Judges Revive Claim that AT&T Overcharged Schools for Internet Service

duck and cover, schoolchildren 1950s
Credit: Walter Albertin, Library of Congress Prints and Photographs Division

For seven years, a Wisconsin telecom consultant has waged an unsuccessful legal fight against AT&T, alleging that the company long defrauded a federal program by overcharging the nation's schools and libraries for Internet and telephone services.

Now an appeals court in the District of Columbia has given new life to his case.

The little-noticed June 23 ruling concluded that the complaint by Todd Heath was properly filed under the U.S. False Claims Act 2013 a decision that could lead to the disclosure of AT&T's internal records about the federal program known as E-Rate.

E-Rate was set up in 1997, at the dawn of the Internet era, to avert a digital divide between rich and poor students by subsidizing telecommunications services to schools and libraries. Its multibillion-dollar budget comes from fees added to the bills of most people with cellular or landline phone contracts.

At issue in the court case is a rule established at the program's inception that requires providers to set rates for schools and libraries at the lowest prices offered to comparable customers. The theory was that bargain rates would help schools in less-wealthy areas provide their students with access to the Web.

An investigation in 2012 by ProPublica found that the preferential pricing rule had been widely neglected by AT&T and the Federal Communications Commission, which oversees the program. The result was that many schools were paying more than the program's framers envisioned, draining the federal fund and limiting the reach of the subsidies.

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