Failure to Connect

[Commentary] Political motives make for bad business decisions. It is amazing how often people see that truth play out right before their eyes without being willing to accept it. The US Department of Agriculture's Rural Utilities Service's mishandling of $3.5 billion in taxpayers' money designated for rural broadband is just the latest case in point. In 1994, Congress created the Rural Utilities Service to provide loans and grants to help finance rural utilities projects, replacing other USDA programs -- among them the Rural Electrification Association – that had played effective roles in rural development. Created in 1935, the Rural Electrification Association subsidized farmers and others to build electrical systems where none existed. In its first four years, the percent of rural households with electricity went from 10 percent to 25 percent. I remember my own rural community obtaining USDA financing in the 1960s to build our first water lines.

The Rural Electrification Association was a great example of how the government can support rural development. The Rural Utilities Service was expected to carry on that tradition. Alas, we were not so lucky. Indeed its work in rural broadband development has been embarrassingly ineffective according to recent research by Politico and the Government Accountability Office. In the rush and hype of the stimulus spending at the start of the Obama administration, Congress gave the service $3.5 billion to fund rural broadband infrastructure. The Rural Utilities Service program is indeed a lesson in how to not build broadband. However, given the context, it is surprising that the program did not have more failures.

[Mark Jamison is a contributor to American Enterprise Institute's TechPolicyDaily.com]