New Report: Is the Broadband Stimulus Working?

| February 25, 2013 | |

On Wednesday, February 27, 2013, the House Energy and Commerce  Subcommittee on Communications and Technology held a hearing entitled “Is the Broadband Stimulus Working?”

The hearing notice included a staff report on the broadband stimulus program and questioned whether “taxpayers are getting their money’s worth four years after the American Recovery and Reinvestment Act of 2009 (ARRA) allocated $7 billion for broadband grants and loans.” The report states while there may be some good coming from these stimulus programs, “the question is whether they have failed to minimize costs, maximize benefits, and generate adequate return on investment, especially in the current fiscal climate.”

Update: Video clip from the hearing

“The Market Public Library is open Thursdays, Fridays and Saturday in a single wide trailer with one Internet connection. Do you really think that’s going to build out to where they have the need for a couple hundred Internet connection router in a community of 1500?… A 5500 square foot library in a town of 1500 needs a $20,000 router?” 

Of note from the subcommittee staff report:

  • Only 60 percent of the broadband funds have been put to use so far even though all $7 billion was awarded by September 30, 2010.

  • Approximately $611 million of the funding covering 42 projects has been revoked, relinquished, or suspended.

  • Of the 553 projects funded, only 58 are finished or in the finishing stages, even though all were originally supposed to be completed by September 30, 2013.

  • Many carriers have complained that awardees have used BTOP and BIP grants and loans to overbuild existing systems rather than extend service to unserved areas.

The report highlights why overbuilding is problematic, including that it provides “seconds or thirds” in terms of broadband access to some customers while others have yet to get “firsts,” an inequitable and inefficient use of taxpayer money in a time of scarce federal dollars.  Overbuilding also unfairly subjects to government-subsidized competition businesses that have invested their own funds. This potentially divides the customer base from which the company can recover costs, jeopardizing its business and the jobs it created.

The report also makes the point that private investment is likely the source of the massive broadband growth (as highlighted below) since the stimulus money is only recently entering the pipeline. Private-sector wired and wireless broadband providers have invested an average of $65 billion a year between 2002 and 2011, as compared to the one-time investment of $7 billion in public funding nationwide.  Moreover, “parties that invest their own money are understandably more likely to scrutinize any economic analysis or strategic plan, since they bear the risk; conversely, the broadband stimulus projects using taxpayer dollars have attracted numerous allegations of waste and overbuilding.”

  • 95 percent of the population already had access to fixed broadband service by 2010, two-thirds of households subscribed, and the number of people with broadband at home had grown from 8 million to 200 million in the prior decade. That does not even count wireless service.

  • As of mid-2012, wired broadband access had ticked up to 96 percent of the population. By the end of 2011, subscribership had reached 71 percent of households and the number of people with broadband at home had climbed to 220 million subscribers.

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