A new study, released by Jeffrey A. Eisenach and Kevin W. Caves of Navigant Economics, examines the subsidization of rural broadband services by the American Recovery and Reinvestment Act of 2009 (ARRA). As was suspected, this program has proven to be an extremely wasteful and inefficient use of tax dollars.
Of the $7.2 billion appropriated to the deployment of broadband services in ARRA, $2.5 billion of this went to the Rural Utilities Service (RUS), a program which has, in the past, been criticized for the waste, fraud, and abuse that it so often employs. ARRA created the Broadband Initiatives Program (BIP) which received $231.7 million in both taxpayer-funded loans as well as federal grants—approximately 7% of the RUS’ subsidy requirements. The wastefulness and duplicative nature of the RUS is only continuing under BIP and is essentially allowing the government to pick-and-choose the broadband companies that are being funded by BIP. This clearly undermines competition in the rural areas in question, ultimately harming companies that do not receive the taxpayer subsidies.
In their report, Eisenach and Caves looked at three rural areas that were recipients of stimulus funds for broadband: Southwestern Montana, Northeastern Minnesota, and Northwestern Kansas. Oddly enough, while the BIP funds were meant to serve these areas due to a lack of broadband services, the authors of the report found that 85% of households in the three regions already had access to one or more broadband providers. The study found that the cost of providing broadband to the few underserved or unserved households in the three regions totaled $349,234…per household.
The project in Montana, in particular, was especially useless and wasteful. Over 98% of the households in the Southwestern Montana region that received subsidized broadband funds already had access to broadband. If 3G wireless service is taken into account, only seven households in the Montana project area had no access to this service. Eisenach and Caves calculated that to serve the households that did not already have access to broadband services in this particular region, it cost $7 million per household. This is hardly a justifiable amount, especially considering that many of these households probably did not want access to broadband services in the first place.
With such a blatant misuse of taxpayer dollars, it would obviously be prudent for Congress to scrap funding for the RUS, right? While they did, indeed, attempt to do so in June, a last-minute amendment from Rep. Chris Gibson (R-NY) in the Agricultural Appropriations Act of 2012 (H.R. 2112) was passed and moved to reinstate the taxpayer-backed program with $6 million out of another administrative fund. The roll call vote on the Gibson Amendment can be found here.
As the debt ceiling talks continue, it remains a mystery as to why President Obama wants to keep tax increases on the table while so many useless and wasteful programs like the RUS can easily and painlessly be cut.