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House Republicans Take New Aim at Broadband Subsidies

House Republicans were not big fans of the Obama Administration's
broadband stimulus grants and loans, and a new Congress has not changed
anything. That includes an ongoing investigation into overbuilding claims
levied by Mediacom, according to committee staffers.

According to the majority staff memo for the Feb. 27
oversight hearing on broadband stimulus funding, the Energy and Commerce
Oversight and Investigations subcommittee is currently investigating
allegations by Mediacom that the Lake County (Minn.) government is using $66
million to overbuild Mediacom, and was able to do so by submitting inaccurate
information. A representative of the project was not available for comment at

Of course, Republicans were critical in general of the
American Recovery and Reinvestment Act of 2009 (ARRA), but the House
Communications Subcommittee leadership, which is holding an oversight hearing
on the funding this week, was particularly focused on the chances for
overbuilding, waste, fraud and abuse in the $7 billion program.

The memo takes aim in the first paragraph. "Advocates
of the law said it needed to be rushed through Congress to infuse money into
the troubled economy and that the funding would go to shovel-ready
projects," said the memo, proceeding to suggest the shovels instead had
been notable for their relative scarcity. "[O]nly 60% of the broadband
funds have been put to use so far even though all $7 billion was awarded by
September 30, 2010," they point out. "And of the 553 projects funded,
only 58 are finished or in the finishing stages, even though all were
originally supposed to be completed by Sept. 30, 2013."

Cable operators' principal concern with the Broadband
Technology Opportunities Program (BTOP) subsidies and grants/loans, which are
overseen by the National Telecommunications and Information Administration and the
Agriculture Department's Rural Utilities Service, is that they are being used
to subsidize overbuilds to existing broadband service, a point the Republican
staffers make in teeing up the hearing. "[M]any carriers have complained
that awardees have used BTOP and BIP grants and loans to overbuild existing
systems rather than extend service to unserved areas," they wrote.

The staffers also invoke the $100.6 million EagleNet project
in Colorado, among others, whichhas been suspended for "performance reasons."

The staffers say overbuilding is problematic for a number of
reasons, including that it funds second and third helpings of broadband in some
markets while leaving empty plates in others, or even in the same market; that
it subjects private companies -- like incumbent cable broadband providers -- to
unfair, government subsidized competition; and puts the government - taxpayer --
dollar at risk since the subsidized carrier has to compete with an established

The staff also suggests the subsidies might be a waste of
taxpayer money. "At a time when government is considering cutting meat
inspectors and FAA traffic controllers to address the federal spending
problem," the memo concludes, "we might do well to re-examine in the
future whether we should be trying to replicate private-sector broadband investment
with public money."

"Ensuring projects meet their milestones and protecting taxpayer funds is of paramount importance to NTIA," said NTIA chief Larry Strickling in a blog posting last week. "Our staff performs extensive and diligent oversight and provides technical assistance to our recipients tailored to their needs. This oversight involves a significant level of effort, and requires our staff to sometimes take tough enforcement action to protect taxpayer funds."