The E-Rate Program

Back in the days of Clinton, a law was enacted to allow schools to get on the information highway (the Internet and other 21st century communication methods).  Schools could not only get on the highway but the costs of doing so would be subsidized by the phone companies, with the largest subsidies going to the schools with the most disadvantaged children.  Subsidies would be funded largely by the “Universal Service Fund”, a little charge that appears on your phone bill; this little charge has amounted to about $2.25 billion.  The law also required the phone companies to grant the schools the lowest competitive rate to comparable customers. 

The problem is that the law is not working. More of the $2.25 billion goes to the profits of the phone companies than to subsidizing the schools.  Defining "lowest competitive rate" has been a big challenge for the phone companies.  AT&T has charged some schools up to 325 percent more than it charged others in the same region for essentially the same services. Verizon charged a New York school district more than twice as much as it charged government and other school customers in that state.

The FCC has not done a very good job in monitoring the program.  It hasn't brought suit against any carrier for violating the lowest cost rule.  Perhaps one reason might be because the FCC has provided little if any guidance to companies on how to apply the best-price rule.They have also been remiss in responding to Freedom-of-Information requests by ProPublica.  ProPublica asked for 12 audits, they got 9.

A private non-profit company, Universal Service Administrative Company, monitors the program for the FCC.  The company pays more attention to infractions of the rules made by schools, rather than the companies.

Who gets the short end of the stick?  Kids in poor school districts and you and me.