Net Neutrality For All, Part 4

You can read Part 1 of this article here.
You can read Part 2 of this article here.
You can read Part 3 of this article here.

Lessons from Previous Rural Expansion Programs

The project will most likely be modeled after the Department of Agricultures Rural Utilities Service Broadband Grant and Loan Program (RUS). This was a program designed to extend broadband services into rural areas of the country. The program was a one stop shopping solution to the broadband needs of any rural area, and was met with little or at least questionable success. An audit of the program reported that, ?During the 4 years the Rural Utilities Service (RUS) has administered Federal loans and grants for extending broadband service to rural America, the programs? focus has shifted away from those rural communities that would not, without Government assistance, have access to broadband technologies. This change in the programs? emphasis has occurred for two reasons. First, in its loan program, RUS has not satisfactorily implemented statutory requirements for serving rural instead of suburban areas, nor does it have a system that can guarantee that communities without preexisting service receive priority. Second, RUS? inconsistent administration of the programs has resulted in irregularities in approving and servicing grants and loans. Of the $895 million in loans and grants funded, we reviewed $599.1 million (67 percent) and questioned the use of over $340.4 million?almost 57 percent of the approved funds reviewed.?[31]

What occurred with the RUS rural broadband program was that there were no clear cut well defined statements of what a rural community was, what the requirements were for installation of services, and consistent adhering to the grant and loan requirements they had defined. This resulted in the program having, ??issued over $103.4 million in loans to 64 communities near large cities, including $45.6 million in loans to 19 planned subdivisions near Houston, Texas.?[32]

RUS was also funding competing service providers without adhering to program policy that stated that underserved or areas with no service were priority to receive funding. The audit also addresses the fact that the Office of the Inspector General is concerned about the ethicality of supporting competing service providers, stating, ?Furthermore, we question whether the Government should be providing loans to competing rural providers when many small communities might be hard pressed to support even a single company. In these circumstances, RUS may be setting its own loans up to fail by encouraging competitive service; it may also be creating an uneven playing field for preexisting providers operating without Government assistance.?

If the Obama administration?s desire is to extend broadband into rural areas, and this is their model, we have a problem. The taxpayer would be just as easily served to throw their wallet out the window as they are driving down the street. At least they would know where their money went in that case. This model needs serious work and accountability. And the ethicality argument is a very good one. Should the government reimburse service providers that go out of business in low volume user areas because the government chose to subsidize a competitor to come into their area and offer service? There is no scenario in which this should occur.

Recommendations Moving Forward

Broadband should be instituted in communities without a strings attached approach. The appropriate move would be to deregulate broadband industries making it easier and more cost efficient for them to expand into rural areas. If the only way the administration will promote broadband expansion is through public funding, operated via a set of rules and regulations determining how that network can be built and how it can be managed, then that is simply not in the best interest of the consumer, and that promotion should be discontinued.

Competition and community need should be the driving force behind expansion of services; giving the free markets a chance to appropriately solve any problem areas and the needs of rural communities. Ultimately, with passage of the American Recovery and Reinvestment Act, public funding is unfortunately assured. But there is still an opportunity to recommend a change in burdensome regulation and neutrality requirements during the creation of the National Broadband plan and implementation. With great emphasis it is recommended that there be reconsideration on forcing the implementation of FCC net neutrality requirements so that the impeding of technology and innovation that may interfere with wealth creation is avoided. Strict refinement of policies used in RUS with defined terminology of what is considered a rural area and plainly distinguish what is an unserved or underserved area. Additionally, ethics policies need to be both put in place and enforced in regards to awarding grants to companies that would use funds to move into areas already served by a service provider, or subsidizing one company over another in underserved areas where two providers may exist and one is seeking to expand services. It cannot be stressed enough that government should not be picking winners and losers; maybe even more so when it comes to technological solutions and innovation.

-nick

A full copy of this article including complete citations can be found here.