Tucked into the Telecommunications Act of 1996 was a little-known program called the "e-rate," setting up a tax that has cost consumers and phone companies upward of $2 billion a year. What has that money bought? A rudderless program riddled with fraud and waste.
The e-rate tax is aimed at providing schools and libraries with Internet access. The program, championed by Al Gore when he was vice president, was supposed to help schools allow low-income students to close the "digital divide" and gain new social and economic opportunities. Sen. John McCain (R-Ariz.) began raising questions about it during a hearing on the program six years ago. Since then, its problems have become more apparent. The e-rate fund has distributed $12 billion over six years, and estimates place the amount wasted in the billions. Because of lack of oversight, it's impossible to know the extent of the losses.
During a recent House hearing, legislators documented some of the lapses. They showed, for instance, how most of the $101 million in e-rate funds spent in Puerto Rico went to dubious purchases, such as 73,000 wireless connection cards for individual computers. The cards, purchased at more than $300 apiece five years ago, have grown obsolete in a warehouse outside San Juan. Most Puerto Rican children still access the Internet through dial-up modems on roughly two computers per school.