Friday, October 5, 2012

NTIA Gives Slowroll to Congressional Complaint on Colorado’s Eagle-Net

Is One Federally Financed Network Overbuilding Others?

StimulatingBroadband.com 10/05/2012 San Francisco -  The National Telecommunications and Information Administration (NTIA) has declined to give a time frame for its response to a sharply worded letter issued  by  four Members of Congress against the agency’s stimulus funded  Eagle-Net Alliance (ENA) network in Colorado.

NTIA Chief Larry Strickling, Assistant Secretary of Commerce
“We received the letter and will respond accordingly,” stated a NTIA spokeswoman when asked by this publication about the agency’s planned response to the letter dated September 17.

 The letter was sent by four Colorado Republican congressmen and addressed to NTIA chief Larry Strickling. Mr. Strickling’s communications staff did not return a call for further clarification of the agency’s planned response.

The four congressmen – Representatives Mike Coffman (R-CO-06), Cory Gardner (R-CO-04), Doug Lamborn (R-CO-05), and Scott Tipton (R-CO-03) - charged that the $100.635 million federally funded ENA network is directly overbuilding numerous small independent operating telephone companies (IOCs).

The House members also state that the ENA is failing to bring high speed fiber links to the state's areas that are most undeserved and fully unserved by broadband networks.

Eagle-Net Meets Congressional Staff
Following the letter’s release representatives of ENA's executive team met in Washington, as part of previously scheduled meetings, with congressional staff assigned to the letter’s authors. The charges made in the letter were the focus of discussions.

Eagle-Net’s communications Vice President, Gretchen Dirks and Business Development V.P. Chip White represented ENA at the meetings. When asked to describe the meetings by this publication, Ms. Dirks responded, “We thought they went very well.”

Before learning of the Washington meetings from other sources, this publication was informed by Ms. Dirks that ENA would have no written response to the congressional complaint. “As the letter you are referring to was addressed to the NTIA and not EAGLE-Net we are deferring to the NTIA and are not responding, and will continue to share updates as our efforts progress,” stated the ENA spokeswoman before we learned of the Washington meetings.  

Is One Federally Financed Network Overbuilding Others?
The most serious charge in the congressional statement is that the IOCs being overbuilt with the federal network grant are themselves recipients of federal rural telecom subsidized loans issued by the U.S. Department of Agriculture (USDA).

Critics of Eagle-Net, lead by the Colorado Telephone Association (CTA) say that ENA’s effort to provide broadband service to community anchor institutions (CAI) takes important revenue away from those small IOCs in the state – virtually all of which today hold USDA loans.

Federal rules protect the tax supported loan portfolio to telecom providers across rural America from precisely this type of federally subsidized overbuilding.

Under regulations of the USDA’s Rural Utilities Service (RUS), once a rural telecom carrier secures a federal loan for network construction under the Telecommunications Infrastructure Loan Program, the agency is prohibited from issuing any new loan for the same area.

This simple rule means that federal funds may not be used to subsidize competition against an existing federal network investment. The rule is part of a fundamental policy allowing federal loan supports to flow to rural telecom providers. That policy was inaugurated when President Harry Truman first allowed such funding for rural telephone cooperatives.

It was Truman that in 1949 signed into law amendments to the Rural Electrification Act (REA) which authorized REA loans to support rural telephone investments. REA is, of course, one of the signature programs of President Franklin Roosevelt’s New Deal.  

Rural telecom providers today are already telling Washington they are under significant financial stress. The the Universal Service Fund (USF) Reform proceeding of the Federal Communications Commission (FCC) which creates the new Connect America Fund has brought capital spending  by IOCs on network projects to a new low.

If a large BTOP network is truly about to start taking CAI based revenues from rural telcos in Colorado which have already invested in broadband facilities using federal loans, that lost revenue could mean the difference between survival and bankruptcy for some carriers. Bankruptcy for these rural providers would mean defaults within the RUS portfolio -- defaults triggered by a federal stimulus program designed to bring broadband to unserved rural America.

If a practice is prohibited by one set of federal rules issued by RUS, can the same practice be somehow allowed under those of NTIA?

Large Broadband Stimulus Award Under Round 2 Program Rules
Eagle-Net is one of only a handful of large broadband stimulus projects funded at more than $100 million under the $7.2 billion program within the American Recovery and Reinvestment Act of 2009 (ARRA).

Former Colorado Governor Bill Ritter (D-CO) announced the award, part of NTIA’s stimulus Broadband Technology Opportunities Program (BTOP), on September 13, 2010. The announcement came just 2 weeks before then U.S. Commerce Secretary Gary Locke issued the last awards from Commerce in the program. Final program funding awards were announced by RUS 3 days later to close out the entire broadband component of ARRA.

Those dates are significant for any close observer of the broadband stimulus effort. Eagle-Net and the scores of other awards made under Round 2 of the program were issued under a set of BTOP rules which streamlined the application review process, and gave greater emphasis to the goal of connecting CAIs.

Serious Questions for Analysis
One of the lead detailed level questions now raised by the criticism of Eagle-Net is this: Did the loosened rules for broadband stimulus Round 2 allow a breach of the federal rules protecting existing public investment in rural networks to occur?

Another is this: In Eagle-Net's legitimate quest to secure revenue to make it a sustainable enterprise, has it short changed the undeserved and unserved areas of Colorado in violation of the founding purposes of the broadband stimulus parts of the Recovery Act? 

And another: Are the problems of Eagle-Net, as expressed by CTA and the Members of Congress, more indicators of the lack of adequate oversight of the BTOP program by NTIA and by Congress itself?  No less than the Inspector General of the Commerce Department has reported multiple times that NTIA's BTOP remains in serious need of better management and oversight.

EAGLE Net Colorado Letter




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