House Republicans Take New Aim at Broadband Subsidies

Oversight Subcommittee Investigating Mediacom Overbuild Claims against Lake County, Minn.

House Republicans were not big fans of the Obama Administration's broadband stimulus grants and loans, and a new Congress has not changed anything. That includes an ongoing investigation into overbuilding claims levied by Mediacom, according to committee staffers.

According to the majority staff memo for the Feb. 27 oversight hearing on broadband stimulus funding, the Energy and Commerce Oversight and Investigations subcommittee is currently investigating allegations by Mediacom that the Lake County (Minn.) government is using $66 million to overbuild Mediacom, and was able to do so by submitting inaccurate information. A representative of the project was not available for comment at presstime.

"The Mediacom allegations were already the subject of a complaint in 2011, to the Department of Agriculture, which resulted in an Inspector General investigation," said Jeffrey Roiland, projexct manager for teh Lake Connections broadband project. "The results of the IG investigation did not agree with the complaint."

Of course, Republicans were critical in general of the American Recovery and Reinvestment Act of 2009, but the House Communications Subcommittee leadership, which is holding an oversight hearing on the funding this week, was particularly focused on the chances for overbuilding, waste, fraud and abuse in the $7 billion program.

The memo takes aim in the first paragraph. "Advocates of the law said it needed to be rushed through Congress to infuse money into the troubled economy and that the funding would go to shovel-ready projects," said the memo, proceeding to suggest the shovels instead had been notable for their relative scarcity. "[O]nly 60% of the broadband funds have been put to use so far even though all $7 billion was awarded by September 30, 2010," they point out. "And of the 553 projects funded, only 58 are finished or in the finishing stages, even though all were originally supposed to be completed by Sept. 30, 2013."

Cable operators' principal concern with the Broadband Technology Opportunities Program subsidies and grants/loans, which are overseen by the National Telecommunications and Information Administration and the Agriculture Department's Rural Utilities Service, is that they are being used to subsidize overbuilds to existing broadband service, a point the Republican staffers make in teeing up the hearing. "[M]any carriers have complained that awardees have used BTOP and BIP grants and loans to overbuild existing systems rather than extend service to unserved areas," they wrote.

The staffers also invoke the $100.6 million EagleNet project in Colorado, among others, which has been suspended for "performance reasons."

The staffers say overbuilding is problematic for a number of reasons, including that it funds second and third helpings of broadband in some markets while leaving empty plates in others, or even in the same market; that it subjects private companies -- like incumbent cable broadband providers -- to unfair, government subsidized competition; and puts the government - taxpayer -- dollar at risk since the subsidized carrier has to compete with an established one. 

The staff also suggests the subsidies might be a waste of taxpayer money. "At a time when government is considering cutting meat inspectors and FAA traffic controllers to address the federal spending problem," the memo concludes, "we might do well to re-examine in the future whether we should be trying to replicate private-sector broadband investment with public money."

"Ensuring projects meet their milestones and protecting taxpayer funds is of paramount importance to NTIA," said NTIA chief Larry Strickling in a blog posting last week. "Our staff performs extensive and diligent oversight and provides technical assistance to our recipients tailored to their needs. This oversight involves a significant level of effort, and requires our staff to sometimes take tough enforcement action to protect taxpayer funds."