Internet Technology

USDA Rural Broadband Program Criticized

By Sharon Fisher, 4-18-09

The Department of Agriculture’s Office of the Inspector General has issued a report finding that the Rural Utilities Service continues to grant loans to areas that already have broadband service and to communities near major cities.

For example, 77 percent of loans were said to have been made in areas that were already served by broadband Internet providers.

“We remain concerned with RUS’ current direction of the broadband program, particularly as they receive greater funding under the American Recovery and Reinvestment Act,” Assistant Inspector General Robert W. Young wrote. “RUS’ 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.” USDA is slated to receive $2.5 billion in funding for such loans under the ARRA.

Since 2001, RUS has released approximately $1.35 billion in loans intended to help bring broadband Internet to rural areas. Intermountain West states receiving such loans include $18 million for Arizona, $267 million for Colorado, $24 million for Nevada, $25 million for Oregon, and $66 million for Utah. States such as Idaho, Montana, and New Mexico did not receive such loans.

The results of the report were similar to those of a report made on the success of an Idaho loan program. When Idaho last awarded a chunk of money to help improve broadband access in Idaho, in 2006, Qwest received $5 million—and, according to a 2007 report, spent the money inefficiently by increasing service in places where it already existed, and charging a high price for it. The result is that not many people got better access, and the cost per new user was much higher for Qwest than for other companies awarded money ($120.83 per customer, compared to as little as $29.76 from another vendor).

In 2005, the office had made 14 recommendations on how to improve RUS. In this new audit, the IG finds that RUS has not implemented 8 of them, including:

* adopting an appropriate definition of “rural area”
* focusing loans in areas where broadband service does not already exist
* developing and implementing internal guidelines for the grant and loan programs
* recovering funds from defaulted loans
* maintaining a database of all grant and loan information

RUS said it had not followed more of the recommendations because it was waiting for the 2008 Farm Bill to pass, which it believed would have required them to revise any guidelines they had rewritten. The organization also said that due to the way terms were defined, it was not allowed to restrict loans to rural areas far from cities, or that were unserved.

In October, 2008, Congress passed a law requiring the FCC to create a map showing areas lacking broadband Internet access, which the Office of the Inspector General said it hopes will help RUS to create programs to provide this service.

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