Back for its 10th year, our most popular webinar offers an in-depth discussion on the federal Universal Service Fund for participants in USF programs and for contributors to the Fund. This webinar will address major developments in the four support funds and discuss the pressures on the USF contribution system in an era of 20% contribution rates. In addition, as usual, we will offer tips and insights into managing audits and investigations in these highly scrutinized programs.

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On February 4, 2019, the FCC announced a plan to create a new division housed in its Enforcement Bureau, dedicated to prosecuting fraud in the agency’s Universal Service Fund (“USF”) programs. Citing to recent USF-related proposed fines and voluntary settlements, the FCC asserted that the creation of a specialized Fraud Division was necessary to combat misuse of funds under the High Cost, E-Rate, Lifeline, and Rural Health Care programs that make up the USF. The FCC’s brief, two-page Order leaves many questions unanswered about the proposed Fraud Division’s ambit and the status of the “USF Strike Force” that preceded it. However, the Order signifies that the FCC plans to redouble its fraud enforcement efforts in 2019 following recent setbacks on the USF rulemaking front. As a result, eligible telecommunications carriers and other recipients of USF support should keep a close watch as the scope and function of the new Fraud Division starts to take shape.
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In this edition of Full Spectrum’s recurring series on FCC enforcement, Partner Steve Augustino and Associate Brad Currier address the legal dangers facing entities that may be unfamiliar with telecommunications regulation. Steve and Brad focus on a multi-million dollar DOJ fraud prosecution involving the E-rate fund and a settlement of inadvertent transfers of FCC licenses

E-Rate fraud is back in the spotlight following the indictment of a Dallas charter school CEO and the owner of a contracting company for an alleged kickback scheme resulting in over $300,000 in illegal subsidies. Federal prosecutors stated that the pair violated the E-Rate program’s competitive bidding requirements and submitted fraudulent invoices to the Federal Communications Commission (“FCC”).  The indictment comes on the heels of major FCC settlements and enforcement actions against educational institutions and service providers for alleged E-Rate violations.  FCC Chairman Pai has repeatedly criticized the administration of the E-Rate program and the indictment may spur further calls for action to combat fraud in the program.

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Federal Communications Commission (FCC or Commission) Chairman Ajit Pai sent a letter this week to Chris Henderson, CEO of the Universal Service Administrative Company (USAC) expressing concern about flaws in USAC’s administration of the E-Rate Productivity Center (EPC), the online application and account portal. In the letter, Chairman Pai noted his support for E-Rate as

webinar_connect_imageA potential solution to the so-called “homework gap” – otherwise known as the limited ability of low-income students in rural or underserved areas to access a broadband connection at home – is the subject of a petition submitted to the Federal Communications Commission (FCC or Commission) by an innovative public-private partnership and is now open for public comment.

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Last week, the Federal Communication Bar Association’s (FCBA’s) Enforcement Committee hosted a legal seminar on an issue that is somewhat new and unfamiliar to the communications bar – the federal False Claims Act (FCA), and particularly its use by the federal government to combat fraud in the Universal Service Fund (USF).  All in attendance had the unique opportunity to hear from representatives from the Department of Justice (DOJ), the U.S. Attorney’s office and the FCC’s Enforcement Bureau on the process for evaluating FCA cases, including the substantial intergovernmental coordination, as well as a lively debate from practitioners and litigators regarding whether or not the FCA should be applied to claims for USF.  For those unfamiliar with the FCA, a brief overview is available here.

While the entire discussion was enlightening and rich with inside detail, there were a few things that stood out for anyone keeping an eye on these issues.


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On December 22, 2015, the Federal Communications Commission’s (FCC’s) Enforcement Bureau adopted a consent decree resolving the Enforcement Bureau’s investigation into whether the NYC DOE violated the competitive bidding rules of the FCC’s E-rate program.  The competitive bidding rules ensure that schools and libraries that seek E-rate eligible goods and services treat price as the primary factor when choosing their service provider.

The consent decree is significant in several respects.  First, this marks the first significant action handled by the USF “Strike Force” established by Chairman Wheeler in 2014.  It also marks the largest e-rate settlement to date, and includes many compliance plan requirements that could become de facto standards for future E-rate enforcement actions.  Further, to the best we can determine, this is the first E-rate enforcement action the Commission has taken against a school or library applicant under the program.


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After voting on December 11, 2014 to adopt new E-rate rules, the Commission’s Second Report and Order and Order on Reconsideration became available to the public on December 19.  As we wrote earlier, the new E-rate rules increase the program’s funding cap to $3.9 billion and provide schools and libraries with additional options and incentives to purchase high-speed broadband connections. 
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At yesterday’s Open Meeting, the Commission voted to increase the E-rate cap by $1.5 billion, bringing the program’s total funding to $3.9 billion.  The funding increase was originally mentioned in July’s Notice of Proposed Rulemaking, and was strongly supported by key Democratic Commissioners. According to the Public Notice of the action, the increase will give schools and libraries greater flexibility with building and supporting their high-speed broadband networks.  To raise sufficient funds for the increase, the Commission intends to raise the USF contribution rate.  The Public Notice estimates this increase to amount to an additional 16 cents per month on an individual consumer’s telecommunications bills, totaling nearly $1.90 per year.  Commissioner Pai decried the increase, stating that it would lead to a contribution factor of 20.3%, double the contribution factor from 2009.

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