Unserved Should Mean Unserved

The following is an edited excerpt of testimony delivered by BendBroadband CEO Amy Tykeson to the House Appropriations Subcommittee on Agriculture, Rural Development, FDA, and Related Agencies on Oct. 23.

The Rural Utilities Service Broadband Loan Program is a prime example of a program that was intended to make it economically feasible for the private sector to serve rural communities that lack broadband access. Though we support the goals of the RUS Broadband Loan Program, we are very concerned about how this program has been implemented and managed. …

BendBroadband and other cable operators in rural communities all across America have taken the risk to provide broadband service in high-cost rural areas. Subsidizing a company to overbuild an existing provider could have the perverse effect of making it increasingly difficult, if not impossible, for a company that entered the market first using private risk capital to continue to provide quality service in that market.

There are numerous examples of loans being granted in areas already served by one or more providers. … In Fairfield, Iowa, the RUS granted a $9.475 million loan to an applicant to compete against two existing broadband providers. The cable operator in that case had invested millions of dollars to bring this town of approximately 9,500 people a state of-the-art 860 MHz system, with capacity that exceeds or equals the capacity of major metropolitan areas.

Recognizing these concerns … the RUS began a rulemaking to update its Broadband Loan Program regulations, and in May 2007, the RUS released its Proposed Rule. We believe, however, that while the RUS is taking constructive steps to reform the program, the Proposed Rule does not go far enough to assure that the program focuses on extending broadband services to unserved areas. …

The RUS proposes to prohibit funding only in areas where there are four or more Existing Broadband Service Providers (EBSPs). Even if the definition of EBSP were corrected to accurately count all providers … this would still ignore the fact that the RUS would be granting loans in areas where vibrant, free-market competition would likely already exist. Not only does this punish the providers already offering service but it also makes loan funds unavailable for truly unserved areas.

Nor should the RUS limit the definition of EBSP to an incumbent based on a “take rate” of 10% of households. This rule would effectively disregard numerous existing providers and allow loans even in communities with more than three incumbents. If such a definition were used, one could easily see a situation whereby new broadband market entrants who have just begun to deploy service and smaller companies fighting for market share in already competitive markets would not be counted.

Finally, to help ensure that the Program will reach unserved areas, the Proposed Rule would also require that applicants proposing to build out beyond their service area must commit that 40% of the households to be reached do not have access to a broadband service provider or have access to only one broadband service provider.

Although we certainly agree that there should be a minimum number of unserved households in an area prior to that area being eligible for funding, we believe that this requirement must be modified to solely apply to households without access to any broadband service. …

Unserved should mean unserved.