Industry Chases New State, Local Business

Industry Chases New State, Local Business

By Nick Wakeman
Staff Writer

A multibillion-dollar federal program to funnel money to the nation's schools and libraries is beckoning small and large industry players to pursue a host of new telecommunications projects at the state and local level.

The Federal Communication Commission will spend $6.75 billion over the next three years to help selected schools install networks, Internet connections, distance learning programs and myriad telecommunications-related projects.

"This opportunity is going to be huge," said Lesley Kao, a senior analyst with the market research firm G2R Inc. in Mountain View, Calif.

Heavy-hitter companies such as Philadelphia-based Bell Atlantic Corp. are lining up alongside smaller players like Denver-based Lewan & Associates for a role in the Education-rate or E-rate program.

This effort, which is geared to rural and inner-city areas, was mandated by the 1996 Telecommunications Act. The Schools & Library Corp. is administering the program with money from the FCC's Universal Service Fund, which was created in the 1930s to help rural areas establish affordable telephone services.

E-Rate Shopping List
Telecommunications equipment and services schools and libraries are expected to buy with E-rate funds:
  • Direct and dial-up Internet access
  • E-mail
  • ISDN lines
  • Satellite services
  • Routers
  • Hubs
  • Switches
  • Network servers
  • Installation and maintenance
With the April 14 deadline looming for submitting applications for the first year's pool of money, interest is high among both the schools and libraries and the contractor community, according to Schools & Library Corp. officials. Plans call for $2.25 billion to be spent annually on the program.

This jackpot is creating opportunities for information technology companies to boost their state and local business, said Shelly Talbott, vice president and general manager of government and education for Ingram Micro Inc., Santa Ana, Calif.

"The more people we educate about this space, the more business and more solutions we can help to deliver," she said.

Distributors like Chantilly, Va.-based Comstor Corp. and Ingram Micro are recruiting new resellers and educating their current partners to pursue this new business.

Ira Barkoe, Comstor's executive vice president

To prepare for the potential influx of business, Comstor is launching a marketing campaign that includes direct mailings to school systems and libraries, said Ira Barkoe, Comstor's executive vice president.

"We are trying to bring the schools and the resellers together," he said. "We expect this to be a multimillion-dollar opportunity for us."

Formed by the FCC in May 1997 to run the E-rate program, the Schools & Library Corp. established a World Wide Web site Jan. 1 for schools and libraries to post funding applications. Through Feb. 25, 19,300 applications had been posted, said Jodie Buenning, deputy director for outreach and communications.

Some applications are for simple projects such as installing a local area network in a single school, she said. Others are far more complex, including applications from the states of Tennessee, Florida and Delaware for statewide distance learning systems, Buenning said.

The federal money will pay for up to 90 percent of the cost of the telecommunications systems installed; the school systems pay the remainder. The amount of money a school gets is based on the percentage of children who qualify for subsidized school lunch programs, Buenning said.

Even though federal officials say there is plenty of money to go around, companies like Lewan & Associates worry the well will run dry, said John Lord, Lewan's manager of government and education sales.

Shelly Talbott, vice president and general manager of government and education for Ingram Micro Inc.

"There are 180 requests for funds in Colorado alone," he said. Lewan & Associates is a $150-million-a-year-company that installs networking equipment. "Somebody is going to get this business, so we hope to get some too," he said.

The large pot of money has attracted the attention of Bell Atlantic, which has been sending packages of information to schools explaining how its technology can address education problems, said Jim Smith, spokesman for Bell Atlantic's large-business division.

Potential projects for Bell Atlantic range from voice mail systems so teachers can communicate better with parents to videoconferencing facilities for distance learning and reducing school officials' travel expenses, Smith said.

Without the money coming from the Universal Service Fund, few of the poor rural and inner-city schools could ever buy this technology, Smith said. "The fund is a real godsend for these schools," he said.

MCI Communications Corp., Washington, is following the program but has not decided how to pursue the projects, said Tracy Smith, spokeswoman for MCI Government Markets division.

"That nature of work is what Government Markets has built its reputation on," she said. But individual schools and libraries fall outside what the division generally views as its customers, Smith said.

This program is another example of how the federal government is shifting funds and responsibility for programs to state and local governments, said Kao. "The [federal] government is saying technology needs to be invested, and that the states and local governments know the best areas to invest in," she said.


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