Caution Needed When Building Digital Bridges | Citizens Against Government Waste

Caution Needed When Building Digital Bridges

The WasteWatcher

When one thinks about infrastructure, roads and bridges usually come to mind.  These structures not only carry physical vehicles; they also provide the capacity to run wires above ground for telecommunications systems.  These systems can also be built underground, and in the case of wireless broadband communications, ride over spectrum across the airwaves.  Many new technologies therefore run across new bridges to bring information across the country.  And when taxpayer dollars are involved, the “construction” of these services should proceed with caution.

During the Obama administration, broadband projects that were supposed to reach unserved regions of the country both failed to provide the much-touted services and overlapped services in areas where private sector broadband was already available.  The end result was federally-funded broadband overbuild in lieu of new broadband deployment to unserved populations. 

The 2009 federal stimulus program allocated $7.2 billion for broadband programs through the National Telecommunications and Information Administration’s (NTIA) Broadband Technology Opportunities Program (BTOP), and the Department of Agriculture’s Rural Utilities Service’s (RUS) Broadband Initiatives Program (BIP).  On June 7, 2012, in testimony before the Senate Committee on Indian Affairs, RUS Administrator Jonathan Adelstein testified that the stimulus program would “connect nearly 7 million rural Americans, along with more than 360,000 businesses and more than 30,000 critical community institutions like schools, healthcare facilities, and rural public agencies, to new or improved service.”   

By December 2011, RUS had issued 227 stimulus loans, grants and contract awards, totaling $1,151,246,819 in BIP funding.  At the time, 15 projects had been completed; 110 were less than 50 percent complete; 69 were more than 50 percent complete; and 33 had not yet started.  By 2013, RUS had obligated $3.5 billion in funding for the BIP program ($1 billion more than the amount provided in the stimulus) for 320 projects in 44 states and territories.

According to a July 28, 2015 Politico exposé, “Wired to Fail,” RUS sometimes ignored its rural mission by using stimulus funding for high-speed internet in well-populated areas; mismanaged broadband projects so badly that they failed or were ineffective; allowed loans to go delinquent; and permitted borrowers to go into default.

The BIP was not the only problematic broadband stimulus program.  On February 7, 2013, KUSA-Channel 9 News in Denver, Colorado, reported on the administration of a NTIA BTOP grant to build new fiber optic lines alongside those already in existence, directly competing with local telecommunications and broadband providers.

According to the report, the grant recipient, Eagle-Net, received a BTOP award of $100.6 million to bring high speed broadband services to all of the schools, libraries and anchor institutions in underserved areas of Colorado.  KUSA highlighted Eagle-Net’s use of grant funding to build these lines to locations already being served by fiber optic communication providers, such as a school in Agate, Colorado, which serves 11 students and has three different fiber optic lines to the school, including Eagle-Net.  Clearly, using funding for such purposes was a waste of taxpayer dollars that could otherwise have been allocated to serving truly unserved areas of the nation.

On top of wasting federal tax dollars, cities and counties across the country have either established or are considering their own government-owned networks (GON).  However, these projects are often riddled with waste, and sometimes fraud.  Citizens Against Government Waste typically opposes the creation of government-owned broadband programs across the nation due to the wasteful nature of these networks that often duplicate and overbuild on top of existing private sector networks.  However, when these systems are built, transparency and accountability are essential to prevent further waste of taxpayer dollars. 

For example, in 2013, a criminal investigation into accounting practices at the government-owned Bristol Virginia Utilities Authority’s (BVUA) broadband network was conducted by the local sheriff’s department, resulting in the conviction and sentencing of nine individuals for various offenses, including misuse of public funds, evasion of employment taxes, failure to report employee income to the IRS, bid-rigging, procurement violations, and violations of the State and Local Government Conflict of Interests Act.  In October 2016, the Virginia Auditor of Public Accounts released the results of an audit of the BVUA, noting that fraud happens when “internal controls are inadequate, policies and procedures do not exist or are not enforced, and collusion occurs.”

The Virginia General Assembly had an opportunity to increase transparency, accountability, and competition into the deployment of GONs in the Commonwealth through passage of HB 2108, which initially contained auditing requirements, the removal of Freedom of Information Act (FOIA) exemptions, and the submission to the state legislature of proposals to existing local broadband providers prior to deployment of a GON by a city or municipality.  While the Council for Citizens Against Government Waste strongly supported the initial language of the legislation, the bill as approved by the Virginia House of Delegates retained only the requirement to comply with FOIA requests.  While the end result of a municipal broadband system is not always the incarceration of its officials, these networks are costly and often fail due to a lack of transparency, accountability, and competition.

A better approach to increasing the digital footprint across the nation is to remove barriers to private sector investments and deployment.  These barriers include high pole attachment rates, zoning requirements, rights-of-way permitting, access to federal lands, and the need to implement a “dig once” approach to highway projects allowing networks to be installed at the same time as road projects are being constructed.

On September 13, 2016, Federal Communications Commission (FCC) Commissioner (and now Chairman) Ajit Pai proposed a Digital Empowerment Agenda to bridge the gap between communities that have the advantages of broadband internet services, and those that do not.  In his proposal, Commissioner Pai recommended the establishment of Gigabit Opportunity Zones; provisioning mobile broadband for rural America, where high costs and low population density make private-sector deployment more difficult; removing regulatory barriers to broadband deployment; and promoting entrepreneurship and innovation.

In his first address to staff as the new chairman of the FCC, Chairman Pai stated, “One of the most significant things that I’ve seen during my time here is that there is a digital divide in this country—between those who can use cutting-edge communications services and those who do not.  I believe one of our core priorities going forward should be to close that divide.”

On January 26, 2017, the FCC approved providing up to $170 million from the Connect America Fund to expand broadband deployment in rural unserved areas of New York State.  On February 2, 2017, Chairman Pai announced that the commission would be taking action to redirect the Mobility Fund toward 4G LTE investments in rural America, where service does not currently exist.  These are important steps to bridging the digital divide, while also avoiding the problems and wasteful spending that occurred during the Obama administration.

Government-funded broadband deployment efforts should be entered into cautiously.  Federal agency program administrators in charge of evaluating and processing grant requests should maintain and monitor the spending and progress of each project from start to finish through databases with measurable metrics in order to ensure the best use of any taxpayer funds involved.  State and local governments must ensure that taxpayer-funded broadband serves only those who truly have no other alternative, and only then after making absolutely certain that the private sector will not provide such services.

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The WasteWatcher: The Staff Blog of Citizens Against Government Waste