A California technology provider has sued a local newspaper after an investigation by reporters called into question millions of dollars worth of eRate purchases made by the Pomona Unified School District–allegations of program abuse that the contractor and the school system vigorously deny.

The complaint–filed by Spectrum Communications Cabling Services Inc. of Corona, Calif.–says the Inland Valley Daily Bulletin and reporters who wrote the series jumped to unfounded conclusions regarding $2.4 million worth of specially equipped laptop computers purchased by the district through the eRate, the $2.25 billion-a-year federal program that provides discounted internet and telecommunications services to schools and libraries.

Instructional computers aren’t eligible for eRate support. The Daily Bulletin claims Pomona circumvented this rule by using eRate funds to buy laptop computers configured as “classroom servers,” which are eligible for discounts–a transparent and ethically questionable attempt to get computers funded through the program at the expense of other applicants, the newspaper alleges. It further implies that Spectrum and the district colluded on this plan, and that Spectrum profited from the plan’s allegedly inflated cost.

Spectrum and the district deny these allegations. In its lawsuit, the company says what it sold the district was well within the program’s rules–and it isn’t responsible for how this equipment subsequently was used. The reports are an attempt to smear the company’s name, Spectrum charges, and it has demanded a retraction.

The newspaper had yet to print a retraction and was requesting more time to consider the complaint at press time.

Does Pomona’s example represent a questionable exploitation of eRate rules–or creative leveraging of program funds? Whichever side you believe, one thing is clear: The district’s “classroom server” plan is highly unorthodox. Educational technology experts who spoke with eSchool News said it seems more extreme than is necessary–and while it might not violate the letter of the rules, it certainly could be viewed as a wasteful use of eRate dollars.

From a national perspective, the situation in Pomona offers yet another example of how school administrators, contractors, and education stakeholders have struggled to interpret the rules that govern the embattled school wiring program–and how the eRate’s many ambiguities have opened the program to questionable practices.

The eRate has taken heat in recent months for a string of alleged rules violations by service providers and schools. In an attempt to rid the program of the waste, fraud, and abuse that has marred its reputation, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC)–the private, nonprofit agency that administers the eRate on behalf of the Federal Communications Commission–is conducting random audits of 100 eRate beneficiaries, and the SLD plans to conduct more in the future, program officials say.

“There is a lot of confusion in terms of what is and what is not eligible,” said Peter Kaplan, director of regulatory affairs for Funds for Learning, a national eRate consulting firm. “The rules change, guidance changes, forms change almost every year. It’s all fairly ambiguous, so school districts do the best they can.”

But sometimes, he admits, even the best intentions are not enough to save schools from public scrutiny. “It’s very easy to misinterpret data when looking at the eRate landscape,” Kaplan said. “Unfortunately, there is a lot of gray area out there.”

Allegations and counter-allegations

It’s that “gray area”–and the Daily Bulletin’s alleged misinterpretation of eRate rules–that Spectrum’s president and chief executive, Robert Rivera, blames for the flak his company is taking in Pomona.

A former member of USAC’s board of directors, Rivera says he spent three years fighting to rid the eRate of the very brand of foul play the Bulletin now accuses his company of committing. Calling himself a proponent of increased accountability, Rivera questioned the Bulletin’s interpretation of eRate rules and accused the newspaper of engaging in a smear campaign to tarnish his firm’s reputation.

He also criticized the newspaper for drawing conclusions without proper knowledge of the program. “What authority does the Bulletin have to investigate anyone involved in the eRate program?” he asked, noting that the deal between Pomona and Spectrum was approved by the SLD–a process that entails a series of checks and balances, including a Program Integrity Assurance review.

The Bulletin referred questions about the series to its legal counsel, James Manning. Manning could not say whether the paper would issue a retraction, only that it is considering the lawsuit.

Spectrum is protesting a series of five articles that ran in the Bulletin from July 21 to Aug. 3, according to court documents obtained by eSchool News. The articles claim a 2002 agreement between Spectrum and the district ran afoul of eRate rules when the school system paid the company nearly $2.4 million to procure 460 Apple G4 PowerBook computers for teachers. Typically, laptop computers do not qualify as eligible purchases under eRate guidelines. However, there is an exception to that rule–one the school system and the company contend the Bulletin downplayed in an attempt to fuel its story.

According to 2002 eRate guidelines, laptops are, in fact, eligible for federal discounts, as long as the machines in question are used as “classroom servers” to store and distribute educational data–and not as stand-alone instructional devices. The same guidelines continue to apply today, according to the 2005 Eligible Services List on the SLD’s web site.

Though the newspaper’s account mentions this exception as part of the school system’s defense, it accuses Spectrum and the district of trying to “disguise” the machines as servers in order to dupe eRate officials into approving the discount. The paper also claims that Spectrum sold the laptops to the district at inflated prices. In a July 27 report, the Bulletin said the district paid $3,573 for each machine, compared with Apple’s retail price of $2,999. Add in fees for service, accessories, and installation and, the Bulletin said, the final price increased to $4,940 per laptop.

Though Spectrum admits the price of each machine came in well above what consumers might encounter at a local retailer, Rivera pointed out that computers purchased by the district were not equipped for personal use, but were intended for use as servers. The distinction, he noted, is important, because for laptops to perform as servers, they must be equipped with additional memory and a more expensive operating system with server-type functionality.

Copies of invoices obtained by eSchool News, as well as documentation from Apple Computer, clearly specify the laptops are to be used as servers and include pricing for the Mac OS X Server operating system. The invoices also include line items for individual keyboards and detachable mice. Though such peripherals typically are not eligible for eRate discounts, as the Bulletin’s investigation pointed out, they are conditionally eligible when required to operate specific hardware, according to rules on the SLD web site.

In Pomona’s case, the district paid Spectrum $257,140–approximately $559 apiece–to equip the machines with Apple’s server-class operating system. The school district also paid several thousand dollars for detachable mice and keyboards to be used with the machines. Without these ancillary hardware and software devices, district officials said, the machines would not have worked at all.

According to Rivera, Apple also increased the computing power of each machine with a series of internal upgrades, including boosting the hard-drive capacity on every laptop from a standard 20-gigabyte hard drive to 48 gigabytes; increasing the amount of random-access memory, or RAM, on each machine; and adding DVD/CD-ROM drives. When asked to explain the upgrades, Rivera said the changes were consistent with the demands and functionality required of any classroom-type server. Given the modifications, he said, the price the district received was fair. “The laptops sold to [Pomona] were custom, not an off-the-shelf device,” the district said on its behalf.

The thinking, according to Rivera, was that the district could repurpose the computers for use elsewhere in the school system following a mandatory three-year stint as classroom servers.

‘A big joke’

Still, not everyone is convinced that was the district’s–or the company’s–intention.

Key to the Bulletin’s investigation were comments made by Garey High School technology resource teacher Cindy Munafo. A 25-year district veteran, Munafo told the California newspaper that she opened up her Apple PowerBook G4 to find “nothing more than a glorified DVD player” and said she was forced to write a grant to secure the $20,000 in additional software needed to upgrade Garey’s laptops with enough applications so fellow teachers could perform basic document creation and other administrative tasks with the machines.

Munafo told the paper that administrators refused to let her use the laptops to perform basic server functions such as file-sharing–which can be done without the more expensive operating system–and that the district purchased at least one additional server for Garey, despite the fact that 75 other laptop “servers” already had been supplied for teachers through the eRate.

“As soon as they introduced those laptop servers to us, I knew it was a big joke,” she told the Bulletin. “They gave them to us with no software on them whatsoever.”

But that was precisely the point, according to Rivera. eRate discounts do not cover the purchase of software, and the program does not permit the use of federal funds to procure personal computers intended for everyday classroom use.

“If the school district had to use additional funds to purchase [software], that’s fine. That’s exactly how the [eRate] is supposed to work,” he said.

The eRate was intended to provide low-income schools with a means to acquire the basic hardware necessary to build out their internet and telecommunications infrastructure in the best and most efficient way possible. Whether that includes purchasing a laptop server for use in every classroom is a subject that remains open for debate.

Even if Spectrum and Pomona refrained from breaking actual program rules, critics say, that doesn’t necessarily mean they weren’t wasteful.

Invoices obtained by the Bulletin and later confirmed by eSchool News indicate that 48 laptop servers were purchased for use in Pomona’s Marshall Middle School, and another 75 were deployed at Garey Senior High, the district’s largest institution.

“There is obviously no reason for a middle school to have 48 servers,” Curtis Lee, director of technology for the Walnut Valley Unified School District in Walnut, Calif., told the Bulletin for its July 22 report. “In a typical school, you may need one to five servers. It’s like buying 48 pieces of furniture for a small apartment.”

Technology coordinators who spoke with eSchool News also questioned the need for multiple classroom servers. Though the technology is eligible under eRate rules, experts said, there are generally more efficient ways of deploying and maintaining on-campus servers.

“The trend these days is toward centralization,” said Ed Zaiontz, executive director of information services for the Round Rock Independent School District in Colorado. “The equipment is eligible under the eRate, sure, but at the same time, in my opinion, it’s not a very efficient way of setting up a campus.”

In a school like Garey–with an enrollment of 2,358 students–Zaiontz said the presence of too many individual servers could lead to a host of maintenance and upkeep issues, endangering the speed and reliability of the network and costing the district money.

“The whole idea is to consolidate, not go in the other direction,” he explained. “At a high school level–at least, in our district–I can’t think of a single school that has more than five servers.”

To receive eRate funds, all eligible districts need to submit a state-approved technology plan, detailing how the technology will be deployed.

A copy of Pomona’s latest Master Technology Use Plan, issued in April 2002, makes no mention of individual classroom servers as “wireless hubs,” but it does specify the use of eRate funds to procure additional network drops for classrooms and indicates a need for additional staff training in anticipation of providing “mobile classroom servers to teachers at their schools for the implementation of technology-supported instruction.”

According to district technology director David Jaramillo, “The classroom servers allowed teachers to share information to workstations in their classroom, and also to share information across their school with other teachers.” In contrast, he said, “The larger, rack-mounted servers could then be used to share multimedia and other lessons with other schools.”

Using the mobile servers, he said, “the concept was for teachers to develop classroom materials, make them available to other teachers, and thereby create an ever-expanding and growing library of lessons.”

Why couldn’t this be done with standard laptop computers instead of individual classroom “servers”?

“Our planned computer-to-student ratio would exceed a standard operating system’s ability to sign on eight or more concurrent users, and therefore, a server operating system made a lot of sense,” Jaramillo said. “Our IT department wanted every one of our classroom teachers and educators to have control over the content their students had access to and believed these servers would meet their needs by controlling their students’ access to instructional materials.”

In a public statement, the district defended its unorthodox approach on the basis of total cost of ownership.

“A stand-alone server, costing approximately $15,000, has a life expectancy of three years under the rules; so do laptop servers,” officials said. “The difference in terms of cost-effectiveness is that laptop servers may be used for multiple purposes, with a life expectancy and return-on-investment of six years.”

Whether the controversy results in an audit of Pomona’s 2002 eRate application remains to be seen. But SLD spokeswoman Tanya Sullivan said the agency is “aware of the situation” in Pomona and “will take the appropriate steps” to ensure that the rules have been followed.

See these related links:

Pomona Valley Unified School District

Spectrum Communications Inc.

Inland Valley Daily Bulletin