmarks

FCC commissioners asked whether it was feasible to set a minimum benchmark for connectivity. Participants agreed that setting a benchmark like this would be difficult to do.

“It is intriguing, and it deserves a closer look,” said Weisiger, explaining that some remote, rural, or poor schools have greater needs for high-cost connectivity to support distance learning, which might be their only means of providing high-quality education.

“Government will always be trying to keep up with the changed technology, and finding a definition that would suit all newcomers is a very problematic situation,” Greene said.

Craven added another reason setting a benchmark is a problem: The connectivity services available, such as DSL or cable, vary widely from community to community—and so do the costs.

See these related links:

Federal Communcation Commission

Schools and Libraries Division

eSchool News Staff

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