Friday, October 28, 2011

Jindal Administration Triggers Largest Broadband Stimulus Project Termination in Nation

Jindal's Administrative Chief Attempted Privatization of Federal $80 Million Investment, Echo of Wisconsin $23 Million Stimulus Giveback Seen 10/28/2011 San Francisco - The Administration of Louisiana Governor Bobby Jindal (R-LA) has triggered the termination of an $80.596 million broadband stimulus project by the U.S. Department of Commerce. The Louisiana Broadband Alliance (LBA) project was slated to support the major academic institutions of the state with expanded optical fiber networking capacity, and to provide middle mile 'big pipes' to numerous unserved communities in rural areas.
Louisiana Governor Bobby Jindal (R-LA)

In an October 26 letter, a grants officer at the U.S. Department of Commerce informed the Louisiana State Board of Regents, sponsor and legal owner of the project, that the $80.59 million Broadband Technology Opportunities Program (BTOP) grant for LBA "is terminated immediately."

Based on our tracking of the status of all such federal projects, the cancellation is the largest termination to date, by dollar value of federal funding, of any such project under the Obama Administration's $7.2 billion broadband stimulus program.

Louisiana's senior U.S. Senator, Mary Landrieu (D-LA), put the blame for the termination squarely on officials in Jindal's government. "Despite receiving the green light for more than $80 million in federal funds," said Landrieu in a press statement of Thursday, "the State fumbled the ball and was either unable or unwilling to complete the project, which could have been a tremendous boost to central and Northeast Louisiana." 

Similar Louisiana - Wisconsin Stimulus Givebacks
The scenario behind the termination is strikingly similar to that carried out in February by the administration of Jindal's fellow Republican Governor, Wisconsin's Scott Walker when the latter returned a $22.978 million BTOP award. Both administrations chose to turn back federal capital monies awarded for state construction of state university owned network facilities in favor of using private carrier leased lines for academic network expansion.

In the world of high capacity optical networks, both the Louisiana Broadband Alliance and the Wisconsin BadgerNet Converged Network are research and educational  networks (RENs). RENs often interconnect campus fiber rings across which are deployed shared supercomputer resources -- key elements of advanced research supporting leading centers of American innovation.  

900 + New Miles of Funded Fiber Gone
Project funding had been awarded in March 2010 for the new construction of 910 miles of optical fiber network routed to educational institutions across Louisiana.  Additionally, the project was planned to interconnect the existing state REN, the Louisiana Optical Network Initiative (LONI) to a similar public network in adjacent Mississippi. The award rolled out in Round I of the national program, and was issued in a rare joint statement by then Commerce Secretary Gary Locke and Senator Landrieu.    

According to yesterday's letter, the Louisiana termination resulted from delays in the environmental engineering phase of the project, and from the absence "of a strong deployment plan in place" a full year after the funding award of March 2010. Importantly, two allied efforts by Jindal's Department of Administration (DOA) to impose privatization strategies on the project after its award changed the project's business model, milestones, and cost structure. 

The termination statement concludes that this post-award "pattern of schedule delays, uncertainties and contingencies demonstrate a lack of management ability and control by Louisiana to get this project built on schedule and on budget.".

Privatization Agenda Proposed After Award
According to the letter, Jindal's DOA attempted to convert grant funded state owned last mile fiber connections slated for scores of community anchor institutions (CAIs) to investor-owned carrier circuits to be installed by existing providers. In this way, the federal grants officer saw that the project's promised "benefits will be contingent on last mile providers to provide the services to CAIs". 

As project delays continued, an alternative plan was floated to substitute for the entire fiber build. 'Alternatively, Louisiana then proposed significant modifications to the project to exclude the construction component and to make up for its schedule delays by pursing and alternative design centered on the purchase of indefeasible rights-of-use agreements (IRUs) from private providers," reads the Commerce letter. 

Under the stimulus package legislation, and rules of NTIA for BTOP, funds are to be expended for the capital construction of large networks and the telecom equipment to operate them. Funds may not be expended under the program for operating costs, like those incurred in carrier line rental. While technically IRUs can be accounted for as fiber capital leases, by definition run counter to the legal purposes of the program's funding by Congress.  

Additionally, the letter went on to document that the "DOA Office of Information Technology (OIT) will provide IT project oversight to ensure that implementation of the BTOP grant will not be in direct competition with private providers." Although noisome to many elements of the U.S. telecom sector, there is no legal requirement that BTOP-funded networks do not, in any all cases, compete with existing providers. 

As the role of DOA in the management of the LBA project increased, NTIA actually had to demand an inter-agency Memorandum of Understanding (MOU), be executed between the Regents and DOA to clearly lay out the project responsibilities of each agency. Previously, LBA and LONI had been administered solely by the Regents

Former Jindal chief of staff Paul Rainwater was appointed by the Governor to head DOA in June 2010 with what many observers of Louisiana's government state is a clear privatization agenda. Most recently Rainwater has been at the center of a political firestorm in the state over the potential privatization of state employee health insurance, and the issuance of a legislative subpoena to Rainwater's agency for documents about the plan. 

Louisiana BTOP Cancellation Letter 10-26-2011
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