- The Washington Times - Thursday, April 2, 2009




As taxpayers fulminate over waste and abuse of the bailout money that already has been approved, they should expect similar episodes with the $787 billion in stimulus money that is just beginning to be issued. How these funds are spent will be a crucial test of whether Congress and the Obama administration are serious about oversight and preventing government waste.

The stimulus contains $7.2 billion for broadband deployment, slated to be distributed by both the Commerce Department’s National Telecommunications and Information Administration ($4.7 billion) and the Agriculture Department’s Rural Utility Service ($2.5 billion).

NTIA primarily is responsible for telecommunications and information policy and will be advising the president on how to spend the broadband stimulus money. First, NTIA must answer questions that could have significant fiscal consequences. They include determining exactly what “broadband” means, whether or not to spend money on municipally owned broadband systems and how much to spend on “unserved” areas as opposed to “underserved” areas of the country.

Defining broadband is unnecessary because the Federal Communications Commission already has done that. An NTIA change in the FCC’s definition would lead to confusion in the marketplace and conflicting federal policies. But if the NTIA insists on taking such action, the definition should be reasonable and technology-neutral.

Regarding municipally owned broadband initiatives, NTIA should heed the history of such undertakings. In March 2008, the New York Times published a detailed account of Philadelphia’s and other cities’ failures to provide cost-effective broadband networks, noting problems with building the infrastructure, marketing and price structures.

The article noted, “Prices for Internet service on the broader market also began dropping to a level that, while above what many poor people could afford, was below what municipal Wi-Fi providers were offering, so the companies had to lower their rates even further, making investment in infrastructure even more risky.”

Typical of other municipal broadband failures throughout the nation, the Philadelphia experience begs the question of whether the federal government got the message. The stimulus bill states that “states and political subdivisions” (counties, towns and cities) are eligible for the government cash. Taxpayers have every right to ask why, if taxpayer-funded broadband initiatives routinely have lost money and inhibited private investment, the government would even consider dumping billions down that same rathole.

Determining whether an area is unserved or underserved raises additional concerns about how the $7.2 billion will be spent. In fact, a September 2005 audit by the Agriculture Department’s inspector general found that because theRural Utility Service’s interpretation of those terms 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.”

Since the RUS became responsible for rural broadband loans in 2002, more than $1.8 billion has been distributed. The agency’s effectiveness has been abysmal, as just 21 out of 68 funded projects have been completed while about 50 percent have not even started.

If NTIA and RUS continue to overbuild existing broadband systems and fail to define terms and issue rules that protect taxpayers, it is likely that much of the $7.2 billion in broadband stimulus money will be wasted. To prevent that from occurring, Congress and the administration must take a long, hard look and carefully monitor this program.

Thomas A. Schatz is president of Citizens Against Government Waste.



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