The idea of putting a freeze on eRate funding got a chilly reception from witnesses representing the Federal Communications Commission (FCC) at a day-long congressional hearing chaired by Rep. Joe Barton, R-Texas, on Sept. 22.

Congress should not freeze $2.25 billion a year in eRate funding while lawmakers figure out how to simplify the program and make it harder to abuse, top eRate officials told a congressional panel.

As in previous hearings, Rep. Barton, chair of the House Committee on Energy and Commerce, argued that the eRate needs “wholesale restructuring.” Different this time: his pointed questions about whether to shut down eRate funding until the program gets an overhaul.

eSN Update:
Panel hears more alleged eRate abuses

In all, the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations questioned 16 witnesses in its third hearing to investigate problems of eRate waste, fraud, and abuse….

  • “Every hearing, it’s one horror story after another,” Barton said. “Is this a program that we should suspend funding for until we get it right?”

    That would be a “radical decision,” declared FCC Inspector General H. Walker Feaster III, noting how the nation’s poorest schools and libraries depend on eRate funding to pay for up to 90 percent of the cost of their internet and telephone service and wiring. Stricter eRate rules put in place the last two years should result in fewer cases of abuse, Feaster added, though he acknowledged these rule changes haven’t come soon enough.

    George McDonald, vice president of the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC), the agency that administers the eRate, said lawmakers must weigh suspension of the program against “the disruption this would cause schools and libraries across the country.” Besides catching program violations in its review process, the SLD is adding 1,000 site visits to the audits it currently performs, he told the panel.

    “I think the subcommittee staff has done a good job at focusing on the worst cases,” said McDonald, who then attempted to say more. “I don’t think the public should come away from these hearings thinking that what they are hearing in these hearings &” But McDonald never got to finish his caveat. Barton interrupted him and then switched the subject to the role self-certification plays in the program.

    “We’re basically on a honor system here,” said Barton. “We spent $8 billion, and there’s a real question about how much of that has been effectively utilized.”

    In his opening statement, Barton had said the “pace and scope” of the FCC’s reforms have been “too little, too late.” He added, “I have serious concerns about why the FCC set up the program like this in the first place.”

    In his testimony, Feaster cited weaknesses in the rules governing the competitive procurement process and an overreliance on self-certification as his two main concerns with how the eRate is designed.

    “It has been frustrating to me and my staff that these were concerns identified in 2002, and the [FCC] has yet to fully address these matters,” he said.

    Feaster said more resources–$10 million to hire 16 staff members to conduct 250 additional audits per year–would significantly increase his office’s ability to provide more oversight of the eRate.

    Jeffrey Carlisle, chief of the FCC’s Wireline Competition Bureau, testified that the FCC has adopted several new rules for recovering misused funds and has strengthened its eRate audit processes. Also, he said, the FCC is expected to rule soon on whether applicants should be required to pay for their own audits and whether the percentage they must pay themselves for internal wiring should be raised. The Wireline Bureau is currently reviewing comments received from the eRate community about these issues before making its recommendations to the FCC.

    Barton asked about changing the program to one where applicants pay the entire cost up front and then are reimbursed later. He also suggested that, in this case, perhaps Congress could devise a loan program for the poorest applicants.

    “I think that’s an excellent idea,” Feaster said, though he admitted he didn’t know what kind of burden this might place on the poorest schools and libraries.

    Carlisle said poorer schools and libraries can’t afford to pay for advanced telecommunications services up front. He also said the FCC is expected to make a decision concerning a change to the discount level for internal connections in the next few months.

    Diana DeGette, D-Colo., expressed concern that the poorest schools and libraries might be shut out of the eRate program if the amount they must contribute themselves to the cost of these services increases.

    School district employees who testified during the hearing agreed.

    “I think that would be detrimental to districts like ours. We couldn’t afford to pay this up front,” said William Singleton, superintendent of the Jasper County Schools in Ridgeland, S.C.


    House Committee on Energy and Commerce

    Federal Communications Commission

    USAC’s Schools and Libraries Division