Lawmakers promise more E-Rate investigations

U.S. House members Thursday promised to investigate an embattled government program intended to bring telephone and Internet access to schools and libraries in poor areas.

U.S. House members Thursday promised to investigate an embattled government program intended to bring telephone and Internet access to schools and libraries in poor areas.

Members of the House Subcommittee on Oversight and Investigations heard testimony on alleged mismanagement of the E-Rate program in Puerto Rico, a nationwide program with a $2.25 billion annual budget funded by telecommunications carriers through the federal Universal Service Fund. In February, subcommittee staffers found $23 million worth of networking equipment intended to go to Puerto Rico schools sitting in a warehouse, reportedly not moved out of the warehouse for about four years.

The Puerto Rico problems are a fraction of the “waste and abuse” found during a year-and-a-half subcommittee investigation into the E-Rate program, said subcommittee chairman Jim Greenwood (R-Penn.).

In late May, NEC-Business Network Solutions pleaded guilty to defrauding the E-Rate program, and agreed to pay $20.6 million in fines and restitution. Earlier this year, SBC agreed to return $8.8 million to the U.S. FCC after equipment was not installed in Chicago schools. The U.S. Department of Justice has investigated E-Rate fraud in New York and Milwaukee and recent newspaper reports have alleged abuse in several other cities.

“We have found that the program’s current structure and administration invites scams – both simple and sophisticated – and wastes serious amounts of money,” Greenwood said Thursday. “Whether it be bid-rigging, poor planning, a lack of meaningful competition or loopholes in the program’s rules, a common and tragic theme occurs – many children, perhaps hundreds of thousands, are deprived of the educational benefits.”

The E-Rate program, sometimes called the “Gore tax” after E-Rate champion and former U.S. vice president Al Gore, was developed as part of the Telecommunications Act of 1996. Telecom companies often pass the tax onto consumers in the form of “universal service fees,” and the program has become a target of some congressional Republicans. Administering the E-Rate funding is the Universal Service Administrative, a subsidiary of the National Exchange Carrier Association, a telecom trade group.

Greenwood questioned this private control of the program by the telecom companies paying the tax. “This management structure is troublesome, and at the very minimum, its fox inside the henhouse appearance is more than a little disconcerting,” he said.

The subcommittee plans to hold more hearings, and Representative Gene Green (D-Texas) said legislation may be necessary to fix the program’s problems.

During the hearing, Manuel Diaz Saldaña, comptroller of the commonwealth of Puerto Rico, outlined several recommendations to fix past problems with the E-Rate program there, including a warning to Puerto Rico’s Department of Education to follow competitive bidding rules. “The proper use of commonwealth and federal funds, especially in … programs that are directly related to the proper education of children, is a matter of serious and vital concern to our office,” Saldaña told the subcommittee.

Others at the hearing defended the E-Rate program, despite abuses. The program has helped many schools and libraries in poor areas, said Representative Bobby Rush (D-Ill.). “We should not let a few bad apples spoil the bushel,” he added.