The Myth (and Lies) of Government Funded Broadband
Yesterday was tax day which gave millions of taxpayers heartache as they rushed to finish their taxes. It also gave people time to reflect on how the federal government spends their hard earned money. The ways government spends money ranges from the necessary such as defense spending to the ludicrous such as the General Services Administration’s Las Vegas vacation (read previous blog posting here). One area of government spending that has become a hot topic of debate lately is that of the government’s role in building publically financed broadband networks. According to The New Republic, the nation’s telecommunications companies are “keeping the country’s poorest on the wrong side of the digital divide for many years to come.” This couldn’t be further from the truth and it has been all levels of government that have failed and it is the private sector that has invested hundreds of billions in infrastructure to bring the Internet and broadband to as many people as possible.
First and foremost, the federal government has been an absolute failure in bringing broadband to the hinterlands. In 2009, as part of the Stimulus Bill, the Rural Utilities Service received a $2.5 billion infusion of taxpayer money to help bring Internet broadband service to unserved rural communities, which are generally defined as communities with populations of less than 20,000. With a $2.5 billion taxpayer cash infusion the program has been super-sized and is wreaking havoc on the free market and taxpayers. Even before the $2.5 billion, the Washington Post reported on February 12, 2009 that there were existing problems with oversight of the 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.”
Even if the agency had completed the projects, there are questions as to RUS’s loss of focus on helping unserved areas. According to the same Washington Post article, “According to the report, $45.6 million went to wire several luxury subdivisions near Houston. About $30 million in loans defaulted, and the agency approved another $137 million in loans even when applications weren't completed. A separate report from the inspector general in June found that $430,000 went to a Lubbock, Texas high-speed Internet service provider that used the money for pilot lessons for its president and treasurer.”
States and localities haven’t fared much better. A glaring example of this is the Chattanooga EPB, which decided to fully install a fiber optic Smart Grid. The technology, in theory, allows EPB to deliver electricity in a more stable and efficient manner, limiting power outages while improving service. EPB, however, had another purpose in mind for their Smart Grid.
The government-owned electric company built the system in such a way that they could sneak their way into the fiber optic business, competing with private enterprises for Internet, cable television and telephone services. EPB managed to nab $111.6 million in federal stimulus funds. When that hefty sum was not enough, EPB borrowed nearly $400 million in bonds, including both principal and interest, which must be paid back through higher electric bills. Chattanooga is now becoming the poster child for the failure to understand the true costs to run a fiber optics network. In a recently-released study, Dr. Joseph P. Fuhr argues that the people operating EPB Fiber Optics have little or no idea about what they’re doing. According to Fuhr, EPB president Harold DePriest has admitted, “We don’t know how to price [Internet services]. We’re experimenting. We’ll learn.” They are learning on the back of taxpayers and rate payers.
All of this taxpayer money spent and all of this failure isn’t even necessary. According to Broadband for America, “According to data compiled by US Telecom Association, National Cable & Telecommunications and CTIA –The Wireless Association, broadband providers have invested more than $250 billion since 2008 in the effort to expand broadband technology in America.” And, according to a April 9, 2012 study by the National Taxpayers Union, “In its recent ‘National Broadband Plan,’ the Federal Communications Commission (FCC) estimated that 123 million out of 130 million households, or 94.6 percent, have access to wired broadband service with at least 4 Mbps download and 1 Mbps upload speeds. If wireless broadband is included in the metric, that coverage number jumps to 98 percent of all Americans with access to quality Internet connections.”
Government at all levels should focus scarce tax dollars on core functions of government such as public safety rather than competing with the private sector in providing broadband service. The only winners in government subsidized broadband are the bureaucratic jobs that are created.