Cable-backed study says three large broadband stimulus projects overlap existing broadband services

A new study released by the National Cable and Telecommunications Association (NCTA) shows that three large broadband projects funded by stimulus money from the U.S. Rural Utilities Service (RUS) cover markets already service by broadband service providers.

The study shows that more than 85 percent of the households covered by the three broadband stimulus projects either have wired or fixed wireless broadband service available to them, not including 3G services. When 3G services are accounted for, nearly 99 percent of the households are covered by the three projects, which are located in northeastern Minnesota, southwestern Montana and northwestern Kansas.

The three projects will provide fiber services to the home, which offers tens of megabits of speed over DSL and 3G services available in these areas.

"While it may be too early for a comprehensive assessment of the ARRA's broadband programs, it is not too early to conclude that, at least in some cases, millions of dollars in grants and loans have been made in areas where a significant majority of households already have broadband coverage," wrote study authors Jeffrey Eisenach and Kevin Caves of Navigant Economics, an analysis firm based in Chicago. "In addition, the [RUS] program creates strong disincentives to private broadband investment in the long run, as potential future investors will discount expected returns for the possibility that the government may step in, ex post, to subsidize a competitor."

Navigant has written papers opposed to government participation in the telecom sector. The authors of this study said the cost of delivering broadband to each unserved home in the three projects is $30,104, if 3G isn't part of the broadband equation. With 3G added, the cost increases to $349,234 per unserved home.

RUS gave the Kansas project $101.2 million in grants and loans to cover 4,247 square miles with fiber- or Wi-Max-based broadband, while the Montana project received $64.1 million in grants and loans to cover 154 square miles in Gallatin County with a fiber network. The Lake County Fiber Network project in Minnesota received $66.4 million to build a fiber network in Lake County and parts of St. Louis County.

Within the service area of the fiber project in Kansas, five companies offer seven broadband services, including 3G services, the study indicated. Seven providers offer service in Montana, while eight providers sell service, including 3G, in Minnesota. In some instances, these providers offer service to a small percentage of residents within the project areas.

"The projects highlighted in the NCTA study are in rural areas that lacked sufficient broadband for rural economic development, as required by the statute," a spokesman from the RUS told PC World. "All were carefully vetted on the ground by RUS field staff, received strong support from the local community, and will vastly increase broadband capacity in their communities."

For more:
- see this PC World article

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