Over $118 Million in Broadband Stimulus Awards Have Been Returned

As more and more broadband stimulus winners begin to break ground on their projects, at least a dozen stimulus winners have opted not to join them.

Unused awards represent a small fraction of roughly $7.2 billion in awards made in the broadband stimulus program—and the money involved, which Telecompetitor estimates at approximately $118.2 million—will be returned to the general treasury. Nevertheless, Telecompetitor thought it would be useful to look at which winners opted not to use their awards and why.

Returned awards tallies

First, a breakdown of the returned awards.

The broadband stimulus program was administered by two agencies–the National Telecommunications and Information Administration and the Rural Utilities Service.

An NTIA spokeswoman told Telecompetitor two awards made by that agency will not be used by the winners. The value of those two awards is approximately $37.3 million.

In mid-March, an RUS spokesman who is no longer with the organization, told Telecompetitor that nine award winners had opted not to take awards made by the RUS, including one company that returned two awards. Since then, press reports reveal that at least one additional RUS award winner has opted not to use its award.

When Telecompetitor asked the RUS for an update, a different spokesman said that at this time, the organization is not maintaining a list of companies that do not plan to use their awards. The total value of the 11 rejected RUS awards of which Telecompetitor is aware is approximately $80.9 million.

There was no single over-riding reason why stimulus winners opted not to use their awards, but all of the reasons fit into one of five categories. The biggest single reason stimulus winners didn’t use their awards—cited by four organizations–was that they found the terms of the award too daunting. Another three winners ran into problems with the project itself. Two more winners said that in the time between when they applied for funding and received it, broadband became available in parts of their project where it had not been available previously, minimizing the need for the project. And one project was scrapped because the company that proposed it was acquired by another company that didn’t want to use the technology proposed in the project.

The remaining three projects involved two organizations that did not respond to attempts by Telecompetitor to contact them. Telecompetitor also was unable to uncover any published reports about why these two organizations did not accept their awards.

Terms were too daunting for four award winners

Rural Texas telco Dell Telephone Cooperative was one of the four stimulus winners that found the terms of its award too daunting. The telco won a $435,000 grant from the RUS to bring fiber to a remote New Mexico community. But Denny Bergstrom, general manager for the carrier, told Telecompetitor that when he attended a three-day workshop about the requirements for award winners, he began to get cold feet.

“It was going to be a nightmare for our accounting department,” said Bergstrom, who noted that the company’s accounting department has just a few people. “We were going to be doing as much work in house as people who got $20 million.”

Another concern was that if Dell Telephone ever wanted to sell the exchange where the stimulus funding would have been invested, it would not be able to do so until it repaid the entire grant amount—even if the proposed sale was for a lower dollar amount.

“I asked our RUS rep if we could turn the money back in and he said yes,” recalled Bergstrom.

Dell Telephone is still hoping to get broadband to the community where the grant would have been spent, but is now considering a less costly wireless deployment instead of fiber.

Another small Texas telco that opted not to use an RUS grant is Five Area Telephone Cooperative. One of the telco’s key concerns was the iron-clad deadlines it would have had to meet. The company opted instead to seek a traditional RUS loan for its project.

Another organization that opted not to use its stimulus grant was the State of Wisconsin, which received a lot of publicity at the time it made the decision. A state of Wisconsin administrator told a local media outlet that there was too much risk involved with accepting the grant. Federal officials, he said, wanted a commitment that the fiber-optic cable underlying the network would be used for at least 20 years but the state had a contract to lease fiber from its supplier for only five years.

A statement that NTIA Administrator Lawrence E. Strickling made to the U.S. Department of Commerce Subcommittee on Communications and Technology offers a bit different take on the State of Wisconsin award, however. Referring to that and another NTIA stimulus award that was not used, Strickling said, “In both of these cases, NTIA worked with the awardees proactively to identify and address issues that could have jeopardized the ultimate success of the projects and wasted taxpayer dollars.”

Unique project problems

An example of a project that encountered its own ‘unique’ difficulties was one that would have brought broadband to areas of the state of Washington. A local media outlet reported that the Chelan Public Utility District opted not to use the award because a study done by the PUD subsequent to the application filing suggested that the project proposal had underestimated deployment costs.

No longer under- or unserved

David Pierce, president and CEO of Education Networks of America, issued a statement saying “Due to ongoing build out and the increased availability of commercially available high-speed broadband service in Indiana, ENA decided to terminate its grant with NTIA.” Pierce added that the organization was able to deliver an upgrade to fiber-based service to one third of the community anchor institutions within the proposed project area without the grant money.

The ENA project was one of the projects–along with the state of Wisconsin project–that Strickling credited the NTIA with helping to stop.

Some winners are mum

A broadband wireless stimulus project in Illinois failed to move forward because the company that proposed it—Norlight, Inc.—was acquired by Windstream. Interestingly Windstream itself won numerous stimulus awards, but those awards were primarily for high-speed DSL projects. Windstream declined to pursue the Norlight project after the acquisition because of its preference for wired projects, a Windstream spokesman told Telecompetitor.

Some award winners that, according to the RUS, opted not to use their awards—Digital Bridge Communications, which opted not to use awards in won in Mississippi and Indiana, and Telecom Cable LLC, which is not using an award it won for a Texas network are being quiet about their reasons. Neither organization responded to inquiries from Telecompetitor and an Internet search failed to uncover any other clues about what might have happened with either of these award winners.