Feds spending billions trying to hook up rural America with high-speed internet

President Trump’s vow in his State of the Union speech to spread high-speed internet service to rural America was one of the few bipartisan applause lines. After all, the same pledge was made by the last two presidents and every 2020 Democratic presidential hopeful.

And yet, the quest for universal broadband service has proved a costly promise that somehow is always beyond the government’s reach.

The Federal Communications Commission and the U.S. Department of Agriculture together spend more than $5 billion on projects designed to hook up rural America to high-speed internet.

The spending comes on top of billions more the USDA has poured into the Rural Utility Service, a long-running program that morphed from providing basic phone service to providing sophisticated technology to rural areas, which can cost up to $13,000 for each household connection.

The FCC has spent billions more on the same project.

Yet the goal remains elusive. An estimated 19 million Americans still lack broadband, according to the FCC.

“The problem with all these debates is they take place as if we’re doing nothing,” said Scott Wallsten, president of the Technology Policy Institute and longtime critic of what he considers over-subsidizing rural broadband.

The USDA has just launched round two of what it calls the “Rural Development Broadband Reconnect Program.” The agency is accepting proposals for some $550 million it will dole out in mid-March in grants, hybrid loan-grants, or low-interest loans.

Round one of the program, which involved $600 million, started its first program in October, meaning the department has had little time to assess its success.

Indeed, a group of USDA spokespeople declined to offer an assessment of the program and referred virtually all questions to the department’s webpage.

That is in keeping with the USDA history of keeping taxpayers and watchdogs in the dark about progress on its effort to hook rural America up to the internet, according to Mr. Wallsten, who said he has tried to take a closer look at the numbers for years only to be stymied consistently by government officials.

The USDA refused to answer questions from The Washington Times about the performance of its Rural Utility Service loan portfolio.

“We don’t know exactly how much is being spent, but in some cases, it is an absurdly high amount per reception,” Mr. Wallsten said, estimating the Rural Utility Service has spent more than $100 billion since 1995. “We should not just be spending more money on this. Even if we agree with the goal of providing broadband to rural areas is laudable, as a society we still want to do it in the most cost-effective way.”

The USDA website trumpets myriad projects being approved under round one — more than $80 million earmarked for households, farms and other entities in rural New York, Maine, Arizona, Kentucky, Tennessee and elsewhere.

Proposals are accepted from all 50 states and U.S. territories worldwide, it said.

The government is trying to reach people who live in areas where at least 90% of households lack access to fixed, terrestrial broadband service of at least 10 megabits per second (Mbps) and 1 Mbps upstream, the USDA said.

Precise numbers are hard to come by because not only households are benefiting from the work. In some of the projects, however, the cost approaches $13,000 per household.

In some cases, deluxe service is being provided by taxpayer subsidies, according to those involved.

In the farm communities around Stanton, Iowa, the Farmers Mutual Telephone Co. was the recipient of more than $6.4 million in grants and loans. The FMTC said the money will help it will reach 1,100 customers — a cost of more than $5,800 per customer.

“We know it can be difficult to understand technical language and what different internet speeds really mean,” Kevin Cabbage, FMTC’s CEO and general manager told customers. “So let me state it this way: less than 12 percent of the customers in Iowa and the U.S. have a fiber-optic network connected right to their home or business. And, an even smaller percentage have a network capable of delivering Gigabit Internet (up to 1000Mb). We are proud to say FMTC customers are in this rare group, with all the benefits the fiber network provides.”

The FCC, on the other hand, has worked on the cost effectiveness of its programs, Mr. Wallsten noted. The commission has held reverse auctions in which scores of telephone companies bid on providing coverage to new zones with the low bid getting the contract.

The FCC said it consults the USDA to ensure there is no overlap in the areas getting the subsidies.

“We regularly coordinate with USDA and other federal partners to make sure we are targeting funds to unserved areas so that all Americans can have access to digital opportunity,” spokeswoman Tina Pelkey said.

Those efforts are not confined to the $5 billion Connect America Fund, Ms. Pelkey said. The commission also recently launched its Rural Digital Opportunity Fund, which will spend another $20 billion expanding broadband over the next decade.

That fund “would be the FCC’s single biggest step yet to close the digital divide,” the agency announced Jan. 28. “Phase I of the fund would target around six million homes and businesses in rural areas across the country where residents currently lack access to adequate broadband and would deploy highspeed broadband to millions of rural Americans.”

Still, the FCC is not fully transparent in how it spends the $5 billion in its Connect America Fund, part of its Universal Service Fund. The fund is flush with money each year from a tax in consumers’ cell phone bills, and its completion is the target rather than any set tax rate.

Phase two of the Connect America Fund is underway, and the FCC makes it clear the fund is not a piggy bank for the nation’s big carriers, although they are allowed to participate. Those companies “have committed to adding service for more than 3.6 million homes and businesses in 45 states and the Northern Mariana Islands,” the agency said.

Smaller companies, who bid on areas the bigger ones decline, “won $1.4 billion over 10 years to provide fixed broadband and voice services to over 700,000 locations in 45 states.”

In any given year when the FCC does not spend the full amount in the Connect America Fund, it carries the remainder over in what Mr. Wallsten said functions as “a slush fund.”