Justice Department steps in
USAC, the nonprofit company that administers the program on behalf of the FCC, audited the eRate bidding process in Indiana and gave it a clean bill of health. But a law firm’s examination of the same bidding process, done for the state, found problems and led to multimillion-dollar settlements with the Justice Department, according to department records.
One of those settlements took place in 2009, as the Justice Department was considering filing civil claims against an AT&T subsidiary about its Indiana eRate service, including for “overbilling the eRate program for services provided.” The telecom giant paid $8.3 million to settle. It did not admit wrongdoing.
The lowest-corresponding-price rule is not referenced in the settlement but figures prominently in a related compliance agreement with the FCC, executed the same day. There, AT&T agreed it “shall prepare a written analysis sufficient to document its compliance with the requirement that the rates it charges for eRate services in Indiana are not above the lowest corresponding price.”
This compliance agreement is the only example cited in the FCC’s statement to ProPublica, but records show it was the Justice Department–not the FCC–that led the investigation of the case. The FCC played a role in the latter stages.
AT&T declined to comment on the 2009 settlement.
The following year, AT&T urged the FCC to drop the pricing rule altogether. “The current competitive circumstances,” the company wrote the agency in 2010, “warrant elimination of the lowest corresponding price rule.”
“A regulatory Wild West”
Numerous reports by Congress, the GAO and the FCC’s inspector general have criticized the ERate program over such issues as waste, fraud, poor management and the program’s hybrid oversight structure involving two private companies with links to the telecom industry.
The FCC is the final authority for eRate policies and oversight, but USAC administers the program, conducts audits, approves or rejects applications and pays invoices. USAC, in downtown Washington, employs “numerous” former telecom executives, according to Eric Iversen, USAC’s spokesman.
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