Mon 12 Jul 2010
The Broadband Stimulus is an Abject and Absolute Failure
Posted by Jesse under Essays
[3] Comments
I usually spend a lot of time checking my non-broadband opinions at the door. If anyone cares about my political leanings outside of telecommunications, they can find my other blog with great ease. In this case though, I’ve got more than a few choice words for the broadband stimulus and how it has failed to improve anything at all. In fact, I believe it has only made things worse.
The purpose of the broadband stimulus, or so I was lead to believe, was to help provide broadband to areas that would otherwise go unserved or underserved. This included rural areas with neglectful incumbents as well as urban areas with, er, “unfavorable demographics” (read: too many poor people) to have service deployed in any kind of meaningful fashion. Certainly these two areas of broadband scarcity, either through a lack of supply or unattainable prices, need to be addressed. Internet service has become as critical as phone service as studies show that a broadband connection more than pays for itself in savings of both time and money.
How far from this goal the stimulus has gone. Much of the money awarded so far as been to organizations that either aren’t addressing these shortcomings or have plenty of other ways to finance construction. The Utah Education Network, for instance, already has a substantial amount of funding from state and local governments. They didn’t have a true need for stimulus funds; it was just gravy on top of their existing budget. The same goes for incumbent Central Utah Telephone. Like many rural cooperative ILECs, they had already taken the commendable initiative to start building out fiber to unify and upgrade their existing copper and HFC plants. It’s not that they didn’t have the means or will to deploy better services; this was just free money to them.
In the end, most of the stimulus stories are just like this: an organization that didn’t have a true need for help asked for and got it anyway. The areas with true need didn’t have the expertise necessary to complete an application and achieve what the broadband stimulus sought to do. Most of the money is still sitting in a holding pattern and will likely be awarded in a very hasty manner so that when the NTIA and RUS have to give an accounting before Congress, they can point to all of the awards without having to also show any results, instead ducking behind the cover of “too soon to tell”.
Yet again, Amerians have been screwed out of a decent telecommunications infrastructure by a bunch of bumbling idiots at the federal level. The states haven’t exactly done much better, wringing their hands when incumbents make requests against the public interest, but rubber-stamping those moronic requests anyway. (Go talk to a Fairpoint or Frontier customer and see how happy they are with those spun-off Verizon lines.) Neither of these parties seems to be able to be held accountable to the public they are supposed to serve. Instead, they seem to be invested in promoting the status quo, rife with special privileges for incumbents and favored businesses.
The feds need to get out of broadband, and the states need to follow soon after. It’s way past time for local communities to be the ones in the drivers seat. The other two had their chances and have been blowing it every step of the way. This is just another in a long line of blunders, intentional or not, that prove that the federal government is made of telecommunications fail.
July 13th, 2010 at 7:33 pm
Jesse,
I have to admire your pluck, your passion, knowledge… and telecommunications expertise is above reproach. I follow FREE UTOPIA mostly for your postings and your follow ups to the comments. I don’t live in Utah any more but I love to follow what you have to say about telecom issues.
After reading your post above, I have to ask you: What government program in modern history has EVER come in under budget, works the way it was proposed or has satisfied beneficiaries? MAYBE ONE: Medicare Part D the prescription drug benefit. I challenge you to name one other.
So why did you think the government would get RUS, BTOP or NTIA correct?
With rare exceptions I don’t find myself at issue with your analysis of Telecom. I do think your love for UTOPIA is a bit misplaced… but I do think the BTOP and NTIA grants originally were for rural areas not metro areas of the country. I read the first postings from the government and it was all about rural under-served areas and after round one they “inserted” an “and” between rural and under-served.
If you look at the areas where UTOPIA operates none of them area considered “rural” by the government or objective people. And yes – Qwest is crappy but they, Frontier, Comcast, Digis and many other providers serve those areas with broadband. It might not be the kind of broadband that you or I wish for but it is what the market dictates. Case in point: If super high speed Internet was so important then the residents in the City of Tremonton would have more than 400 users on the system in a city that size. If the take rate was higher then the City of Tremonton would be falling all over itself to chip into the new UTA!
I submit further to you that with the reputation that UTOPIA has in Washington DC and the halls of the RUS, did you think that UTOPIA would get one red cent of this “free” money?
Again – I appreciate your passion but the facts are UTOPIA is doomed to failure. If you look at what the company has spent in Brigham City alone, if they got every customer to sign up they still wouldn’t pay back their initial capital, on going maintenance and BAU expenses in 50 years. (Full discloser: I sat with 3 Comcast Executives in 2006 in St. George after a open UTOPIA board meeting and they ran through the numbers and it didn’t pencil out)
I also submit to you that Central Utah Telephone and UEN are deserving. The folks that Central Utah serve are just as needy as those in Layton! With UEN’s mission to bring technology to kids in San Juan County or the wilds of Box Elder County I’m glad that someone provides cutting edge services to these remote locations of Utah. The kids and the state are better for it.
I agree with you about Fairpoint – they should have never been in the big-boy phone business but Frontier seems to be doing o.k. with their new Verizon purchase. I just checked DLS reports and out of 184 reviews (64 were positive) (81 were negative). If their take over was such a flop I would think the reviews would have been more like 1,840! http://www.dslreports.com/comments/1677
But when I read stories like this: http://www.fiercetelecom.com/story/utopia-ftth-network-looks-turn-itself-around/2010-07-13
And stories like this: http://www.sltrib.com/sltrib/opinion/49895801-82/utopia-million-network-agency.html.csp
It makes me cringe to know that these cities are doubling down on a bad model. Sure the speeds are great and it’s super cool but when a city the size of Tremonton is 90% built out and they only have 400 customers something doesn’t compute! Comcast and Frontier basically own that market and UTOPIA seems to be catering to the speed junkies and gamers. Unfortunately, there are not enough of those kinds of buyers to make UTOPIA a going concern. When and if the UTOPIA cities take control and sell or rent their fiber – because at the end of the day they are paying for 100% of the debt then they will make a deal with whom ever they sell or lease it to for their telecommunication FREE for all time – about the time Buck Rogers comes around they will have the system paid for!
July 14th, 2010 at 1:12 pm
I think that maybe you’ve misread me. When it came to the broadband stimulus, I’ve tried to report without opinion. My suspicion from the get-go is that it would probably end up in the pockets of the politically connected and/or savvy and not make much of an impact. Despite this cynicism, I still hoped for the best (like funding cooperatives and muni efforts more aggressively).
I didn’t think UTOPIA would likely get much (if any) money because, as you noted, they have a bad history with RUS. They also don’t meet the definition of “underserved” in most of their footprint. All the same, they money would have helped them even if there were more deserving projects.
The biggest problem, as I noted, is that the application process itself, because of complex requirements and a short submission period, excluded many of those who needed it most. Some podunk town or dirt-poor neighborhood just doesn’t have the expertise needed to apply and can’t justify the cost of getting someone to help when there’s such a slim chance of success. That kind of barrier only ensures that existing providers, many of who could otherwise find capital, will walk away with the spoils. It’s another USF-style fiasco.
Whether or not UTOPIA is on the right course is an entirely different subject. I think a lot of folks don’t fully understand the purpose of this new bond (nor the purpose of the 2008 bond). Explaining that would be a post in and of itself, not to mention redundant given the amount of space I’ve spent on it. I’m planning on writing more about it later today all the same in light of recent news articles.
July 23rd, 2010 at 7:40 am
“What the market dictates” is a meaningless idea without a functioning market. A “market” does not simply mean someone is selling something and it is not magical. There “market” for broadband, to the extent there is one, is greatly warped by a variety of factors, most notably substantial market power by a few massive companies. This is a prime area of government to get involved rather than sitting by while all businesses and residences pay monopoly rents.