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Cable Operators

House GOP Hammers Broadband Subsidies

NTIA’s Strickling Defends Stimulus Programs From Waste, Overbuilding Charges 2/27/2013 8:56 AM Eastern

WASHINGTON — The gloves came off during a Wednesday House Energy & Commerce Committee hearing over government broadband subsidies.

Republicans on the panel hammered National Telecommunications & Information chief Lawrence Strickling (pictured) over the agency’s oversight of the subsidy program, designed to speed broadband deployments to underserved and unserved areas, and charged it with overbuilding incumbent providers. Strickling returned fire, vigorously defending the effort.

Cable operators are concerned that the federal government is unfairly subsidizing their competitors, but Strickling suggested Wednesday that the mostly middle-mile buildouts to anchor institutions like libraries, schools and hospitals were not overbuilds at all.

At issue was $7 billion in broadband-stimulus funding — grants and loans comprising the Broadband Technology Opportunities Program (BTOP), overseen by NTIA and the Broadband Initiatives Program (BIP), managed by the Agriculture Department's Rural Utilities Service.

Republicans on the panel charged the program with waste and fraud. Rep. Joe Barton (R-Texas) said it was time to pull the plug and ask for the still-unspent $2.5 billion to be returned to the Treasury.

Democrats generally defended the program, saying there were going to be problems in any effort of that size and scope. As a whole, they argued, the broadband-stimulus program was working as intended.

Some of the most heated exchanges were between Strickling, Rep. Joe Barton (R-Texas) and Rep. Greg Walden (R-Ore.), the committee chairman. The Republicans focused on wasted funds and overbuilding of existing private providers.

Walden said the stimulus funding, part of the American Recovery and Reinvestment Act, was rushed out the door before the FCC's broadband maps could show which areas were truly unserved by high-speed Internet networks.

Strickling countered that he did not see the middle mile-focused projects as overbuilding, since they were targeting anchor institutions with high-speed broadband that private companies could tap into via interconnection agreements at reasonable and nondiscriminatory terms. Some 600 such deals have been struck, he said.

He said a fundamental feature of the subsidies was to “prime the pump” for additional private-sector investment.

Rep. Henry Waxman (D-Calif.), ranking member of the full committee, was effusive in his praise. He said the NTIA and RUS were meeting the challenge of high-speed broadband deployment and transforming communities.

Waxman applauded the billions in private investment, but said public investment was needed or some Americans would be excluded from the digital economy. He also said NTIA had been a "model of transparency and accountability."

Walden, who said there were perhaps hundreds of millions dollars in wasted spending, pointed to $611 million in funds that had been suspended, relinquished or revoked. Strickling questioned Walden’s math and explained that only $11 million had been spent on projects that had been terminated, with the rest of that money going to suspended projects, some of which are now active.

Rep. Mike Doyle (D-Pa.) came to the strong defense of Strickling. He made special note of the interconnection requirement, giving the NTIA chief an opening to make his point about middle-mile buildouts giving private companies access to cheaper Internet backhaul.

Walden said that some of what Strickling said wasn't true, while Strickling said Walden was confusing the issue. Republicans continued to cut off the NTIA chief as he attempted to draw finer lines about overbuilds and middle-mile plant vs. residential service between the Republicans’ broad-brush criticisms.

The Republican legislators honed in on two projects, a West Virginia router subsidy that one audit found was an overpayment and on a no-bid contract, and the currently suspended build by Eagle-NET in Colorado.

Strickling said the West Virginia contract was similar to others, and that it was not an overpayment if the goal was to build a future-proof project. He said GOP lawmakers refused to take into account key speed differences between existing and new services and were “confusing capability with cost.”

The EagleNET build was suspended due to a lack of environmental studies, Strickling said, a situation he hoped would be resolved. He also suggested that complaints about Eagle-NET came from companies that failed to win the grant.

Strickling also said he was willing to work for a win-win outcome in Colorado. Rep. Diana DeGette (D-Colo.) volunteered to sit down with the parties involved to help "make peace."

In West Virginia, Strickling said, the routers may have more capacity than is needed today, but in 10 years that could be a different story. Walden suggested it wasn't going to be that different and that due to a no-bid contract, the state had paid millions more than it had to.

Strickling disputed that claim, citing an audit of the bid by Cisco Systems that examined list prices, rather than the discounted prices Cisco had offered.

Strickling was asked point blank whether the BTOP programs were overbuilding existing service.

His response: That depends on the definition of “overbuild,” arguing that the presence of Internet service at 4 Megabits per second was not the same as having the 100 Mbps service that many schools need.

Wednesday’s hearing was the seventh broadband-subsidy oversight hearing before the Energy and Commerce panel, and probably not the last.

A second panel featured, among others, a pair of grant recipients extolling the success of their programs.

Republicans on the panel conceded that there were success stories, but also said there were problems that definitely needed addressing.

September