Adelstein Answers to Broadband Stimulus Speed, Open Range Controversy
Rural Utilities Service Administrator Jonathan Adelstein defended the pace of broadband stimulus projects and the failure of Open Range Communications, at a budget hearing Thursday of the House Appropriations Subcommittee on Agriculture. The White House’s FY 2013 budget proposal provides “adequate” broadband funding for rural areas, Adelstein said. RUS is studying the impact of the recent Universal Service Fund and intercarrier compensation overhaul, he said.
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More than 90 percent of active Broadband Initiatives Program (BIP) projects funded by the American Recovery and Reinvestment Act are under construction, and about 11 percent are complete, Adelstein told the subcommittee. In his written testimony, Adelstein said it’s “essential that RUS’s full request for the administrative costs be provided in order to ensure proper oversight of new investments."
Rep. Sanford Bishop, D-Ga., complained about slow broadband deployment in his district and said being 11 percent complete seemed like too little progress after two years of work. Some grantees have told Bishop that manufacturers are forcing them to sign non-standard contracts, Bishop added. Adelstein replied that broadband projects frequently take five years to finish, and that RUS will consider obstacles faced by grantees on a case-by-case basis. RUS has worked hard to get money out the door to award winners, but large projects can sometimes run into environmental and other problems, he said. Some of the incomplete projects are already providing limited service, he added.
Subcommittee Chairman Jack Kingston, R-Ga., needled Adelstein about the Open Range controversy. Open Range filed for bankruptcy in October last year after receiving a $267 million broadband loan from RUS in 2008 under President George W. Bush appointee RUS Administrator Jim Andrew (CD Feb 9 p18). “When we all get a little egg on our face, we all have responsibility in it,” Kingston said. “We just want to make sure that we don’t go down this path again."
RUS “limited as best we could the losses to taxpayers” resulting from Open Range’s collapse, Adelstein said. “We demanded a new business plan on two occasions. We reduced the amount of financing available from $267 million to $180 [million]. We reduced the amount of markets that were eligible for financing from 500 to 160. We demanded an equity infusion … and we worked with the FCC to mitigate the risks.”
RUS is “carefully studying changes in USF payments and intercarrier compensation rates recently ordered by the [FCC],” Adelstein said in written testimony. “We have asked applicants to reestimate their revenues based on the FCC order and are being vigilant with our existing profile.” RUS asked “a couple of weeks ago” for additional data from borrowers to see how the USF changes would affect their ability to take out loans, Adelstein told us after the hearing. “We gave them 90 days to get back to us."
For FY2013, RUS requested $8.3 billion with $543 million of budget authority to support program spending for telecom, electric, water and wastewater programs. The budget request would enable RUS to provide $690 million in loans for the Telecommunications Infrastructure Loan program, “sufficient to meet rural telecommunications demands,” Adelstein said. The budget includes about $94 million in loans for the broadband program created under the 2002 Farm Bill and revised by the 2008 Farm Bill, he said. “With the publication of new regulations last year, RUS is now accepting applications for new broadband projects,” he said.
The proposed budget also includes $25 million for the Distance Learning and Telemedicine grant program and $13.4 million for the Community Connect program, Adelstein said. Community is seeing the highest demand among RUS’s broadband programs and is currently “oversubscribed,” he told the subcommittee. The proposed amount in the budget would allow RUS to meet the demand, he said.
RUS telecom investments since 2009 will bring broadband to more than 1.57 million subscribers in rural areas nationally, Adelstein said. Over the last three years, RUS distance learning and telemedicine programs have funded more than 3,000 educational and nearly 2,000 medical facilities for rural areas, he said. Collaborating with states, regions and other federal agencies is expected to improve reliability and affordability of telecom and other rural needs, he said.
Adelstein emphasized the importance of broadband investment, saying it helps business and residents compete. Dallas Tonsager, undersecretary of agriculture for Rural Development, said that use of broadband has even cut costs for USDA by reducing “some need for brick and mortar facilities.”