Gotham Gazette

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Fraud Stalls Wireless Library Project

This month a new pilot project was to begin that would use wireless technology to turn New York libraries into high-speed Internet hubs for low-income neighborhoods. But it has been delayed, thanks to the controversy over a federal program known as E-rate.

Congress created E-Rate in 1996 in order to give schools and libraries -- especially the poorest ones -- substantial subsidies (up to 90 percent of the cost) to enable them to wire classrooms for Internet access. Hundreds of millions of dollars in E-rate funds have been distributed in New York City alone, out of a total fund of about $2.25 billion, paid for by consumers in taxes of about ten percent on their monthly telephone bills.

But in December 2002, according to the Times, a Staten Island Internet company, Connect2 Internet Networks Inc., was the focus of a criminal case accusing it of conspiring to enlist school officials in order to steal millions of dollars from the E-Rate program. Indeed, a recent report by The Center for Public Integrity found that the E-Rate program is riddled with fraud, and a report on the Universal Service Fund, the agency that oversees the E-Rate program, by the Federal Communications Commision's Inspector General's Office [pdf format] found "something wrong everywhere we have looked," according to FCC auditor Tom Cline. The United States House of Representatives launched an investigation of E-Rate, led by Congressman Billy Tauzin, a Republican who is chairman of the Committee on Energy and Commerce. Tauzin has opposed E-Rate from the beginning; there is already a bill pending to completely eliminate the E-Rate program.

"While there have always been attacks on E-Rate, the program's detractors are gaining momentum with the recent charges of waste, fraud and abuse," said New York City Councilmember Gale Brewer, who is the head of the select committee on technology in government. "Of course we have to investigate these serious charges; but this process should strengthen the program not lead to its dismantling, as some in the House are currently proposing."

New York's public schools cannot afford to lose the E-Rate funding. The city's Department of Education already faces a 25 percent cut to its capital budget, which deprived schools of $8 million in city telecommunications funding this year. As a result, the city will lose $24 million in leveraged federal dollars for E-Rate supported programs.

An immediate victim of the scandal is the experimental project that would have allowed libraries to share their Internet access beyond their walls with community-based organizations and small businesses within a ten block radius. In this way, libraries would have been able to serve as round-the-clock access points for free high-speed connectivity for students, community-based organizations and small businesses.

But just a few days after the city was given verbal approval to conduct a one-year experiment, Congress launched its investigation and the city was told it would have to go through a formal FCC waiver process which could take years.

"We are very proud of this project and I am very disappointed that there has been a delay," said Council Speaker Gifford Miller.

The total cost of the pilot project would have been just $30,000 for five pilot library sites. The necessary bandwidth is already paid for, through a mix of city and federal funds, and participants in the planning of the project have included NYCwireless and Cisco Systems Inc.

In all, the project could allow as many as 50 community organizations get access, and enable some 500 low-income New Yorkers to use the Internet for education and training, which could result in economic gains for their communities. Now the city must look elsewhere for funding in order to jumpstart this project.


In an effort to better coordinate information technology (IT) plans across city agencies, on April 9, Councilmember Brewer introduced two new bills: the first would require that all agencies produce annual IT plans which would be incorporated into a comprehensive strategy by the Department of Information Technology and Telecommunications , and the second requires that department to develop a five-year telecommunications plan every three years. Such annual strategies are badly needed since the city has not produced a comprehensive report for information technology since 1999. Furthermore, city agencies should seek out input from non-profit groups, academics from diverse fields including sociology and communications (not just engineers), and especially the public in drafting their information technology strategies so that the greatest number of creative ideas can be incorporated into the plans.

More On E-Rate

Top 25 Recipients of E-Rate Funds

NYC Schools that Received E-Rate Funds in 2002

Tauzin Letter to FCC

Universal Service Administrative Company

NYC Education E-Rate Office

Laura Forlano is a doctoral student studying communication technology policy at Columbia University.

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