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Friday, January 30, 2009

Throwing Good Money After Bad
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I'll be the first to concede that large spending bills inevitably entail some level of waste. The current proposed Stimulus Bill is no exception; to point that out would be unworthy of much ink. At some point, however, one would expect that Congress would pause before plowing several billion dollars into a program modeled on one that already is failing badly. Yet this is precisely what is promised by the broadband section of the current bill.

As it is written, the Stimulus Bill creates a system for broadband expansion modeled largely on the Department of Agriculture's Rural Utilities Service ("RUS ") program. The RUS, program, however, has utterly failed to increase broadband outreach in areas that lack broadband access - and not for lack of funding. To the contrary, as the USDA Inspector General reported a few years ago, the RUS broadband program has been badly structured and managed from the outset.

The Stimulus Bill passed by the House of Representatives gives every sign that Congress has not learned from the mistakes of the past. The Stimulus Bill, for example, like the RUS program before it, does not define essential terms such as "unserved area" or "underserved area." Nor does it therefore detail how funding prioritization decisions are to be made regarding grant applications within and among eligible areas.

This very same shortcoming caused the RUS program to go astray. As the USDA IG explained, the lack of definitional precision in the RUS program was used "to justify funding loans to affluent suburban communities while other more rural communities remained underserved." Indeed, the IG went on to find that 42% of communities receiving funding under the RUS program already were served by competing providers.

Such funding, the IG, wrote, raised three troubling questions: 1) "[c]an the sparsely populated rural areas for which these loans are intended reasonably support multiple broadband service providers," or are the loans being made to systems that are doomed to fail? 2) "What is the government's responsibility if, due to subsidized competition, a preexisting, unsubsidized broadband provider goes out of business?" And 3) as an equitable matter, "why should the government subsidize some providers in a given market and not others?"

All good questions indeed, and questions that might just as easily be asked of the drafters of the Stimulus Bill if the proposed new grants are used to support infrastructure development in affluent non-urban communities, or even in undeveloped areas nearby urban centers, rather than broadband buildout in the less-affluent, rural areas that the program purportedly is intended to aid.

Whatever we may think of the underlying rationale for rural broadband grants - or Keynesian stimulus as a general economic theory for that matter - can we not all at least agree that Congress should ensure that funds devoted to support rural broadband buildout in fact are spent to benefit actual rural communities?

posted by W. Kenneth Ferree @ 9:21 AM | Broadband , Capitol Hill , Universal Service

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