The Rural Health Care Program (“RHCP”) is sure to face increased scrutiny in the wake of a $18.7 million proposed fine issued by the Federal Communications Commission (“FCC”) at its January meeting against a telecommunications reseller for allegedly defrauding the program.  The FCC claims that DataConnex, one of the top five recipients of RHCP funding, violated the program’s competitive bidding rules and submitted falsified documents to increase the support it received.  The FCC recently ramped up enforcement involving the RHCP and proposed significant reforms last month aimed at improving oversight and deterring fraud.  The FCC’s actions potentially foreshadow additional restrictions on the use of RHCP consultants and the amount of available funding.


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At its last open meeting in 2017, the five FCC Commissioners unanimously voted to adopt a Notice of Proposed Rulemaking (NPRM) and Order regarding the Commission’s Rural Health Care (RHC) Program, a 20-year old initiative aimed at improving rural health care provider access to first telecommunications services and later an array of communications services, including Internet access, dark fiber, and business data services.  This item is part of FCC Chairman Ajit Pai’s overall initiative to close the “digital divide,” and proposes to increase the $400 million spending cap for the first time since 1997.  The NPRM also proposes to change how the FCC handles demand beyond the cap, from general proration to prioritization based on rurality or remoteness.  As such, all interested stakeholders should carefully monitor and consider participating in the rulemaking process.  Comments will be due 30 days after publication of the item in the Federal Register (which usually takes a few weeks) and reply comments will be due 60 days after publication.

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With the e-rate program pressing against its cap in funding, the FCC seems to be clamping down on its competitive bidding procedures.  For the fifth time this month, the FCC’s Wireline Competition Bureau denied a school’s e-rate appeal because it failed to comply with the competitive bidding procedures.

In this case, the applicant

Shortly after I posted an entry noting the FCC’s denial of e-rate appeals for competitive bidding violations, the Wireline Competition Bureau issued another decision along the same lines.  In this case, however, the focus was on the conduct of the service provider during the bidding process. 

This case involves a Missouri service provider, Synergetics

Earlier this month, the FCC’s Wireline Competition Bureau denied three appeals by school districts seeking funding under the Schools and Libraries Program of the Universal Service Fund.  In all three decisions, the Bureau found that the school had failed to follow the Commission’s competitive bidding rules for such requests, and therefore, the USAC had properly denied funding of the request.

The decisions highlight three elements of the competitive bidding rules:  (1) that the selection of vendors be based on the bid process itself, (2) that all information be disclosed to all potential bidders and (3) that price be the primary factor in selecting vendors. 

Collectively, the cases serve as a reminder to schools and service providers alike that the bid process must be fair and open in order to receive funding from the program.  Both school districts and service providers need to be vigilant to avoid inadvertent violations of the e-rate program’s competitive bidding rules.


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