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Broadband Subsidies Hammered on Hill

It was a gloves-off hearing on government broadband
subsidies on Wednesday as Republicans hammered National Telecommunications and
Information Administration chief Larry Strickling over its oversight and
charges of overbuilding, while Strickling vigorously defended the program.

Cable ops are concerned that the government is unfairly
subsidizing competition, but Strickling suggested that the mostly middle mile
build-outs to anchor institutions like libraries, schools and hospitals were
not overbuilds at all.

At issue was $7 billion in broadband stimulus funding -- grants
and loans comprising the Broadband Technology Opportunities Program (BTOP)
grant money overseen by NTIA and the Broadband Initiatives Program (BIP)
overseen by the Agriculture Department's Rural Utilities Service.

Republicans on the panel charged the program with waste and
fraud, and one, Rep. Joe Barton (R-Texas) said it was time to pull the plug and
ask for the still unspent $2.5 billion to be returned to the treasury.
Democrats generally defended the program, saying there were going to be
problems in any program of that size and scope, but that as a whole it was
working to get broadband to unserved and underserved communities.

Rep Henry Waxman (D-Calif.), ranking member of the full
committee, was effusive in his praise. He said NTIA and RUS were meeting the
challenge of high-speed broadband deployment and transforming communities. He
applauded the billions in private investment, but said public investment was
needed or some Americans would be excluded from the digital economy. He also
said NTIA had been a "model of transparency and accountability."

Committee chair Greg Walden (R-Ore.), who said there were
perhaps hundreds of millions in wasted spending, pointed to $611 million
in funds that had been suspended or relinquished or revoked, but Strickling
questioned the math and explained that only $11 million had been spent on
projects that had been terminated, with the rest of that in suspended projects,
some of which had been un-suspended, and others he hoped would also be.

Some of the most heated exchanges were between Strickling
and Barton and Strickling and Walden. The Republicans were focused on waste and
overbuilding of existing, private investment. Walden said the stimulus funding,
part of the Obama Administration's omnibus recovery act (ARRA) subsidy
legislation, had been rushed out the door before the FCC's broadband maps could
show where areas were truly unserved and where there was already broadband.

Strickling countered that he did not see the middle
mile-focused projects as overbuilding, since they were targeting anchor
institutions with high-speed broadband that private companies could tap into
via interconnection agreements at reasonable and nondiscriminatory terms, which
private companies had done to the tune of some 600 agreements. He said a
fundamental feature of the subsidies was to "prime the pump" for additional
private sector investment.

Rep. Mike Doyle (D-Pa.) came to the strong defense of
Strickling. He said GTOP and BIP were programs to be proud of and took issue
with the suggestion that the entire program was a waste of money. He also
pointed to the interconnection requirement, giving Strickling the opening to
make his point about the middle mile build-outs giving private companies access
to cheaper Internet backhaul that would let them better serve the homes and
businesses, with BTOP programs focused on the anchor institutions.

Walden said that some of what Strickling said wasn't true,
while Strickling said Walden was confusing the issue. Republicans continued to
cut off the NTIA chief as he attempted to draw finer lines about overbuilds and
middle mile plant vs. service to the home between the broad brush criticisms of
the program by Republican critics.

The Republican legislators honed in on two projects, a West
Virginia router subsidy that one audit found was an overpayment and on a no-bid
contract and the EagleNET build in Colorado that is currently suspended.
Strickling said the West Virginia contract was similar to others, and that it
was not an overpayment if the goal was to build a future-proof project. Walden
seemed incredulous that Strickling was defending the program, while Strickling
suggested that Walden and other Republicans were missing the point by focusing
on homes when middle-mile was the focus of the programs, by looking at
overbuilding without taking into account key speed differences between existing
and new service, and by "confusing capabilities with cost."

Strickling said that the EagleNET suspension was because of
a lack of environmental studies that that he hoped that could be resolved. He
also suggested complaints about EagleNET had come from companies who had failed
to get the grant. Strickling also said he was willing to work for a win-win in
Colorado. Rep. Diana DeGette (D-Colo.) volunteered to sit down with the parties
to help "make peace."

In West Virginia, Strickling said, the routers may have more
capacity than is needed today, but in 10 years it could be a different story.
Walden suggested it wasn't going to be that different and that due to the
no-bid contract, the state had paid millions more than it had to. Strickling
disputed that claim, saying that the audit of the Cisco bid looked at list
prices, not the discounts Cisco was offering.

Strickling was asked point blank whether the BTOP programs
were overbuilding existing service. He said it depends on the definition of
overbuild. He said that the presence of 4 Mbps service was not the same as
having the 100 Mbps service that many schools needed. It was the seventh, and
probably not last, House Energy and Commerce broadband subsidy oversight

A second panel featured, among others, a pair of grant
recipients extolling the success of their programs.

Republicans on the panel conceded that there were success
stories, but also said there were problems that definitely needed addressing.