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Rural Residents Still Without Broadband After Federal Tax Dollars “Mishandled”

August 5, 2015

Blue and red fibre optical cablesA recent Politico report on the Rural Utilities Service (RUS) notes that hundreds of billions of tax dollars doled out in the 2009 economic stimulus have failed to stimulate nationwide broadband connections because, well, the money and networks have been very poorly managed.


Created in FDR’s New Deal as the Rural Electrification Administration, the federal agency’s primary function was to connect rural areas through telephone lines. Fast-forward to the Internet age and policymakers naturally turned their eyes to the rechristened RUS to deliver broadband connectivity to rural and underserved areas throughout the country. Theoretically, federal grant dollars would be used to build networks in places where the private sector wasn’t – that is, not in dense, semi- or urban communities.


In 2000, then-President Bill Clinton set aside $102 million in his budget for an RUS pilot program; a 2001 Brookings Institute report noted that “widespread adoption of basic broadband” could benefit the national economy by $500 billion. Former President Bush was supportive of these efforts, proposing in 2004 that “broadband coverage should be universally available within three years.” Enter in the 2009 stimulus, which was supposed to make good on all those promises, yet Politico reports this:


“A POLITICO investigation has found that roughly half of the nearly 300 projects RUS approved as part of the 2009 Recovery Act have not yet drawn down the full amounts they were awarded. All RUS-funded infrastructure projects were supposed to have completed construction by the end of June, but the agency has declined to say whether these rural networks have been completed. More than 40 of the projects RUS initially approved never got started at all, raising questions about how RUS screened its applicants and made its decisions in the first place.”


And this:


“In the end, the watchdog’s probe found, ‘64 communities near large cities received loans and grants totaling $103.4 million.’ These networks, in a sense, were easier to build: They were located in denser communities, where a lower price tag for buildout and a higher demand for faster service made it easier to recover costs. But they weren’t in the rural, unserved areas where many in Congress wanted RUS to focus its attention.”


There’s also this:


“Federal investigators also calculated that RUS had awarded more than $137 million in loans, despite incomplete or inaccurate applications. About $30 million of its loans ‘[were] in default due to inadequate servicing,’ largely because the agency hadn’t developed strong oversight guidelines for its earliest loans — meaning the cash wasn’t “timely and thoroughly monitored.’ And another $6.8 million in canceled broadband loans ‘was not put to use in a timely fashion and was therefore unavailable for future funding.’”


The article also noted that “RUS ‘continued to make loans to [broadband] providers in areas with pre-existing service,’ while neglecting needier rural towns.”


Government-provided broadband to rural and underserved areas can be an appropriate use of tax dollars if it’s done properly, which includes utilizing the knowledge and experience of the private sector, which successfully builds and manages these technologically complex networks. But frittering away hundreds of millions of dollars in areas that are already served by the private sector or through a lack of oversight, experience or knowledge helps no one, least of all the very people government programs should be supporting.