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House Subcommittee Holds Second Hearing on E-rate Abuses

The House Energy and Commerce subcommittee on oversight and investigations held the second in a series of critical hearings on the E-rate program on July 22, this time focusing on activities involving NEC Business Network Solutions and the San Francisco Unified School District.

San Francisco Superintendent Arlene Ackerman detailed how, after arriving in the district in August 2000, she came to be suspicious of the E-rate application that was submitted on behalf of her district for the 2000 funding year. The application sought $50 million worth of E-rate discounts, and Ackerman said, "Nothing I had studied or heard indicated that any District funds had been set aside" for the district's portion of the project. Further, she said, the project seemed "incoherent and and did not reflect a strategy to align technology with instructional objectives."

Officials from NEC Business Network Solutions and NEC Unified Solutions, Inc. testified on the company's behalf, invoking the Fifth Amendment in response to some questions from subcommittee members. In May, the U.S. Department of Justice announced that NEC Business Network Solutions Inc. had agreed to plead guilty and pay $20.6 million to settle charges of collusion and wire fraud in connection with E-rate-related activities in the San Francisco district and four other states.

In response to a question, Ackerman said that the activities in her district were "a new low in my 30-plus years in public education." However, Ackerman stressed that she continued to support the E-rate program and its goals.

Among the witnesses scheduled to participate was Judy Green, who was described as a "former E-rate consultant and salesperson for Video Network Communications Inc., of Long Beach." Rep. Joe Barton, R-Tex., noted that in his 20-year tenure on the committee, it had never failed in its efforts to subpoena a witness from whom it wanted to hear. He vowed that the committee would eventually track down Green and force her to testify.

William Maher, chief of the Federal Communications Commission's Wireline Competition Bureau and George McDonald, vice president of the Universal Service Administrative Company, also testified about the actions their agencies had taken in reviewing the school district's applications.

Maher was asked whether applicants should be required to solicit three competitive bids before choosing a vendor. He noted that many applicants receive only one bid and that rural communities often only have one telecommunications provider. It was then suggested that such applicants could be required to apply for a waiver of the rule, and Maher agreed that that approach could be considered.

Transcripts of the witnesses' statements are available below:










Rep. Greg Walden, R-Ore, has taken over the chairmanship of the subcommittee from Rep. James Greenwood, R-Pa., who just resigned his seat to become head of a trade association serving the biotechnology industry.


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