Congress Widens E-Rate Probe

The U.S. House Energy and Commerce Committee is expanding its investigation of the troubled $2.25 billion E-Rate program, calling on IBM, which received $350 million from the fund in 2001, and other participants to turn over documents related to their involvement in the program.

The E-Rate program is designed to help schools and libraries connect to the Internet and financed by fees added to consumers’ telephone bills.

In January, the Center for Public Integrity, a Washington-based non-profit
“public service journalism” organization, issued a report claiming the program was “honeycombed” with fraud.

The center’s study is based on two Federal Communications Commission (FCC)audit reports and independent interviews.

The FCC audits have discovered abuses ranging from simple paperwork and reporting errors to false billing and other fraud potentially involving hundreds of millions of dollars.

The report led to Rep. Billy Tauzin’s House and Energy committee to launch an investigation into the program. In March, Tauzin (R-La.) and and Rep. James Greenwood (R-Pa.) sent letters to the FCC and the Universal Service Administrative Company (USAC), which administers the E-rate program for the FCC, seeking information related to program funds, management and oversight.

While USAC submitted thousands of pages of documents following the committee’s initial request, confidentiality concerns prompted USAC to omit certain information considered critical to the investigation, leading Tauzin and Greenwood to issue a subpoena to USAC CEO Cheryl L. Parrino to produce the omitted information.

The E-Rate program is based on a competitive bidding process, and the fund’s top service providers include IBM, SBC, Verizon, Bellsouth and Qwest.

In December, USAC officials began denying or delaying applications by IBM, which received more than $350 million from the fund in 2001.

At the time, An IBM official said the company was surprised by the report and hoped to quickly resolve any billing or paperwork disputes.

Originally organized to help rural areas obtain affordable telephone services, the Universal Service Fund’s scope was expanded in 1996 to include discounted Internet connection rates for public schools and libraries. The FCC maintains oversight authority for the program but contracts out the administration of it to USAC.

Almost 90 percent of U.S. schools and libraries receive subsidies from the
fund for Internet connections.

The U.S. House Energy and Commerce Committee is expanding its investigation of the troubled $2.25 billion E-Rate program, calling on IBM, which received $350 million from the fund in 2001, to turn over documents related to its involvement in the program.

The E-Rate program is designed to help schools and libraries connect to the Internet and financed by fees added to consumers’ telephone bills.

In January, the Center for Public Integrity, a Washington-based non-profit
“public service journalism” organization, issued a report claiming the program was “honeycombed” with fraud.

The center’s study is based on two Federal Communications Commission (FCC)audit reports and independent interviews.

The FCC audits have discovered abuses ranging from simple paperwork and reporting errors to false billing and other fraud potentially involving hundreds of millions of dollars.

The report led to Rep. Billy Tauzin’s House and Energy committee to launch an investigation into the program. In March, Tauzin (R-La.) and and Rep. James Greenwood (R-Pa.) sent letters to the FCC and the Universal Service Administrative Company (USAC), which administers the E-rate program for the FCC, seeking information related to program funds, management and oversight.

While USAC submitted thousands of pages of documents following the committee’s initial request, confidentiality concerns prompted USAC to omit certain information considered critical to the investigation, leading Tauzin and Greenwood to issue a subpoena to USAC CEO Cheryl L. Parrino to produce the omitted information.

The E-Rate program is based on a competitive bidding process, and the fund’s top service providers include IBM, SBC, Verizon, Bellsouth and Qwest.

In December, USAC officials began denying or delaying applications by IBM, which received more than $350 million from the fund in 2001.

At the time, An IBM official said the company was surprised by the report and hoped to quickly resolve any billing or paperwork disputes.

Originally organized to help rural areas obtain affordable telephone services, the Universal Service Fund’s scope was expanded in 1996 to include discounted Internet connection rates for public schools and libraries. The FCC maintains oversight authority for the program but contracts out the administration of it to USAC.

Almost 90 percent of U.S. schools and libraries receive subsidies from the
fund for Internet connections.

The U.S. House Energy and Commerce Committee is expanding its investigation of the troubled $2.25 billion E-Rate program, calling on IBM, which received $350 million from the fund in 2001, to turn over documents related to its involvement in the program.

The E-Rate program is designed to help schools and libraries connect to the Internet and financed by fees added to consumers’ telephone bills.

In January, the Center for Public Integrity, a Washington-based non-profit
“public service journalism” organization, issued a report claiming the program was “honeycombed” with fraud.

The center’s study is based on two Federal Communications Commission (FCC)audit reports and independent interviews.

The FCC audits have discovered abuses ranging from simple paperwork and reporting errors to false billing and other fraud potentially involving hundreds of millions of dollars.

The report led to Rep. Billy Tauzin’s House and Energy committee to launch an investigation into the program. In March, Tauzin (R-La.) and and Rep. James Greenwood (R-Pa.) sent letters to the FCC and the Universal Service Administrative Company (USAC), which administers the E-rate program for the FCC, seeking information related to program funds, management and oversight.

While USAC submitted thousands of pages of documents following the committee’s initial request, confidentiality concerns prompted USAC to omit certain information considered critical to the investigation, leading Tauzin and Greenwood to issue a subpoena to USAC CEO Cheryl L. Parrino to produce the omitted information.

The E-Rate program is based on a competitive bidding process, and the fund’s top service providers include IBM, SBC, Verizon, Bellsouth and Qwest.

In December, USAC officials began denying or delaying applications by IBM, which received more than $350 million from the fund in 2001.

At the time, An IBM official said the company was surprised by the report and hoped to quickly resolve any billing or paperwork disputes.

Originally organized to help rural areas obtain affordable telephone services, the Universal Service Fund’s scope was expanded in 1996 to include discounted Internet connection rates for public schools and libraries. The FCC maintains oversight authority for the program but contracts out the administration of it to USAC.

Almost 90 percent of U.S. schools and libraries receive subsidies from the
fund for Internet connections.

Other companies asked to produce documentation include Avnet, Inc., Tempe, AZ; Checkpoint Communications, Costa Mesa, CA; Computer Assets, Inc., Espanola, NM; Ed-Tec, Inc., Lakewood, NJ; Expanets of North America, Englewood, CO; Micro Systems Enterprises, Houston, TX; NEC Business Network Solutions, Inc., Irving, TX; Network Konnection, Inc., Rockville, MD; SBC Datacom, Richardson, TX; SBC Global Services, Inc., San Antonio, TX; Siemens Enterprise Networks, New York, NY; Southern New England Telephone, Dallas, TX; and Spectrum Communications Cabling Services, Inc., Corona, CA.