Less Waste, More Transparency in Government Broadband Loans

Americans for Tax Reform and seven other free-market institutions signed a letter that urges legislators to prevent waste of tax dollars on broadband infrastructure in the new Farm Bill. The Rural Utilities Service (RUS) was given billions of taxpayers’ dollars in order to subsidize growth of broadband into rural areas. But RUS, which operates under the Department of Agriculture, has shown imprudent use of these funds. Many of the grants and loans given by RUS were used to over build existing broadband service in urban areas and the House has complained that RUS lacks enough transparency to be trusted. Click here or see below for a copy of the letter.

United States Senate                                                                             May 21, 2012
Washington, D.C.

Dear Senator,

As the Senate completes work on the reauthorization of the Farm Bill, the undersigned groups urge you to ensure that there is strict oversight for the Rural Utilities Service (RUS) Broadband Loan Program to prevent taxpayer funded over building on established broadband networks.

We would prefer the government leave the private sector broadband market alone, and save us taxpayers the money. It has flourished in the absence of government "assistance," already delivering service to over 98 percent of Americans. An end to the broadband "stimulus" would be best. Barring that, rigid oversight – of the sort not yet exhibited by RUS – of how our billions of dollars are spent must be emplaced.

RUS has had a history of approving loans to companies who build broadband systems in areas that are already served. And, the areas where these companies build are often already served by multiple private broadband providers.

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.

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.”

According to a report by the USDA on April 23, 2012, “We found that RUS had not maintained its focus on rural communities most in need of Federal assistance. This is largely because its definition of ‘rural area,’ although within the statutory guidelines, was too broad to distinguish between suburban and rural communities. As a result, RUS issued over $103.4 million in loans to 64 communities near large cities.”

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.

In the interest of taxpayers and ensuring a vibrant free market in broadband deployment, the Farm Bill needs to provide tough oversight of any taxpayer funds that are used to over build systems.

Sincerely,

David Williams                                                                     Duane Parde
President                                                                             President
Taxpayers Protection Alliance                                             National Taxpayers Union

Tom Schatz                                                                         Seton Motley
President                                                                             President
Council for Citizens Against Government Waste                Less Government

Stephen DeMaura                                                               Phil Kerpen
President                                                                             President
Americans for Job Security                                                 American Commitment

Grover Norquist                                                                   Jeff Mazzella
President                                                                             President
Americans for Tax Reform                                                  Center for Individual Freedom