Broadband stimulus program: Faster Internet, slower bureaucracy

NewWave Communications of Sikeston, Mo., is not a deep-pocketed technology giant that can afford to throw money around in Washington. The cable television operator serves 115,000 customers in rural portions of the Midwest and South and keeps a tight budget.

Yet the company was forced to shell out $80,000 on its application for $10 million in federal funding under the $7.2 billion broadband stimulus program -- with no assurance of receiving any funds.

"Having to spend that kind of money for projects with no guarantees is pretty tough," NewWave Communications President and CEO James Gleason said in an interview. "I don't think the process was intended to be that way," he added, reeling off several complaints about arcane restrictions that could dampen any enthusiasm for broadband stimulus funds.

Critics say extraneous fees and red tape are indicative of a larger set of flaws with the broadband stimulus program, which has drawn close scrutiny from Congress. The initiative, run by the Agriculture Department's Rural Utilities Service and Commerce's National Telecommunications and Information Administration, is part of the $787 billion economic stimulus package enacted by Congress and President Obama in February to spur job creation.

Problems are considered most acute at the RUS, which sources said was included at the insistence of Sen. Tom Harkin, D-Iowa, then-chairman of the Senate Agriculture Committee who wanted to ensure the panel would have jurisdiction. The RUS, which for the past nine years has overseen an annual portfolio of broadband loans averaging nearly $7 million, is now doling out broadband grants and loans totaling $2.5 billion, raising questions about whether it is overwhelmed.

A top aide to RUS Administrator Jonathan Adelstein insisted the agency is not in over its head, emphasizing its 60 years of experience in handling applications for federal assistance.

Nevertheless, sources said political vultures already are circling, just waiting for the agencies to slip up.

"Everybody knows in Congress that telecommunications programs are some of the worst for fraud, waste and corruption," said a congressional staffer. "Democrats are making sure that this doesn't fall into the same category, and I think Republicans are assuming that it will and are ready to attack."

The broadband funds are supposed to help extend high-speed Internet connectivity to areas that lack service, competition or the latest technology. Working under a rushed schedule, rules were crafted that critics view as unnecessarily complex, forcing applicants to first apply to the RUS, even if they'd rather deal only with the NTIA.

After being inundated with 2,200 applications seeking $28 billion -- seven times the $4 billion available in the first round -- both agencies fell a month behind in announcing recipients and plan to begin the process in mid-December.

The House Small Business Committee, which doesn't normally address telecommunications issues, held an Oct. 28 hearing on the program after receiving complaints from business owners, including Gleason, who testified.

Among the harshest critics are Democrats, including Senate Commerce Chairman John (Jay) Rockefeller, who are angry the Agriculture agency specified that only "remote" areas -- defined as beyond 50 miles from a city or town with a population of at least 20,000 -- are eligible for its most generous grants.

While West Virginia, represented by Rockefeller, is mostly rural, with one-fifth of residents lacking broadband access, only a few small stretches qualify as remote under the definition. Ironically, the RUS has faced considerable criticism in the past for steering too many loans to nonrural areas.

During a late October Senate Commerce hearing, Rockefeller and Sen. Claire McCaskill, D-Mo., questioned why two agencies need to be involved. "I really wanted all that broadband money to go to that guy -- NTIA," Rockefeller said, pointing to its administrator, Larry Strickling. "And a certain Midwestern senator, who is on Appropriations, and I was not, changed that."

Aides to Harkin, a member of the Senate Agriculture Appropriations Subcommittee, were not immediately available for comment.

"It's kind of a moot point," observed Tom Power, Strickling's chief of staff. "The agencies have worked together to make the process as seamless as possible for applicants."

The agencies, he added, are "very happy with the joint collaboration."

Under pressure from Congress, both agencies announced last week they are seeking comment on several "enhancements" intended to streamline the application and funding process. Any changes would be unveiled in January as part of the second and final round of funding.

The announcement came days before the House Agriculture Rural Development Subcommittee holds an oversight hearing on the program Thursday.

"That is definitely a positive development," a Senate Commerce aide said. "We always appreciate when they are responsive to what our members talk about in oversight hearings."