Rural Broadband Program Escapes Axe

A program created to speed the rollout of high-speed Internet services to the most remote reaches of the United States will survive for another year after nearly being cut in half by Congress.

Washington Post

In the rush to pass a 2004 budget, congressional appropriators followed the Bush administration’s advice to provide approximately $350 million in rural broadband loans in 2004, half the $700 million that was previously authorized for the Rural Utilities Service (RUS) program. Most of the funding was restored only after a group of technology companies and more than 60 lawmakers protested the reduction.

Included as part of a $190 billion farm bill passed two years ago, the RUS program allows the Agriculture Department to award up to $700 million a year in loans for companies that provide broadband service to rural areas. It awarded $63 million in loans and fielded $1 billion in loan applications during 2003. The program calls for up to $700 million to be distributed annually through 2005, and up to $350 million in 2006 and 2007.

According to a Federal Communications Commission report issued last month, rural areas lag far behind their urban counterparts in getting high-speed Internet connections. There were broadband subscribers in 99 percent of the most densely populated zip codes as of 2003, but only in 69 percent of the most thinly populated areas.

The lag is due in part to the fact that companies providing Internet access to far-flung communities spend higher amounts of money to build their networks, and the return on that investment is less than that achieved by providers serving urban communities with potentially larger numbers of subscribers. The RUS loans are geared toward smaller companies — including many that use wireless technology to serve rural customers. Companies serving more than 2 percent of the telephone lines in the United States are ineligible for the loans.

When Congress first moved to cut the RUS program, Rep. Rick Boucher (D-Va.) wrote to appropriators urging the program to be restored.

"The fact that the administration would propose those cuts is a sign that economic development and community advancement domestically [have] now taken a back seat to other priorities," said Boucher, who represents the extreme southwestern portion of Virginia, a mostly rural district.

Private companies that manufacture equipment for broadband providers, including 3Com, Cisco Systems and Nortel Networks, also weighed in, saying the lower funding level for RUS would stunt the rural broadband rollout rate.

Congress ultimately moved the 2004 funding level up to $602 million after two senators representing rural northern states — Sens. Conrad Burns (R-Mont.) and Byron Dorgan (D-N.D.) — pushed for the increase.

An aide on the House Appropriations Committee said the original move to cut the program was tied to the Agriculture Department’s problems with doling out the loans.

"All of our members are on board," the aide said. "They like the program, they think it’s a good program, but right now USDA is having a hard time rolling out the current [loans]."

When the Appropriations Committee set the funding levels, the department had handed out a tiny fraction of the more than $1 billion in loans that they were cleared to offer, the aide said.

Claiborn Crain, an Agriculture Department official, said that the administration wants "to make sure the loans we make are good loans."

"You’ve got to do the due diligence," he said. "A lot of the companies coming in are new borrowers or start up companies. … We want to get some of these loans out and see how they work and get our next step down the road, but you’ve got to walk before you can run."

The RUS program’s close call in 2004 is a lesson to businesses to keep a vigilant eye on lawmakers anxious to cut any programs that are not securely nailed down, said Stan Fendley, director of legislative and regulatory policy for Corning, a major producer of the fiber-optic cable used for broadband connections. "These are tight budgetary times and people are looking to reduce outlays everywhere they can."

— David McGuire, washingtonpost.com Staff Writer