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Telecom Companies Skirting E-Rate Rules?

A new investigative report from Pro Publica crushes both the telecommunications industry—particularly AT&T—and federal regulators while unearthing what it says is evidence of companies' neglect of the rules set by the federal E-rate program.

According to the story, telecom companies that provide phone and Internet services to schools are habitually ignoring the provision in the Federal Communications Commission-run program that services offered must meet a "low-price" requirement, meaning schools must be offered the lowest rates available to comparable customers in the same community. In some cases, AT&T has charged schools more than three times as much as it does other community consumers for similar services, Pro Publica reporter Jeff Gerth writes.

The result is that the program, now funded at close to $2.3 billion per year through a Universal Service Fee collected from telecom providers, drains that funding more quickly, meaning only schools with the most impoverished students get federal support for internal connectivity projects based on the program's two-tiered funding structure. Meanwhile, the story suggests the FCC has showed far more willingness to restrict how schools and libraries can use E-Rate dollars while devoting far less energy to enforcing companies' compliance.

The FCC under current chairman Julius Genachowski has made broadband access for students and the general public a priority, through programs such as the "Connect to Compete" initiative that aims to bring broadband Internet subscription prices down to a highly discounted level for students qualifying for the federal school lunch program. But that program and others have focused largely on residential connectivity, and even the FCC's recent explorations into reforming the E-rate program have involved a focus on home connectivity, whether that be through pilot programs involving schools as community Wi-Fi hotspots, or as providers of mobile devices offering students after-hours connectivity. Critics have at times argued that the FCC's efforts at reform without additional funding for the E-Rate program will hurt most schools, not help them.

E-Rate provides funding through a two-tiered system, where Priority 1 represents projects to connect schools and libraries to an outside network, and Priority 2 represents internal connections. Typically, all Priority 1 requests are satisfied before running over the $2.3 billion threshold, and then Priority 2 requests are filled at schools with the highest number of students qualifying for the federal school lunch program first.

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