RUS Never Sleeps, It Just Grows

Every time that Congress debates and crafts a new Farm Bill there is an opportunity for them to either embrace free market reforms or continue business as usual.  This year is no different as Congress crafts the latest Farm Bill.   From agricultural subsidies to government run broadband, this Farm Bill, along with every other Farm Bill, is a reflection of members of the House and Senate and their desire to embrace the true tenets of the free market or continue the wasteful inefficient ways of the past.  There is no other issue that is pervading the government more than the obsession to spend as much money on government funded broadband as possible.  There multiple ways that the government funds broadband and the Rural Utilities Service (RUS) is the way it is funded in the Farm Bill. Unfortunately, RUS’s track record is abysmal as more money is spent to subsidize service in areas that are already served.  All hope is not lost.  With vigorous attention paid to the deficit and debt, taxpayers are even more aware and vocal about the financial strains of the federal government.  As House and Senate Ag Committee members craft this year’s bill they should ensure that the new Farm Bill requires RUS approved loans to include 90 percent of households without any broadband service.  This would be a significant step forward in crafting a fiscally responsible Farm Bill.

RUS’s Rural Broadband Access Loan and Loan Guarantee Program was established by Congress as part of the 2002 Farm Bill, and modified as part of the 2008 Farm Bill.  Its primary goal is to provide loans to help bring Internet broadband service to unserved rural communities, which are generally defined as communities with populations of less than 20,000.

The American Recovery and Reinvestment Act (ARRA), which was enacted into law in 2009, contained $2.5 billion for the Rural Utilities Service (RUS) to expand broadband in the United States.

According to a February 12, 2009 Washington Post article about the RUS broadband 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.”

A March, 2009 report by the U.S. Department of Agriculture’s (USDA) Office of Inspector General (OIG) observed that while the 2008 Farm Bill modified the broadband program and narrowed the definition of “rural area,” the  RUS continued to issue loans in exurban and suburban areas. Instead of funding deployment in unserved rural areas, the RUS had funded service in 148 communities which were within 30 miles of cities with 200,000 inhabitants, including communities near very large urban areas such as Chicago and Las Vegas.

That same report reiterated that the Office of Inspector General (OIG) remained concerned that the existing broadband program may not meet the Recovery Act’s objective of awarding funds “to projects that provide service to the most rural residents that do not have access to broadband service.”

Though the RUS claims these concerns were addressed in their new March 2011 rules, the new rules still allow loans to be made in proposed service areas that are already 100% served.  No unserved households have to be reached.

Not only does this misuse of taxpayer dollars do little to help the areas of the country that still don’t have broadband, but it also causes private broadband providers to reconsider the build-out and upgrade of their systems, when faced with not only private competition but frequently also a government subsidized competitor.

Raymond Keating (chief economist for the Small Business & Entrepreneurship Council) points outs a specific example of why government subsidized competition is bad in a February 9, 2011 Daily Caller op-ed, “Consider the situation of Eagle Communications in Hays, Kansas. In a letter last year to Secretary of Agriculture Tom Vilsack and Rural Utilities Service Administrator Jonathan Adelstein, Gary Shorman, Eagle’s president, explained that a broadband stimulus grant would undermine the investment his firm made in providing broadband access to homes and businesses in Hays. According to Shorman, Eagle employs 277 workers, of which 212 are employee-owners. But a $101 million grant to Rural Telephone Service Company would do the following: ‘The use of this award money to overbuild Eagle, which has invested over $20 million in private capital in Hays and surrounding areas, jeopardizes the company’s survival and the jobs of its 277 employees. Eagle currently offers Hays residents and businesses broadband service of up to 100 mbps, as well as cable television and digital phone service. It also offers local businesses web hosting, e-business, and wireless solutions.’”

It is time for Congress to recognize that the private sector can meet the broadband needs of the country much better than a slow cumbersome government.