Rural Broadband Programs Helping Fewer Customers
A steadily dwindling number of customers have received broadband service through the Agriculture Department’s Rural Utilities Service loan and grant programs over the past nine fiscal years, government data show. Loan and grant programs begun under the Clinton administration connected 315,000 customers in FY 2001, but that number is projected to drop to 23,000 in FY 2009, USDA annual reports show. Shifting terms for loan qualifications and complex application procedures drive many applicants away, according to Government Accountability Office and Congressional Research Service reports and interviews with those familiar with the process.
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“Applications take a tremendous amount of time and money to prepare,” said Christopher McLean, a consultant with e- Copernicus and former RUS official. Some applications are at least five or six inches thick, and can take a long time to process, he said. The 2008 farm bill tries to make the application process easier by giving the Agriculture Department authority to lower costs and paperwork for first- time applicants of loans and loan guarantees, particularly small companies and start-up Internet providers.
The Agriculture Department is readying an announcement of some new broadband loans in the next week or two, a spokeswoman said. About a half-dozen applications are pending. The department announced $15.6 million in broadband grants to 25 communities in 16 states at the end of July. The largest grant in that group, $1 million, went to Copper Valley Telephone Cooperative in Alaska to provide service to an Alaskan native village. Many of the loans provide service to rural health clinics, public safety and schools and were granted to a variety of small cable providers, rural telephone companies and Internet service providers.
The Bush administration requested no funding for a broadband grant program in FY 2009, maintaining as it has in past years that loan programs are more suitable than grants. “Building broadband infrastructure in rural America is expensive and requires extensive amounts of capital,” said the administration’s FY 2009 budget documents.
Disagreeing, the Senate Appropriations Committee approved a bill (S-3182) in July authorizing $13.4 million for broadband grants. However, that bill is likely to die along with several other incomplete appropriations measures, and Congress instead will pass a continuing resolution to keep the government running until a new administration and Congress take office (CD Sept 4 p2).
To receive grant funding, projects must serve a rural area of 20,000 or fewer where no broadband services exist. The programs must provide free basic service, defined as 200 kbps upstream and downstream to all community facilities. The program requires that awardees contribute a matching contribution equal to 15 percent of the requested amount. Since the RUS broadband loan program began, $81 million in grant money has been distributed to 166 communities. A pilot program begun under the Clinton administration provided $20 million in FY 2002 and $10 million the following fiscal year. Amounts since then have stayed around the $9 million level.
RUS’s single largest loan of $267 million serving 518 communities in 17 states was announced in March. The vender, Open Range Communications, will provide wireless broadband and satellite services.
RUS is the only government agency that manages loans for broadband loans and grants, said a Congressional Research Service report. The agency proposed rules in 2007 to revise its loan rules and regulations, seeking comment on an array of issues from the appropriate broadband speed to definition of what constitutes a rural area. A final rule has yet to be published. RUS must incorporate changes required by the farm bill in its final rule, which some speculate may be delayed until a new president takes office.
The farm bill includes a new definition of “rural” and puts rules in place to assure that loans go to companies seeking to serve areas with no service. For example, the bill said a “rural area” is a place other than a city or town with a population greater than 20,000 or contiguous to a city or town with a population greater than 50,000. Places with more than 200 housing units per square mile also could be excluded. Loans can’t be made to service areas that have three or more incumbent providers except in special circumstances.
Any changes in the broadband program “will likely result in ‘winners and losers’ in terms of which companies, communities, regions of the country and technologies are eligible or more likely to receive broadband loans and grants,” the CRS report said. The Government Accountability Office said in a 2005 report that lower broadband subscription rates in rural areas are a result of service not being available, rather than a “lesser tendency of rural households to purchase broadband service.” And a 2008 Pew Internet Project survey found that 60 percent of suburban areas have broadband at home, compared with 38 percent for rural areas.