NCTA Beefs About USDA Broadband Loans

The cable industry is voicing concern that a federal broadband-loan program is straying from its mission of funding high-speed-data carriers that intend to offer service to communities where the service is unavailable.

Cable’s objections were expressed in a letter Tuesday from National Cable & Telecommunications Association president Kyle McSlarrow to U.S. Department of Agriculture secretary Mike Johanns.

“RUS [Rural Utilities Service] loans are being used to unfairly subsidize second and third broadband providers in communities where private risk capital already has been invested to provide broadband service,” McSlarrow said.

Cable operators, particularly small systems, have complained in the past about the broadband loan program run by USDA’s RUS. In his letter, McSlarrow asked Johanns to “personally examine” the program and ensure that money is flowing to markets where broadband is not being offered.

A copy of McSlarrow’s letter was also sent to all members of the House of Representatives and the Senate.

The RUS program as it is currently being run is unfair to companies that have funded their broadband investments with private capital but now have to face government-funded rivals, McSlarrow said.

“The cable industry has consistently supported the primary objective of the Rural Utilities Service broadband-loan program, which is to spur the deployment of broadband in areas of the country that lack broadband service. We are concerned, however, that the program has lost its focus,” said McSlarrow, who offered to meet with Johanns on the subject.

RUS spokesman Claiborn Crain said Congress authorized loans to broadband providers that face competition.

“The statute says USDA will give priority to any area without broadband service and consider other applications on a first-come, first-served basis,” he said. “If that’s not what the law said, we wouldn’t be doing it.”

Last September, the USDA’s office of Inspector General reviewed the program, which provides funding at interest rates not obtainable from private lenders. The report determined that unserved communities were not the exclusive focus of the loans, contrary to the intent of the law.

“Based on this review, we found that RUS has not maintained its focus on rural communities without pre-existing service,” the 65-page report said. “Although the language of the law specifies that these federal loans and grants are for rural communities, RUS has codified and implemented a definition that cannot reliably distinguish between rural and suburban areas.”

The report noted that “due to this ambiguous definition,” RUS funded "$103.4 million in loans to 64 communities near large cities, including $45.6 million in loans to 19 planned subdivisions near Houston, Texas.”