The USDA’s $1.2 billion Rural Utilities Service program, which is tasked with funding rural broadband deployment, was attacked earlier this month by Congress for not doing anything of the sort. The Washington Post reported that since 2001 more than half the money has gone to metropolitan regions or communities within easy commutes of a mid-size city.
Members of a House committee said earlier this month that the five-year, $1.2 billion Universal Service Fund to provide rural communities with broadband was broken. It missed many unserved areas while channeling hundreds of millions of dollars in subsidized loans to companies in places where service already exists, charged the committee.
“If you don’t fix this, I guarantee you this committee will,” House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) told James M. Andrew, administrator of the Rural Utilities Service at the U.S. Department of Agriculture. “I don’t know why it should be this hard.”
A study found more than half the funds instead went to urban broadband deployment, and just one out of sixty-nine loans went to wiring a region without any broadband service whatsoever.
The USDA has responded by issuing a new set of proposed rules aimed at making sure the fund is doing what it was originally designed for. The USDA is also pushing to have the program extended until 2012 as part of the 2007 Farm Bill.
Rural Development Under Secretary Thomas Dorr outlined several key elements of the proposed rules today:
- Promoting deployment to rural areas with little or no service
- Ensuring that residents in funded areas get broadband access more quickly
- Limiting funding in urban areas and areas where a significant share of the market is served by incumbent providers
- Clarifying and streamlining equity and marketing survey requirements
- Increasing the transparency of the application process, including legal notice requirements, to make more informed lending/borrowing decisions
- Promoting a better understanding of all application requirements, including market survey, competitive analysis, business plan, and system design requirements
- Ensuring that projects funding are keeping pace with increasing demand for bandwidth
Currently the Universal Service Fund (”USF”) is financed by telecommunications companies (as a line item on your phone bill). Contributions are a percentage of the interstate and international revenues. The percent is determined on a quarterly basis by dividing the demand for all four USF programs (high cost (telecom), low income, rural health care, and schools and libraries, a.k.a. “E-rate”).
Currently, USF funding is available to carriers with a high cost of delivering service. It has helped small rural phone companies and discouraged large phone companies because big city phone operators have a lower cost (on average). That tends to make them ineligible for the subsidy. Currently, universal service funds are allocated by state PUC’s. But, charged Congress, the program is funding duplicate programs or subsidizing carriers who serve urban areas more than rural ones.
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