On Wednesday, the Federal Communications Commission (FCC) announced that it reached a $24.25 million settlement with IBM for the company’s purported violations of the FCC’s E-Rate program rules in relation to New York City and El Paso, Texas, school districts; this funding will be returned to the Universal Service Fund. The Universal Service Fund is the means by which, prior to the Telecommunications Act of 1996, interstate carriers were assessed to subsidize telephone service to low-income Americans and high-cost areas. The E-Rate program provides discounts on telecommunications services to schools and libraries.
According to the FCC, IBM previously “provided communications services to the New York City Department of Education and the El Paso Independent School District in Texas using E-Rate subsidies.” The FCC explained that the E-Rate program requires “applicants to seek competitive bids from prospective service providers and to treat prices for eligible products and services as the primary factor when selecting among competing service providers”; these rules are meant to ensure “that federal funds are used efficiently and distributed in a fair and transparent manner.” However, upon investigation, the FCC found that IBM failed to satisfy the Commission’s competitive bidding rules for funding years 2005-2008 in New York and for funding year 2001 IBM failed to provide eligible equipment and services in El Paso.
As a result of this conduct, IBM will pay $24.25 million. IBM will also provide employee training on the FCC’s competitive bidding and eligibility requirements before it submits future bids for the E-Rate program.
In response to the settlement, FCC Chairman Ajit Pai stated, “As stewards of the federal fisc, we must protect the Universal Service Fund from waste, fraud, and abuse and ensure that funding is distributed in the most cost-effective manner. Today’s settlement helps promote those important goals.”
