Last updated: April 29, 2011 - 8:45am
More coverage of a study commissioned by the National Cable & Telecommunications Association, an industry trade group, which concludes that the federal government, through the broadband stimulus program at the Department of Agriculture, is subsidizing some companies to compete against others that didn't receive subsidies.
The study evaluated projects in Kansas, Minnesota and Montana. "They were successful in getting Uncle Sam to subsidize them and make it cheaper to compete against their cable company competitors," said Jeffrey Eisenach, an author of the study who is an adjunct professor at George Mason University School of Law. One project is in Lake County, Minn., a remote county that borders Canada. Sponsored by the county government, the Lake County Fiber-Optic Telecommunications Project got $66.4 million in loans and grants. Initially, the project didn't receive funding because it didn't have enough customers. So officials expanded the project area to include two towns, Ely and Babbitt, in neighboring St. Louis County, according to project manager Jeff Roiland.
Midcontinent Communications already services the two towns, and officials at the company were surprised when the Lake County project entered their service area.
"Are customers getting a better deal?" asked Tom Simmons, the senior vice president of public policy at Midcontinent. "Is their ability to have a choice of providers worth the money the government spent?"
Jonathan Adelstein, the administrator for Rural Utilities Service, said the stimulus awards were fair and open, and they were for projects that lacked broadband for rural economic development.
House Republicans have questioned the program, noting that all of the awards had to be issued by Sept. 1, 2010, while the National Broadband Map, which charts broadband availability, wasn't published until this past February.
But Larry Sevier, CEO of Rural Telephone Service in Kansas, says the federal government was smart in allowing award recipients to create networks in some more-populated areas that already have service. The law allows the Rural Utilities Service to fund projects as long as 75% of the area lacks sufficient access to high-speed broadband to support rural economic development. His company received more than $100 million in grants and loans to bring broadband to unserved communities in northwestern Kansas. The company used some of the money to expand in Hays, which already had service providers. By establishing a presence in Hays, Sevier says, the company had access to a customer pool that will enable it to pay back its loans and reach communities without service. Ultimately, he added, broadband will enable young people to stay in rural areas.
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