Study: Broadband Stimulus Overlapped Existing Service
Three large broadband projects funded recently by the U.S. Rural Utilities Service (RUS) largely cover areas already served by broadband providers, according to a study released Wednesday by a trade group representing cable broadband providers.
More than 85 percent of the households covered by the three projects, using money from the American Recovery and Reinvestment Act (ARRA) of 2009, have wired or fixed wireless broadband service available to them, not including 3G mobile broadband service, said the study, released by the National Cable and Telecommunications Association (NCTA).
Including 3G service, nearly 99 percent of the households covered by the three projects, in northeastern Minnesota, southwestern Montana and northwestern Kansas, have broadband service, the study said. The study counts 3G, with download speeds of 600 Kbps to 1.4 Mbps, and DSL (digital subscriber lines), with speeds up to 3 Mbps, as broadband, although providers covering parts of the areas deliver faster service.
The three RUS projects largely focus on providing fiber service to the home, with speeds in the tens of megabits per second.
"While it may be too early for a comprehensive assessment of the ARRA's broadband programs, it is not too early to conclude that, at least in some cases, millions of dollars in grants and loans have been made in areas where a significant majority of households already have broadband coverage," wrote study authors Jeffrey Eisenach and Kevin Caves of Navigant Economics, an analysis firm based in Chicago. "In addition, the [RUS] program creates strong disincentives to private broadband investment in the long run, as potential future investors will discount expected returns for the possibility that the government may step in, ex post, to subsidize a competitor."
Eisenach and other Navigant analysts have written several papers opposing government involvement in the telecom sector and other industries, although Eisenach has supported some broadband deployment subsidies. Eisenach was cofounder of the Progress and Freedom Foundation, a think tank that has championed de-regulation.
The cost of bringing broadband to each unserved home in the three projects is US$30,104, if 3G service isn't counted as broadband, the study said. If 3G service is counted, the cost rises to $349,234 per unserved home.
"Either comparison shows the cost to connect unserved households to be extraordinarily high because the vast majority of homes are already being served by another provider," said NCTA spokesman Brian Dietz.
The ARRA allocated RUS and the U.S. National Telecommunications and Information Administration (NTIA) more than $7 billion for broadband deployment and related projects. RUS gave the Kansas project $101.2 million in grants and loans to cover 4,247 square miles with fiber- or Wi-Max-based broadband.
The Montana project received $64.1 million in grants and loans to cover 154 square miles in Gallatin County with a fiber network. The Lake County Fiber Network project in Minnesota received $66.4 million to build a fiber network in Lake County and parts of St. Louis County.
Within the boundaries of the Kansas project, five companies offer seven broadband services, including 3G, the study said. In Montana, seven broadband providers offer services, and in Minnesota, eight broadband providers, including 3G carriers, offer service, the study said. In some cases, the broadband providers offer service to a small percentage of residents within the project areas.
An RUS spokesman called the program awards process "fair and open."
"The projects highlighted in the NCTA study are in rural areas that lacked sufficient broadband for rural economic development, as required by the statute," the spokesman said. "All were carefully vetted on the ground by RUS field staff, received strong support from the local community, and will vastly increase broadband capacity in their communities."
Craig Settles, a community broadband adviser, also questioned the study. Communities applying for grants had to show that residents were not getting services or were not getting adequate speeds, he said.
"Just because a community has a private sector provider does not mean the service provided is adequate to meet the economic development, education, telemedicine and other needs of the community that require tens, if not hundreds, of megs of speed," Settles said in an e-mail. "It is borderline criminal how telecom and cable companies have suckered some congresspeople into believing an area covered by 'advertised speeds' means individuals and businesses actually have broadband coverage."
The study represents "sour-grapes tactics" by broadband providers, Settles added. He also questioned the study for equating 3G service to broadband.
"It's tiring listening to incumbents whine about 'duplicate coverage' when so many of them fail to deliver speeds that impact local economic development," he said. "We have to stop being taken in by the hype of the industry, and get into the community trenches to see what they're really dealing with, and why these stimulus awards make sense."
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is firstname.lastname@example.org.
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