The RUS: A Fiscal Ruse | Citizens Against Government Waste

The RUS: A Fiscal Ruse

The WasteWatcher

The so-called stimulus bill passed by Congress and signed by the President grows government so much it would even make FDR blush.  There are countless expenditures included in the bill that have nothing to do with “fixing” the economy.  One such item is $2.5 billion for broadband deployment through the Rural Utilities Service (RUS).

More and more people in recent years have opted to pay for faster Internet service by installing broadband internet service.  Conversely, some people have opted to stick with their dial up service.  In fact, the recession could make it more likely that dial up will be around for awhile.  However, the government now wants to ensure that the whole country has access to broadband.

Not only is the $2.5 billion an obscene 700 percent increase in funding for the RUS broadband program from fiscal year 2008, the money is going to a program of questionable merit.

The predecessor to the RUS was the Rural Electrification Administration (REA), which was established in 1936 to bring electricity and telephone service to America’s hinterlands.  The REA’s mission was completed long ago, but in a congressional shell game, the REA stubbornly lives on as the RUS.  In the past, REA/RUS loans have helped to illuminate former rural outposts such as Aspen and Vail, Colo.; Hilton Head, S.C.; and Potomac, Md.  Running out of hinterlands that lack basic utilities, RUS is now in the business of subsidizing broadband service in rural areas as if it were a utility similar to electricity and telephone service.

The RUS Broadband Access Program was established by Congress as part of the 2002 Farm Bill.  Its primary goal is to provide loans to help bring Internet broadband service to unserved rural communities, which are generally defined as communities with populations of less than 20,000.

According to a February 12, 2009 Washington Post article about the RUS broadband program, “Since it began 6 years ago, $1.8 billion in loans have been distributed.  Of the 68 projects funded, 21 are nearly complete and about half have not begun.  An Agriculture spokesman could not confirm whether the rural utilities service program has completed any projects.”  On top of this lack of progress, the broadband access program faces management and agenda problems, which are evident given the more than $30 million in broadband loans that have gone into default.

The first problem with the agenda is that the broadband program has lost its focus on serving rural America.  According to a September 2005 audit by the U.S. Department of Agriculture’s (USDA) inspector general, “RUS has not exclusively served those rural communities most requiring Federal assistance to obtain access to broadband technologies. 

Because RUS’ definition of ‘rural area’ is too broad to distinguish usefully between suburban and rural communities, the agency has issued over $103.4 million in grants and loans (nearly 12 percent of $895 million in total program funds) to communities near metropolitan areas… Though the law does not explicitly forbid issuing loans to communities with preexisting service, we question whether the Broadband Loan Program should be providing funds for competition in many of the communities served, while other communities go entirely without service.”

Second, instead of allowing the free market to flourish, the RUS has been subsidizing private companies to provide broadband in neighborhoods that already have service.  The IG report noted “one of the more highly publicized cases, [where] RUS issued loans to a company providing broadband access to affluent suburban communities a few miles outside of Houston, Texas…the subdivisions’ proximity to urban areas also made broadband services available to them through means other than the pilot loan program….We concluded that, in this case, the Government’s loan was not being used to extend service to rural areas that would not otherwise receive access to broadband, but instead to subsidize a company that would have provided the same service without the loan.”

As spending on the stimulus bill moves forward, the broadband program will be a poster child for how the money will not do anything to fix the economy.  The RUS simply cannot effectively spend $2.5 billion in 18 months on a program that failed to successfully spend its first $1.6 billion in six years.

-- David Williams

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