Wednesday, May 08, 2019

Kentucky's broadband boondoggle is a cautionary tale; is governor's aide undercutting him by siding with AT&T?


Five years ago, the Democratic governor of Kentucky, who couldn't run for re-election, and a powerful Republican congressman struck a deal with private investors to get high-speed internet to the state's rural areas, especially the congressman's depressed district. The KentuckyWired system is only one-third built, and now the governor is a Republican whose administration is divided about whether to pull the plug, trim the sails or keep paying the bill, already $100 million over budget.

That's the short version of a long and revealing story by Alfred Miller of the Louisville Courier Journal, in cooperation with ProPublica, the nonprofit investigative journalism outfit. The circumstances are peculiar to Kentucky, but show some of the pitfalls of politicians rushing to bring broadband to sparsely populated rural areas where private telecommunications companies aren't willing to run fiber-optic cables. The state made the mistake of letting its desired costs on paper dictate an ultimately impossible construction schedule, former director Phillip Brown told Miller.

U.S. Rep. Hal Rogers
"State Auditor Mike Harmon conservatively estimates that Kentucky taxpayers over the next 30 years will be on the hook for $1.5 billion — 50 times what they were originally told the project would cost them. That’s because the state quietly assumed most of the risk for this public-private partnership in the closing weeks of the previous Democratic Gov. Steve Beshear’s administration, Harmon said in his September 2018 report on the project," Miller reports. Beshear's Republican partner was Fifth District U.S. Rep. Hal Rogers, then chair of the House Appropriations Committee; now the partner is Republican Gov. Matt Bevin, a strong conservative who blew hot and cold on the idea but was finally persuaded by Rogers to keep it alive. But there is dissension in Bevin's camp, Miller reveals.

"Perhaps Bevin’s boldest move to dig the state out of its technological quagmire has been hiring an old Army buddy, Chuck Grindle, to advise him as the state’s IT chief at a salary of $375,000 annually, the highest-paid position of its kind in any state. While Grindle makes clear that he does not directly supervise the stalled project, he has publicly disdained it. And his job gives him the power to direct millions in state business annually away from KentuckyWired to other vendors. . . . Administration officials are engaged in a high-dollar tug of war over KentuckyWired, with some officials fighting to complete the project as promised and others such as Grindle seemingly willing to let it die an expensive death."

If completed, the network would not "connect directly to individual homes and businesses, but the private companies the state chose to construct and operate the loops would be able to sell access to third-party internet service providers," Miller writes. "In theory, that would promote broadband access in areas otherwise lacking good internet infrastructure. However, where exactly private companies have existing fiber lines is typically a closely held trade secret, meaning the project could duplicate existing private infrastructure." Meanwhile, AT&T, a troublesome player from the start of the project, is building more rural broadband, Grindle told a group at the University of Louisville, Miller reports: "Grindle said he prefers working with 'trusted partners' such as AT&T."

UPDATE, May 9: Jamie Lucke, recently retired editorial writer for the Lexington Herald-Leader, tells The Rural Blog, "AT&T really wants to sabotage potential competitor KentuckyWired, because what if it becomes a model for other places, even though AT&T has no interest in bringing high-speed internet to low-density, low-profit rural areas. (Many rural Kentuckians would never have gotten phones without rural co-ops and if they’d had to wait on Ma Bell.) Bevin’s overpaid crony is siding with the corporate giant that has wined and dined him rather than with rural Kentuckians."

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