School Net Scams

No tech firm left behind.


Puerto Rico has spent $101 million in federal grants to wire 1,500 public schools for Internet access. Yet the island-wide school district warehoused most of the equipment for more than three years, and only nine schools were actually connected to the Internet.

Like most large-scale government giveaways, the federal E-rate program, which collects $2.5 billion a year in telephone taxes to hook up schools and libraries to the Internet, has produced a huge amount of fraud and abuse. The Chicago public schools have more than $5 million in E-rate computer equipment sitting in a warehouse. In San Francisco school officials discovered that a $68 million project should have cost less than $18 million. In June the Federal Communications Commission reported that 42 criminal investigations were under way.

Large corporations have gained millions from the E-rate feeding trough. In May NEC Business Network Solutions pleaded guilty to rigging bids at six school districts; the company will pay a $20.6 million fine. And in June The New York Times revealed that the El Paso school district paid IBM $35 million to build a network powerful enough to serve a small city. When the school district could not run the network, IBM charged it an additional $27 million to build a maintenance call-in center that was shut down after nine months when funding ran out.

With the federal government auditing less than 1 percent of E-rate recipients, these cases may be just the tip of the iceberg in a program that has spent $13 billion to date. But the program enjoys bipartisan congressional support, and legislators argue that, thanks to E-rate, 90 percent of schools now have access to the Internet.