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Mediacom Cries Foul Over Loan Grant

Fairfield, Iowa, was the last straw. Mediacom Communications Corp. serves the town of 10,000, and executives were shocked when they saw its name as a successful applicant for a low-interest government loan from a program designed to push broadband into unserved rural communities.

It was that loan that compelled Mediacom, along with the Iowa Cable Telecommunications Association, to file suit in U.S. District Court for the Southern District of Iowa challenging the lack of transparency in the process and whether grants were given to appropriate recipients.

The Broadband Grant and Loan Guarantee Program, administered by the Rural Utilities Service, a division of the U.S. Department of Agriculture, was created as part of an omnibus farm bill passed by Congress in 2002. Since its inception, the program has approved 57 loans totaling $872 million, according to recent testimony on Capitol Hill by Rural Utilities Service administrator Jim Andrew. The program, whose stated goal is to support the deployment of high-speed data services into communities that don't currently have them, has $900 million to loan this year.

“Mediacom supports that initiative. That's what we were created for. We serve 300 communities in Iowa, and they all have the same products as Des Moines,” said Mediacom vice president, government relations Marvin Rappaport.

Members of the American Cable Association have also raised questions, while Midcontinent Communications asked legislators to look into the program at a Senate Agriculture Committee hearing May 17.

Rappaport pointed to Fairfield as an example of what's wrong with the federal program. Lisco, a local telephone company that currently provides residential dial-up and business broadband services in competition with Mediacom and telephone provider Iowa Telecom, was awarded a $9.47 million grant, and will use the funds to build a fiber-to-the-home broadband plant there.

According to a recent report by Iowa utility regulators, there are still totally unserved communities in the state.

“So why were funds made available for an overbuild?” Rappaport asked.

Clayborn Crain, assistant to the administrator for utilities programs at the RUS, said the agency couldn't comment on pending litigation.

Lisco vice president of marketing Michael Porter expressed concern the action might jeopardize the loan.

“Our goal is to build infrastructure that will allow our town to survive,” he said. Noting the towns that died out when bypassed by railroads a century ago, he said those passed over by broadband service would meet the same fate.