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FCC Limits Role of Service Providers in Managing Form 470 Applications

The Federal Communications Commission May 23 upheld the Schools and Libraries Division's decision to reject E-rate funding requests that were based on Form 470 applications for which a service provider had acted as the contact person.

The appeals had been filed by Mastermind, an Oklahoma-based Internet service provider. In instances involving dozens of Oklahoma school districts, the SLD said the E-rate program's competitive bidding requirement had been violated because a Mastermind employee had been listed as the contact person for the applications. Mastermind argued that neither the SLD nor the FCC had ever issued regulations saying a vendor could not play that role.

In instances where Mastermind had neither signed an application nor served as contact person, the FCC instructed the SLD to review the applications again to determine whether they should be funded.

In its filings, MasterMind said that the SLD was aware of its involvement in the competitive bidding processes before any of the disputed Forms 470 were filed and that it was unreasonable for the SLD subsequently to deny the applications because it had never challenged the company's actions. The company said that it was "trapped by a policy that was being considered and developed as MasterMind assisted in the filing of the Form 470 and was applied retroactively to MasterMind."

But the FCC replied, "We believe that, when an applicant delegates that power to an entity that also will participate in the bidding process as a prospective service provider, the applicant irreparably impairs its ability to hold a fair and open competitive bidding process."

It also rejected Mastermind's argument that the SLD should have warned the company that it was violating the program's rules. "Even if SLD had been aware that the applicants were engaged in such activities, its failure to notify the applicants or MasterMind of possible violations at that time would not preclude SLD or the commission from later determining that a violation has occurred. We note that, even where a party has received erroneous advice from a government employee, the government is not estopped from enforcing its rules in a manner that is inconsistent with the advice provided by the employee."

The full text of the decision is available at

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