Policy

NCTA: Broadband Subsidies Waste ‘Millions’

4/18/2011 12:01 AM Eastern

Washington — Cable operators are being overbuilt using
millions of dollars in government subsidies, and taxpayers
could face a much larger bill for broadband buildouts,
according to a new study being circulated by the
National Cable & Telecommunications Association.

The Agriculture Department’s broadband-subsidy program
wastes millions of dollars to overbuild existing service
and, if it is symptomatic of a larger infirmity, could
mean that it would cost $87.2 billion to reach every unserved
household in the country, rather than the FCC’s estimated
$23.5 billion, according to the just-released case study of
three Broadband Initiatives Program investments that the
NCTA commissioned.

The three grantees studied were: Montana Opticon LLC,
serving southwest Montana; Lake County Fiber Network, a
county-government project in Minnesota; and Rural Telephone
Service Co. of Northwest Kansas.

The $2.5 billion BIP grant-and-loan program is administered
by the Rural Utilities Service and is part of the
American Recovery and Reinvestment Act’s $7 billion in
broadband-stimulus funding. The National Telecommunications
& Information Administration oversees the rest of
the broadband stimulus money, all in grants. The NCTA has
long expressed concerns that the programs promote overbuilding
of incumbent telecom providers, rather than targeting
areas with no broadband service.

According to the report, at least in the case studies, “millions
of dollars in grants and loans have been made in areas
where a significant majority of households already have
broadband coverage,” and that “the costs per incremental
home passed are therefore far higher than existing evidence
suggests should be necessary.”

Defenders of the program argue that grantees need to be
able to provide service in the more lucrative served areas to
afford sustainable service to the targeted unserved areas.
Sustainability is one of the requirements of the one-time
grants and loans.

September