updated 4/4/2008 12:36:01 PM ET 2008-04-04T16:36:01

The thousands of Navajo Nation residents who rely on the Internet to work, study and communicate across their 27,000-square-mile reservation will be out of luck Monday, if their service provider shuts access as planned.

"It's going to be a sad day," said Ernest Franklin, director of the tribe's Telecommunications Regulatory Commission.

A tribal audit last year revealed that Utah-based provider OnSat Network Communications Inc. may have double-billed the tribe, and it raised questions about how the tribe requested bids for the Internet contract.

Those discoveries led the Universal Service Administration Co., which administers the service under the Federal Communications Commission's E-rate program, to tell the tribe March 28 that it would withhold $2.1 million from OnSat.

Jim Fitting, an attorney for OnSat, said the delay in payment means it can't pay subcontractor SES Americom for satellite time.

"With USAC taking this particular position, it doesn't look like we're going to get paid in the foreseeable future," Fitting said. "We're already $4 million in the hole, so why should we continue doing it?"

Most evenings, when residents get off work, the reservation's chapter houses are closed, but their wireless signals remain live. So it's common to see residents with laptops sitting in cars outside working away, a local official said.

Through the Washington, D.C.-based USAC, the FCC reimburses 85 percent to 90 percent of the costs for Internet service to 70 of the tribe's 110 chapter houses, which operate like city governments. The Navajo Nation covers the other 10 percent to 15 percent of the cost and offers service inside the chapter house and nearby through Wi-Fi.

The USAC told Navajo President Joe Shirley Jr. in a March 28 letter that it is withholding money for OnSat for 2006-07 because of the possible overbilling and because the tribe didn't comply with federal rules that require it to select the most cost-effective service or equipment through a fair, open and competitive bidding process.

The USAC asked the tribe to prove OnSat provided the service it is billing for and has not overbilled.

OnSat won a preliminary injunction last July in Window Rock District Court barring the tribe's auditor from further disseminating the audit, said Fitting, the OnSat lawyer.

"We don't believe this audit is valid," Fitting said.

The Navajo Nation has until May to respond to USAC's letter, and the USAC can release full or partial funding or continue to withhold funding, said spokeswoman Laura Betancourt.

Tribal regulator Franklin said he has given the USAC documents detailing how OnSat was selected and has shown USAC personnel the service operating last year at sites they randomly selected.

"We proved that we are delivering the bandwidth and that we went through the proper procurement system," he said. "We had to dig up all these documents."

OnSat will continue to provide Internet services for the tribe's Division of Public Safety and the Office of the President and Vice President, offices whose satellite service isn't dependent on FCC funding, Fitting said.

Each Navajo chapter received a grant for computers and Internet access from the Bill and Melinda Gates Foundation's Native American Access to Technology Program in 2000. But it wasn't possible to establish dial-up access _ or create a wireless grid — because the reservation largely lacked wired telephone service.

So the tribe's Division of Community Development contracted with OnSat in 2001 to provide satellite Internet service to the chapter houses — even though satellite Internet technology is costly, slow and unreliable.

The tribe eventually would have stopped using OnSat, Franklin said, but it needed to sustain the satellite connections for at least two years until a wireless grid is completed on the reservation.

"It's not like it's not being used and it's just going to go away," he said. "It's used tremendously by the public. It's just sad that this has to happen."

Navajo President Shirley said reservation residents have come to rely on Internet access to improve their professional and educational lives.

"It would be a very sad day for the children and people of the Navajo Nation if the dark clouds descend, the lights go out, and access is denied to the chapter houses on the reservation, in large part, because USAC has failed to timely fund our application," Shirley said in a December letter to Mel Blackwell, vice president of USAC's Schools and Libraries Division.

Inscription Chapter House community services coordinator Victoria Bydone said she is bracing for a backlash from residents who typically park outside her chapter house in the evening.

"It's going to be unfortunate," she said. "It's not going to be very good."

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