Over the long weekend I started to read a new report from the Government Accountability Office (GAO) that raises questions about the RUS and funding for broadband access in rural areas. I started the report several times and finally just finished it. My difficulty in reading it stems from wondering what in the heck the feds are asking about the broadband programs. But that may have been the researchers’ point. Their recommendations are…

• evaluate loans made by RUS through the broadband loan program to identify characteristics of loans that may be at risk of rescission or default; and
• •align performance goals under the “enhance rural prosperity” strategic objective in the APR to the broadband loan program’s purpose, to the extent feasible.

I think this is one of those topics that’s wonky but very important. It’s important to Minnesota – because traditionally we have seen a lot of the funding as the map below indicates. It’s important because what gets measured gets done and what gets measured positively gets funded again. Finally it might be helpful to the Office of Broadband Development as they talk about the Minnesota broadband fund and how to manage and measure it.

The report starts with the premise that the “USDA Should Evaluate the Performance of the Rural Broadband Loan Program.” How do you rate performance?

Loan repayment?

According to the report…

Of the 100 RUS loans approved through the loan program, 48 are currently being repaid, and 9 have been fully paid back. Forty three are no longer active, either because they were cancelled before they were paid out (25 rescinded) or because the provider defaulted by failing to abide by the terms of the loan (18 defaulted).

I think the difficulty here is using business measures for government funding. If there was a business case to build out in these areas, government funding wouldn’t be necessary. One provider interviewed for the report indicated that even if a grant helped deploy broadband a business case can be difficult to make to maintain a connection to remote areas with low population density. So loan repayment, while nice, is not a great indicator of success.

The Legislators who created the Minnesota Broadband Fund were smart to create a grant program, not a loan. The grant is really an investment in infrastructure that will help the State shift services to remote areas to online services. The money may be recouped in cost saving down the line rather than repayment.

Multiple providers?

The researchers looked at how many providers served areas with and without RUS funding. There was little to no difference – although they noted that assessing information on a county-wide level was perhaps not adequate since some areas served were not lager enough to move the arrow on a county-wide assessment.

Looking at number of providers is using a metro metric on rural research. Multiple providers do create customer-friendly competition in metro areas. But in the most remote areas, with low population density there may not be a critical mass of potential market to support sustained competition. Therefore competition because counterproductive.

Deployment?

Deployment is a first step for broadband expansion – but without adoption, it’s not valuable. This I think is an important distinction and one that the researchers may be trying to highlight…

The goals in USDA’s APR do not fully align to the purpose of the RUS broadband loan program. The purposes of the loan program are to improve broadband deployment in rural areas—that is, increase the number of broadband subscribers with access to new or improved broadband service … This performance goal is assessed using data on the number of subscribers to be served for each loan, derived from applicants’ estimates in their approved loan applications.54 This method does not measure actual adoption of RUS-financed broadband services. As the National Broadband Plan states, “adoption is necessary for utilization, but utilization is necessary to extract value from a [broadband] connection.”

We have to stop asking about deployment and access except as a potential barrier to adoption. It’s the difference between buying a treadmill and using it. We’re just asking the wrong question. We don’t need to know if you own a treadmill – but are you using one? Once we ask that question it opens the door to funding that gets to the root of the issue. Funding may still be required for deployment but it may also be well spent in adoption programs.

Economic development?

The report indicates that RUS-recipient counties did better economically…

According to our analysis of RUS loans and economic development data, counties affected by at least one approved RUS loan were associated with modestly higher levels of employment and payroll after the year of loan approval and in all subsequent years, as compared to counties that did not receive RUS loans.47

We found that RUS loans are associated with a one to four percent higher level of employment and payroll in affected counties. As noted above, stakeholders told us that broadband access can help make businesses more efficient, which can lead to job creation and increased payroll. However, we found no relationship between RUS loans and the number of total business establishments in a community. We ran the model using several specifications, most of which involved alternative comparison groups of unaffected counties, and our results were consistent.

Yet apparently this isn’t part of the specifications…

Furthermore, USDA’s APR does not have any goals or measures to determine the loan program’s progress towards economic development outcomes.

Economic development, healthcare and potential saving in government services seem like the top things that the USDA might want to measure. They aren’t easy to measure and there are lots of contributing factors but it seems like looking at the impact of funding on these factors help to determine a successful government investment. Last year the National Agricultural & Rural Development Policy Center (NARDeP) did a report that looked closer at the impact of rural broadband. They make the case that broadband boost the economy but also found that adoption programming was at least as important in rural areas as access…

Broadband adoption thresholds have more impact on changes in economic health indicators between 2001 and 2010 than do broadband availability thresholds in non-metro counties

Again the Minnesota Broadband Fund does contain a component of broadband adoption. I’m not sure how much of a component – maybe we’ll find out when Danna MacKenzie, Director of the MN Office of Broadband Development, talks about the fund for a webinar on July 10.