BTOP-BIP Brouhaha

On February 27, the House Commerce Committee’s Communications and Technology Subcommittee held an oversight hearing on the American Recovery and Reinvestment Act (ARRA) broadband stimulus programs: the Broadband Technology Opportunities Program (BTOP) directed by the National Telecommunications and Information Administration (NTIA) in the Department of Commerce and the Broadband Initiatives Program (BIP) run by the Rural Utilities Service in the Department of Agriculture. Larry Strickling, the head of the NTIA, and RUS Administrator John Padalino testified before the Subcommittee.

On February 11, the New York Times previewed this week’s hearing noting that rural areas certainly suffer a lack of high-speed Internet access. While about 88 percent of urban households in the United States have access to high-speed cable Internet service, only 40 percent of rural households do, according to NTIA’s and the Federal Communications Commission’s National Broadband Map About 20 percent of United States households have access to fiber optic Internet service, the fastest connection, compared with 86 percent in Japan and two-thirds in South Korea. But in the haste to get broadband everywhere, some grant planners appeared not to have taken into account the current condition of infrastructure.

The ARRA charged the NTIA with creating the $4.7 billion BTOP. Of that money, the NTIA used approximately $300 million to create a National Broadband Map and approximately $4 billion to award 233 broadband grants. Congress rescinded approximately $300 million in 2010 for other spending. NTIA used the rest for administration and oversight. The ARRA charged the RUS with creating the $2.5 billion BIP. RUS dedicated $2.28 billion to broadband grants and used $87 million to back $1.26 billion in broadband loans. The RUS used the rest for administration and oversight. Altogether the RUS issued 320 BIP awards. The NTIA says that by September 2012, its grant recipients had deployed more than 78,000 new or upgraded network miles in 51 states and territories; connected or improved service to 11,200 “anchor institutions” across 45 states and territories; and installed more than 38,600 new workstations in public computing centers across 38 states. The NTIA also says that training and adoption projects led 510,000 households and 12,000 businesses to subscribe to broadband services. The RUS says that its awards will provide access to 2.8 million households, 364,000 businesses, and 32,000 anchor institutions across more than 300,000 square miles.

Subcommittee Chairman Greg Walden (R-OR) and his staff, from the get-go, indicated that the hearing would focus on possible waste, fraud and abuse in the programs that were allocated $7 billion in ARRA and Republican members of the Subcommittee claimed throughout the hearing that the program is rife with wasteful spending. A background memo from the Subcommittee’s majority staff highlighted that approximately $611 million of the funding covering 42 BTOP and BIP projects has been revoked, relinquished, or suspended. “The question is,” the memo reads, “whether [the programs] have failed to minimize costs, maximize benefits, and generate adequate return on investment, especially in the current fiscal climate. Better directing the money to areas where there was no economic business case for the private sector to deploy service would have helped. That, at least, would have focused government intervention on market failures and been more targeted to the ostensible goal of expanding broadband access to people for whom service was not available.”

"Promoting broadband is a laudable goal. But there are many laudable goals," Chairman Walden said. "From what we know now, the government has spent millions on equipment it did not need and on stringing fiber to areas that already had it." Rep Joe Barton (R-TX) questioned the necessity of the $7 billion program: “When 220 million Americans have access to broadband in their homes and on their iPhones and iPads, 96 percent of the country has access in some shape, form or fashion, it really calls into question why we need the program. It’s not that it’s a bad program. It’s not that it’s even a wasteful program. But is it a necessary program when this weekend we’re going to have sequestration kick in and it’s going to cut $85 billion and if you believe President Obama the sky is falling?”

Subcommittee Democrats, however, defended the spending, arguing that while there will always be problems with large government programs, the broadband stimulus has been worthwhile. "The investments made in broadband infrastructure are having a profound impact in local communities around the country," said Rep. Anna Eshoo (D-CA), the ranking member of the subcommittee. "I don't really understand how any of my colleagues can argue that providing better, faster Internet and more digital literacy training to underserved and unserved areas of this country is something we should criticize," Rep. Mike Doyle (R-PA) said.

NTIA's Larry Strickling pushed back against the Republican criticism in several testy exchanges with lawmakers. Chairman Walden focused on a project recently flagged by the Department of Commerce Inspector General and the West Virginia Legislative Auditor (see Why a one-room West Virginia library runs a $20,000 Cisco route). Both concluded that a $126.3 million BTOP grant awarded to West Virginia resulted in overspending and that no capacity or needs assessment had been done beforehand. But Strickling maintained, “there is no real showing of wasted dollars.” [Strickling also defended NTIA oversight in a column released Feb 22]

Overbuild
Under the ARRA, the purpose of the BTOP infrastructure grants was to “provide access to broadband service to consumers residing in unserved areas” and “provide improved access to broadband service to consumers residing in underserved areas.” The NTIA defined an area as “unserved” if at least 90 percent of households lacked access to terrestrial broadband service providing at least 768 kbps downstream and 200 kbps upstream. It defined an area as “underserved” if at least 50 percent of households lacked access to such broadband service, if no more than 40 percent of households subscribed to such service, or if no broadband service provider advertised speeds of at least 3 Mbps downstream. The ARRA directed the RUS to focus on unserved and underserved areas, requiring at least 75 percent of the area served by a BIP project to “be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development,” with priority for projects that “provide service to the highest proportion of rural residents that do not have access to broadband service.” Nevertheless, many carriers have complained that awardees have used BTOP and BIP grants and loans to overbuild existing systems rather than extend service to unserved areas. Pete Kirchhof, Executive Vice President of the Colorado Telecommunications Association, testified, “First and foremost, federal agencies should insure that taxpayer dollars are not used to duplicate infrastructure development in rural communities.” Republican members of the Subcommittee echoed those concerns during the hearing.

NTIA’s Strickling said that he did not see the middle mile-focused BTOP projects as overbuilding, since they were targeting anchor institutions with high-speed broadband that private companies could tap into via interconnection agreements at reasonable and nondiscriminatory terms. Some 600 such deals have been struck, he said. He said a fundamental feature of the subsidies was to “prime the pump” for additional private-sector investment. Strickling was asked point blank whether the BTOP programs were overbuilding existing service. His response: That depends on the definition of “overbuild,” arguing that the presence of Internet service at 4 Megabits per second was not the same as having the 100 Mbps service that many schools need.

Universal Broadband
There did seem to be general consensus at the hearing that the U.S. could do a better job of bringing broadband Internet connections to the entire nation. Writing in the Financial Times on February 24, Edward Luce faulted the Obama Administration not for BTOP BIP, but for having a too-cozy relationship with Comcast, America’s largest cable television and internet provider and a near monopoly in most of its largest cities. “The FCC has been a good friend to Comcast and Time Warner Cable the two largest cable providers that dominate US broadband,” Luce writes, “ In contrast to the spread of electricity and telephones, where the US was far ahead of the rest of the world, Washington has abjured the same regulatory promotion for the internet. Through brilliantly effective lobbying, US cable companies have escaped the universal access and affordability clauses that were imposed on telecoms and electricity companies in earlier eras. And availability and cost are the two driving factors in demand and uptake.

As Headlines readers know, universal broadband is one of our favorite topics at Benton, so this is not the last you’ll hear of BTOP, BIP or other efforts to bring high-speed Internet to everyone in the U.S. Here’s a quick look at next week’s agenda and, ‘til next time, we’ll see you in the Headlines.