AT&T fined $106K for overcharging schools in Florida under E-rate program

AT&T (NYSE: T) is facing a $106,425 fine for charging two Florida schools what the FCC says is the highest telecom rates in the state, violating the regulator's "lowest corresponding price" rule.

Under the lowest corresponding price, schools and libraries that participate in the FCC's E-rate Program can get the best rates available by prohibiting E-rate service providers from charging them more than the lowest price paid by other similarly situated customers for similar telecommunications services. 

The FCC alleges that AT&T charged the school districts prices for telephone service that were "magnitudes higher" than many other customers in Florida.  According to the regulator, one or both school districts paid the highest price in all of Florida for one service, while other customers paid much less. 

In its Notice of Apparent Liability (NAL), the FCC alleges that AT&T violated the lowest corresponding price rule from at least mid-2012 to mid-2015, when it charged the school districts in Orange County and Dixie County, Florida.

Additionally, in each of these years AT&T certified its compliance with the E-rate program's rules, apparently inaccurately. As a result, the Universal Service Fund subsidized the school districts' services at greatly inflated prices and allowed AT&T to receive at least $63,760 in federal support that it should not have received, the FCC says.

Besides requiring AT&T to pay the fine, the FCC plans to order AT&T to repay that $63,760. 

"Charging school districts among the highest rates in the state for telephone or broadband internet service is outrageous," said Travis LeBlanc, enforcement bureau chief for the FCC, in a release. "Schools and libraries across the country heavily rely upon federal and state funds to afford these critical services."

Joan Marsh, VP of federal and regulator for AT&T, said in an e-mail statement to FierceTelecom that the FCC's charges are baseless and that it will lay out its argument when it files a challenge to the NAL.

"The FCC has issued a Notice of Apparent Liability alleging that AT&T apparently violated the Lowest Corresponding Price rule in the E-Rate program," Marsh said. "The allegations lack merit and we look forward to making that case in detail in response to the NAL.  Among other deficiencies, the NAL proceeds from the flawed premise that AT&T should have ignored regulations issued by the State of Florida when selling intrastate E-rate services in Florida." 

As part of its 2014 modernization of E-rate, the FCC directed the Enforcement Bureau to devote additional resources to enforcing the lowest corresponding price rule as part of a broader effort to maximize the benefits E-rate provides in schools and libraries and produce savings in the program.

However, not everyone at the FCC agrees with the decision to fine AT&T.

Commissioner Ajit Pai dissented on the regulator's decision, saying the regulator acted too late in penalizing AT&T for its actions.

At issue is the one-year statute of limitation on these types of agreements set by the Communications Act.

"The Enforcement Bureau became aware of AT&T's conduct two full years ago, just as the statute of limitations was beginning to run and long before it expired," Pai said in his dissent statement. "That means we could have imposed a lawful forfeiture had we acted with alacrity (or even a modicum of urgency)."

 For more:
- see the release

Related articles:
FCC raises E-rate subsidies to pay for extended education technology program
FCC's Wheeler: E-Rate reforms should address 'closing the rural fiber gap'
FCC approves $2B E-Rate changes aimed at improving broadband and Wi-Fi for schools, libraries

This article was updated with additional information from AT&T on July 28. 

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