Congress steps up eRate probe

United States Rep. Billy Tauzin, R-La., has stepped up a congressional probe of contracts obtained by SBC Communications Inc., IBM Corp., and others to wire the nation’s schools for the internet.

Tauzin and Rep. James Greenwood, R-Pa., sent letters to 15 companies asking, among other things, whether they had essentially helped schools rig the system so they could wring more benefits from the f advertisement ederal eRate program.

Tauzin’s letter doesn’t directly allege any wrongdoing by the companies. But it asks for more information from companies “having significant involvement in the eRate program” to assist the review being conducted by Greenwood’s Oversight and Investigation subcommittee of the House Commerce Committee.

Established by Congress in 1996, the eRate provides up to $2.25 billion in annual discounts to schools and libraries installing telecommunications equipment. Administered by the private Universal Service Administrative Co. (USAC), the program has been both praised for bringing schools into the digital age and panned for its allegedly lax oversight.

According to sources familiar with the investigation, IBM and a second company, Alpha Telecommunications Inc., received letters that were different from the others. The letters to IBM and Alpha asked the companies for information about their relationship, including “all records of communications between or among IBM, Alpha, and IBM eRate clients or potential clients … [and] all contracts or statements of work agreed to between IBM and Alpha.”

A source who wished to remain anonymous told eSchool News the committee is looking into whether Alpha steered its school and library customers to IBM for other eRate solutions. Such an arrangement might violate the principle of competitive bidding that underlies the program, committee members reportedly believe.

Neither company was available for comment before press time.

The other 13 companies receiving letters were: Avnet Inc. of Tempe, Ariz.; Checkpoint Communications of Costa Mesa, Calif.; Computer Assets Inc. of Espanola, N.M.; Ed-Tec Inc. of Lakewood, N.J.; Expanets of North America of Englewood, Colo.; Micro Systems Enterprises of Houston; NEC Business Network Solutions Inc. of Irving, Texas; Network Konnection Inc. of Rockville, Md.; SBC Datacom of Richardson, Texas; SBC Global Services Inc. of San Antonio; Siemens Enterprise Networks of New York; Southern New England Telephone of Dallas; and Spectrum Communications Cabling Services Inc. of Corona, Calif.

Tauzin and Greenwood launched their probe in March, two months after a report from the Center for Public Integrity (CPI) called the eRate “honeycombed with fraud and financial shenanigans.”

The CPI’s conclusions were based on a September 2002 report from the Federal Communications Commission’s Office of Inspector General, which said there were at least 26 federal or state investigations in progress involving the questionable use of some $200 million in eRate funds. Because of a lack of funding to watch over the program, investigators said they were unable to give “any level of assurance that the program is protected from fraud, waste, and abuse.”

USAC’s Schools and Libraries Division has recently taken steps to tighten its review of eRate applications. The agency rejected more than $1 billion in 2002 requests from applicants suspected of violating the program’s rulesincluding more than $600 million in requests for IBM-related services aloneand established a task force to study ways to prevent future abuse.

“I think everyone hopes when Congress asks these kinds of questions it’s geared at trying to improve the program rather than tear it down,” said Sara Fitzgerald of eRate consulting firm Funds for Learning LLC, who also is a task force member. “The fact that a congressional committee is looking into this [issue] will underscore that the rules are to be taken seriously.”

The eRate enjoys a lot of support, Fitzgerald said, and its success is winning over many of the politicians who once opposed it. In fact, a group called the Education and Library Networks Coalition released a report on July 8, titled “eRate: A Vision of Opportunity and Innovation,” which highlights the program’s success in connecting schools and libraries to the internet and expanding the learning opportunities for students.


Text of letter to IBM Chief Executive Samuel Palmisano

Text of letter to Alpha Telecommunications President Paul Karas

Text of letter to 13 other companies

“eRate: A Vision of Opportunity and Innovation” (EdLiNC report)

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