After analysis of a small number of projects being funded with the $3.5 billion worth of federal funding made available to the Dept. of Agriculture Rural Utilities Service for its Broadband Initiatives Program (BIP) NCTA opines that “the RUS’ history of funding duplicative service has continued,” and that “the current program is not a cost-effective means of achieving universal broadband availability.”

Commissioned by the cable industry’s leading trade association, the National Cable & Telecommunications Association (NCTA), Navigant Economics analysts examined “three large BIP subsidy awards” totaling $231.7 million, “about 7% of the total $3.5 billion loan and grant program.”

It examined three large BIP subsidy awards which total $231.7 million, or about seven percent of the total BIP $3.5 billion combined loan and grant program:

  • $101.2 million in western Kansas
  • $66.4 million for Lake and St. Louis counties in northeastern Minnesota
  • $64.1 million to cover a portion of Gallatin County in southwest Montana.

“While it may be too early for a comprehensive assessment of the ARRA’s broadband programs, it is not too early to conclude that, at least in some cases, millions of dollars in grants and loans have been made in areas where a significant majority of households already have broadband coverage, and the costs per incremental home passed are therefore far higher than existing evidence suggests should be necessary,” according to the NCTA study and news release.

The NCTA’s principal criticism is the RUS’ funding of broadband projects in areas where broadband services are already available, a practice that the NCTA has criticized in the past. “Reports by the Department of Agriculture’s Inspector General (AIG) and the Government Accountability Office (GAO) have shown that RUS’ prior broadband subsidy programs have not been cost effective, in part because they have provided duplicative service to areas that were already served by existing providers,” the study says.

Funding duplicative services is directly at odds with FCC National Broadband Plan recommendations, the NCTA notes. Moreover, funding such projects increases the cost of a nationwide broadband build-out by $63.7 billion. Such a build-out has been estimated to cost $23.5 billion by the FCC in its Omnibus Broadband Initiative.

At a time of fierce debate in Congress regarding reducing the federal budget deficit and national debt, Navigant and the NCTA found that BIP projects are not cost-effective. “Based on the cost of the direct grants and subsidizing the loans, the study estimates that the cost per incremental home passed will be $30,104 if existing coverage by mobile broadband providers is ignored, and $349,234 if mobile broadband coverage is taken into account.”

We suspect we’ll see some rebuttal of NCTA’s interpretation of these awards.

 

 

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10 thoughts on “NCTA Comes Out Swinging At RUS Stimulus Program

  1. Here. Let me swing back.

    Just because a community has a private sector provider DOES NOT mean the service provided is adequate to meet the economic development, education, telemedicine and other needs of the community that require tens, if not hundreds, of megs of speed. It is borderline criminal how giant telecom and cable companies have suckered some Congresspeople into believing an area covered by "advertised speeds" means individuals and businesses actually have broadband coverage.

    Communities applying for grants had to go through a lot of hoops to show that 1) people in areas supposedly served by incumbents indeed were – or were not – getting services, and 2) the speeds at which they are getting coverage meets minimum broadband levels at which you can run meaningful applications. Using 3G as a benchmark to support their claims is a pretty weak argument. If we're going to spend millions to put broadband infrastructure, it's counterproductive to build down to the lowest denominator. Applicants got bonus points for delivering faster speeds, and I believe that's a good thing.

    It's tiring listening to the large incumbents whine about "duplicate coverage" when so many of them fail to deliver speeds that impact local economic development. We have to stop being taken in by the hype of the industry, and get into the community trenches to see what they're really dealing with, and why these stimulus awards make sense. Communities and RUS did right when they supported and partnered with smaller regional or local telcos to build local infrastructure that's a counterpoint to inadequate services from larger companies.

  2. Additionally, the vast majority of people in Lake County, to name one, do not have existing options. Duplicative is an interesting word to describe running a fiber-optic network around a county mostly dependent on satellite and dial-up. Where there are services, it is crap DSL and last-generation cable. When they say duplicative, they are saying a hang-glider duplicates the functionality of a 747.

  3. Reality is, how could RUS know whether they are funding duplicative networks or not? The national broadband map is flawed, and it came out after the funding was awarded! It was done backwards. There should have been a more comprehensive effort to identify broadband availability, and not just relying on companies to respond to a BIP application in their market, first. Then award grants/loans to build capacity where it didn't already exist.

  4. FROM THE PILE ON DEPT:

    we need not be lugubrious (sat word)for we should thank the whining big telecoms who have in effect “pull our coats” (as they say around the way) to the way we all are treated LIKE technological “BABES” by the guys who have big telecom contracts and service govt

    That would be the 3 phases of govt ..(local state and federal phases if your counting) or just whunnng we “only need THEM”.. lets see if I have this right…..

    regular people are charged for access .

    content providers are charged for access.

    We are told its unlimited ..YET amazingly when some actually uses it “THEY” are admonished??

    we are told how fast it is yet they have metering plans???..

    it seems everyone pays THEM…

    PERHAPS using some of the TaXpayer money should go to free services for all…GIVE THEM SOMETHING TO REALLY WHINE ABOUT..BUT THAT IS JUST ONE PERSONS OPINION

  5. The RUS BIP rules don’t prohibit overbuilds.

    Note that NCTA never claims that overbuilds violate any RUS rules — that’s because they don’t. NCTA citing the FCC’s NBP is disingenous because the RUS is a separate agency and not subject to FCC rules.

    In fact the NBP isn’t even a rule — it’s a “plan”.

  6. Funding competition was one of the goals of the broadband stimulus funding, as stated right in the legislation. Many people and groups said when the stimulus bill was passed that this wasn't a good use of funding – but Congress (at that time) was more interested in spending money to stimulate in the short term than in spending it wisely. That at least is not RUS's fault. Now, unsurprisingly, the pendulum on the Hill has swung the other way and people are complaining about Congressional reluctance to spend money no matter how good the investment. Doesn't matter what the decision is, someone's gonna gripe.

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