The Rural Broadband Boondoggle | Citizens Against Government Waste

The Rural Broadband Boondoggle

The WasteWatcher

In the 2009 stimulus bill, Congress allocated $2.5 billion to the Rural Utilities Service (RUS) to fund its Broadband Initiatives Program (BIP), all of which was supposed to be spent by the end of June 2015.  This was a massive influx of money for a small agency whose previous annual average budget for broadband programs was approximately $290 million in direct loans and grants.    

According to a July 28, 2015 article in Politico, ”Wired to Fail,”, RUS Administrator Jonathan Adelstein reported to Congress in 2009 that the stimulus funds would help connect nearly seven million rural Americans, 360,000 businesses, and 30,000 local institutions such as schools, public service agencies, and health care facilities.

But by the time December 2011 rolled around, RUS had issued 227 stimulus loans, grants and contract awards, totaling $1,151,246,819.  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, the 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 Politico, 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.

Politico cited reports from the Government Accountability Office that found the RUS had difficulties processing applications and servicing loans, which were symptomatic of larger management issues at the agency.  More than $137 million in loans were issued even though the applications were incomplete or inaccurate; and about $30 million of its loans were in default because the agency did not have strong oversight guidelines on the earliest loans.  Another $6.8 million of cancelled loans were unavailable because the funding was not put to use in a timely manner.  

The mismanagement of the broadband program preceded the stimulus funds, begging the question as to why RUS was entrusted with such a large amount of stimulus funding, which required the agency to issue record amounts of grants and loans faster than it ever had before.  Of course, that was a problem for many other recipients of stimulus funds, but few misspent the money as badly as RUS.

The Politico article noted that RUS “killed 42 broadband infrastructure projects that it had heralded only months earlier.  The agency rescinded $300 million in loans and grants before a single check was written.  In many cases, local officials struggled to finance their share of their networks, or obtain the permits needed to lay new fiber cables or erect new wireless towers.”

None of this information was made public until after the GAO issued a report in 2014 castigating RUS.  And further details on the failures only came to light after Politico filed a Freedom of Information Act request to the RUS, after which it was revealed that “the 42 cancellations meant as many as 430,000 residents” did not receive new or improved services.  For example, 17,000 homes in Panola County, Mississippi and 2,000 homes in Franklin County, Indiana, never got the promised service upgrades.

Perhaps one of the worst ventures was KeyOn Communications, based in Omaha, Nebraska.  After repeatedly turning down the company’s application, RUS finally approved a $10 million wireless project.  However, Politico noted that “the award still couldn’t save the company, which had to sell off its assets before any stimulus payments could begin.”

The RUS broadband program has also been under the microscope at Citizens Against Government Waste (CAGW) for many years.  CAGW’s 2014 book, Telecom Unplugged: Ushering in a New Digital Era, cited the dysfunction at RUS in managing the projects funded under the stimulus program, as well as internal mismanagement of individual projects across the nation.  Among the issues cited in CAGW’s report was the purchase by one state of a high volume of large-capacity routers left sitting in a warehouse because many of the state’s public facilities already had broadband routers; the funding of BIP projects that often overlapped pre-existing RUS-subsidized providers; and the approval of 10 projects totaling more than $91 million that could not be completed within the timeframe imposed by RUS.

As GAO Physical Infrastructure Issues Director Mark Goldstein told Politico, “We are left with a program that spent $3 billion and we really don’t know what became of it.”  His remarks and the clear evidence of massive mismanagement of the RUS’ broadband stimulus program reinforces the need for the Department of Agriculture to drop that initiative and focus solely on its mission to “provide leadership on food, agriculture, natural resources, rural development, nutrition, and related issues based on sound public policy, the best available science, and efficient management.” 

CAGW has long maintained that the RUS itself has outlived its usefulness and duplicates other federal programs intended to provide services to rural communities.  Since 1993, CAGW has cited both the RUS and its predecessor, the Rural Electricity Administration, as an area where the government could cut spending in CAGW’s annual Prime Cuts report.  It is high time to end this rural broadband boondoggle.

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