The ARRA Broadband project is getting called to the principal’s office tomorrow. Yesterday the Subcommittee on Communications and Technology announced a Hearing on Broadband Loans and Grants.
Here’s the situation as stated in the Subcommittee memorandum…
More than three years after the American Recovery and Reinvestment Act of 2009 (ARRA) allocated $7.2 billion for broadband grants and loans, the jury is still out whether taxpayers are getting their money’s worth. Despite claims of ARRA projects being “shovel ready,” recipients of 233 National Telecommunications and Information Administration awards worth $4 billion have spent just $1.6 billion of it so far. Less than a dozen of the projects have been completed. Six of the awards worth $124.5 million have been returned or revoked. Recipients of 320 Rural Utility Service Awards worth $2.4 billion have spent $968 million. Five projects have been completed. As of July 2011, $124 million in grants and $35 million in loans have been rescinded or revoked. Allegations also persist that NTIA and RUS funds are not bringing broadband to unserved areas but instead are subsidizing competitors to overbuild privately financed networks.
Here are the numbers:
Budgeted $4 billion
Spent $1.6 billion
Revoked $124.5 million
11 projects completed
Had $2.4 billion
Spent $968 million
Revoked $159 million
5 projects completed
Congress is convening a panel of experts to talk about what’s happening, the panel includes:
- The Honorable Larry Strickling, Assistant Secretary for Communications and Information and Administrator, NTIA
- The Honorable Jonathan Adelstein, Administrator, RUS
- The Honorable Todd Zinser , Inspector General, U.S. Department of Commerce
- Mr. David Gray, Deputy Inspector General, U.S. Department of Agriculture
Causes of Current Problems
Telecompetitor notes that there are some extenuating circumstances that have made finishing projects more difficult…
The telecom industry has cited several factors (not mentioned in the memo) to explain the apparent spending slowness such as an often long approval process for environment impact studies or a shortage of fiber cabling that resulted when the April 2011 tsunami took a key vendor offline. No doubt Strickling and Adelstein will review some of these factors at the hearing.
I’ve heard from folks that both are real issues – but I’ve heard that from projects that are otherwise on track and seemingly making progress. I don’t know that the main concerns here are the projects that are running somewhat behind – but rather the projects that seem to still be hovering around the starting blocks.
Causes of Future Problems
The memo itself outlines another issue that I think may be even bigger moving forward; the FCC has made substantial changes to USF, thereby requiring changes in business plans of many ARRA grant/loan recipients…
More problems may lie ahead. The FCC has recognized the need to reform the USF’s high-cost program for a decade, with proposals in 2008 and a reiteration of that view in the 2010 National Broadband Plan. The RUS nonetheless apparently guaranteed loans under the BIP and its Telecommunications Infrastructure Loan Program on the assumption that applicants would continue to receive the same level of high-cost USF funding for the life of each loan. Now that the Commission is reforming the high-cost program, the RUS has asked loan recipients to revise and resubmit their financial projections to demonstrate sustainability.
It will be interesting to see how the Subcommittee and panel of experts addresses those issues. It’s a byproduct of the funding coming out before the National Broadband Plan – perhaps an unintended consequence but not unforeseeable.
Minnesota Projects Mentioned
Finally, two Minnesota projects were mentioned specifically in the memo. First the Leech Lake Reservation Business Committee in Minnesota declined its $1.7 million grant on the grounds that it would not be able to meet its grant requirements. And the Lake County project…
Nevertheless, industry observers have suggested that the BTOP’s and the BIP’s infrastructure loans and grants have been used to overbuild existing systems rather than extend service to unserved areas. The Government Accountability Office confirmed these suggestions at the Feb. 10, 2011, subcommittee hearing, noting that the NTIA and the RUS had performed “due diligence” with respect to overbuilding but “made a decision to go forward nonetheless” with projects that would overbuild existing facilities. Indeed, the Energy and Commerce Committee’s Subcommittee on Oversight and Investigations is already investigating recently publicized allegations by cable company Mediacom that the Lake County government in Minnesota is not only using $66 million in BIP funding to overbuild Mediacom, but committed fraud by misleading the RUS in its application.
The Lake County project has had its share of ups and downs. (Some might note that disruptions from incumbents may be one reason some projects are running behind.) Last we heard Lake County celebrating new location in Two Harbors. I did notice that their last couple of meetings had been cancelled.
The Subcommittee meeting will be held tomorrow, May 16, 2012, at 10:00 a.m. in room 2123 of the Rayburn House Office Building. I haven’t seen any notice of online broadcast.