Federal Reserve: Electric co-ops, wireless systems and partnerships most promising ways to better rural broadband

Broadband access is transformative, but rural areas still lag because they're more costly to serve. It's worth it, though, according to a recent report by the Federal Reserve Bank of Richmond.

"The economic case for rural broadband infrastructure, though, is compelling despite its cost: Broadband access and adoption in rural areas is linked to increased job and population growth, higher rates of new business formation and home values, and lower unemployment rates," Alexander Marré reports. "Unlike with many other types of infrastructure, the long-run benefits of broadband access could grow exponentially, given the potential for innovation and productivity gains it provides."

Electric cooperatives, fixed satellite and wireless providers, and public-private partnerships are the most promising avenues for building out quality broadband in rural America, according to the report. But each approach has its pitfalls. Some states bar co-ops from providing broadband, and legal issues can make it tricky for co-ops to operate outside their service areass. Satellite and wireless don't require expensive house-to-house fiber installation, but can be slower and more expensive. Public-private partnerships are useful where there is no interested provider, but it can be challenging to build the right partnership with effective, interested parties. 

Connecting all of rural America to broadband will cost at least $85.6 billion, but current federal funding is about $30 billion, Marré reports. The Federal Communications Commission's Rural Digital Opportunity Fund is the largest source of funding, at $20.4 billion over 10 years. However, the RDOF has been plagued with faulty data maps that can waste money. The FCC also provides $4.9 billion through its Alternative Connect America Fund. The second-largest source of departmental funding is through the Agriculture Department's eConnectivity Pilot Program, or ReConnect Program, which provides loans, grants, and loan/grant combos to broadband service providers. ReConnect has distributed more than $1.3 billion; all told, USDA funds about $2.3 billion for broadband buildout through ReConnect and other Rural Utilities Service programs. Other major sources of funding include state spending (less than $2 billion in 2018-2019) and the CARES Act, which allocated about $600 million to broadband funding projects.

The report notes that the coronavirus pandemic has highlighted the necessity of broadband for all, and recommends increasing federal subsidies to help close the rural gap. 

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."

Private prisons shouldn't be able to deny freedom of information requests, journalism prof says

Privately operated prisons have become common in rural areas, especially those desperate for jobs, but often deny Freedom of Information requests, claiming they should be exempt because they are private entities, journalism professor Alexa Capeloto writes for The Crime Report, published by the John Jay College at the City University of New York, where she works.

Incarceration is a vital government function, Capeloto writes, but private prisons keep out of reach such useful records as staffing levels, budgets, rates of violence, prisoner demographics, security measures and health care.

Eight percent of prisoners and 49 percent of immigrant detainees were held in privately run centers in the U.S., and the number has risen 1,600 percent from 1990 to 2009, Capeloto reports. The 137 facilities are run by the Corrections Corporation of America, the GEO Group Inc. and the Management and Training Corporation.

"CCA, the largest among them, generated nearly $1.7 billion in revenue and netted a $300 million profit in 2013," Capeloto writes. "Government contracts, funded by taxpayer dollars, form the vast majority of this revenue."

U.S. Rep. Sheila Jackson Lee (D-Texas) introduced a bill to require these facilities to release more information, but the bill is the sixth of its kind that Democrats have introduced since 2005, and it isn't likely to go anywhere, Capeloto writes. In most states, no legislation requires private prisons to share their records, and "This failure has left courts to do the heavy lifting when private contractors deny FOI requests to services once handled by government."

Capeloto says an update of freedom-of-information laws is needed because privatization has changed the boundaries between public and private. Until that happens, the issue should be taken to the courts, she argues.

CAA spokesman Steve Owen told the weekly Vermont newspaper Seven Days that "transparency is a critical part of the relationships we have with our government partners and the taxpayers they serve. We comply with all applicable open records laws and share information freely with our government partners." Capeloto writes that the "applicable laws" need to erase any room for doubt. (Read more)

House votes to deny NPR federal funds; unlikely, but would have disproportionate rural impact

The U.S. House voted 228-192 today to keep federal funds from going to National Public Radio, a move that would have a disproportionate impact on public stations in rural areas.

"All but seven Republicans voted for the measure, and all Democrats present voted against it," reports Felicia Sonmez of The Washington Post. "The measure is unlikely to be taken up by the Democratic-controlled Senate." However, in the current budget-cutting atmosphere, and recent impolitic statements and actions by NPR officials, the issue is unlikely to go away.

"Could NPR survive without public funding? That depends on which NPR you're talking about," writes Clarence Page, Washington columnist for the Chicago Tribune. "There are two NPRs. There's the national news and talk show syndicator formerly known as National Public Radio, and there are about 800 local "member stations" that buy its programming. It is the local stations that serve more rural and less wealthy markets that would suffer the most without the federal grants they receive" from the Corporation for Public Broadcasting, which House Republicans have voted to de-fund. (Read more)

Former Post editors Len Downie and Bob Kaiser make similar points in an op-ed piece that concludes by urging local stations and their supporters to speak up: "The public broadcasting community has appeared flustered by the ferocity of its critics’ attacks, some of which are ideologically motivated. But most members of Congress are sent to Washington by communities with NPR member stations, which could do a better job of selling their increasingly vital role in news reporting. Consumers of public broadcasting could raise their voices, too. Public broadcasting should be able to accept and manage a fair share of federal budget cuts, but should it be abandoned?"

Alaska is especially dependent on public radio, Erika Bolstad of McClatchy Newspapers reports: "The state's public radio stations have long been woven into the fabric of life, and the state's 700,000 residents could be hard hit if Congress limits how local public radio stations spend federal money — or if it does away altogether with government funding of public broadcasting." She quotes Steve Lindbeck, president and general manager of Alaska Public Telecommunications Inc.: "The more rural and remote you are, the more dependent you are." (Read more)

Rhonda McBride of KTUU-TV in Anchorage reports, "If you tuned in to KYUK, the public radio station in Bethel at noon on Monday, you would have heard Lillian Michael broadcast in Yup’ik, the Eskimo language of Southwest Alaska. On the radio, she goes by her traditional name, Atmak, which means 'backpack' and, true to her name, she shoulders an important responsibility. She helps to keep elders in her region informed about state, local and national news. In so doing, she helps to keep the Yup’ik language alive. Native language broadcasts are just one of the reasons the Alaska public broadcasting system is different from those in the Lower 48. Stations also receive more federal funding, due to their remote location and sparse population, which in most rural communities is not big enough to support commercial radio."

The boss of the public station in Carbondale, Ill., WSIU, Greg Petrowich, discussed the issue with Chicago's WBEZ-FM. To listen, go here. Rural NPR affiliates came under attack when the network fired commentator Juan Williams. For that story, click here.

States look to private sector for help attracting businesses; would it help or hurt rural areas?

Several Republican gubernatorial victors made campaign promises about privatizing various sectors of state government, but the devil is in the details, Melissa Maynard of Stateline.org reports. Incoming Ohio Republican Gov. John Kasich proposed privatizing the Ohio Development Department, saying, "The days of trying to connect to business leaders through bureaucrats are over." Govs.-elect Terry Branstad of Iowa, Jan Brewer of Arizona and Scott Walker of Wisconsin also made similar privatization campaign promises designed to spur economic development.

"The question of how to empower business leaders to play a more meaningful role in state economic development efforts without sacrificing the accountability and transparency with which public funds are used is hardly a new one," Maynard writes. "A number of states — including Florida, Indiana, Michigan, Texas, Utah and Virginia — have privatized some aspects of their economic development functions in recent years, with mixed results." The structures of each state's programs may be different but "the governing principle behind all of these approaches is the same: Let local business leaders, rather than bureaucrats, take the lead on state economic development and marketing efforts," Maynard writes.

"This is one of those skill sets that government just doesn’t have as a core competency in-house," insists Leonard Gilroy, director of government reform for the Reason Foundation, a free-market think tank. Texas has enjoyed some success with its public-private partnership with nonprofit TexasOne, which is able to use strategies like sporting-event tickets to attract businesses that state agencies can't. Other states have run into some trouble. In Michigan the "semi-privatized Michigan Economic Development Corp. last year awarded $9.1 million in tax credits to a convicted embezzler," Maynard writes. (Read more)

Privatization proposals may pose a risk for rural areas. "States should constantly evaluate and adapt their economic-development programs to changes in the private sector, but I feel obliged to raise a caution flag about privatization: It has the potential to shortchange rural communities, because most business consultants and perceived 'experts' are urbanites and may not be familiar with the distinct challenges and opportunities in rural areas," said Al Cross, the director of the Institute for Rural Journalism and Community Issues.

Meanwhile, a nonprofit group has issued a report showing how well each state does at disclosing information about economic-development subsidies. Good Jobs First "seeks to shed light on how well or poorly economic subsidies work," Steven Greenhouse reports for The New York Times. Illinois was rated best, followed by Wisconsin and North Carolina; 13 states got Fs. "The study links to AccountableUSA, a new set of Web pages about every state that contains an overview of each state’s subsidy practices as well as profiles of major subsidy deals, Greenhouse reports.

Coalition walks a fine line to help state lawmakers craft legislation

On Friday we reported the private prison industry played a large role in the crafting of the controversial Arizona immigration law through an organization called the American Legislative Exchange Council. The Arizona law is far from a unique circumstance as ALEC frequently connects private industry with state legislators to write legislation, Laura Sullivan of National Public Radio reports. ALEC is a membership organization with state legislators paying $50 a year to join and private companies like tobacco company Reynolds American Inc., Exxon Mobil Corp. and drug-maker Pfizer Inc. paying tens of thousands of dollars a year to join.

"With that money, the 28 people in the ALEC offices throw three annual conferences," Sullivan writes. "The companies get to sit around a table and write 'model bills' with the state legislators, who then take them home to their states." Tax records show corporations have paid as much as $6 million a year to ALEC, Sullivan reports. "It's not an effective way to get a bill passed," Michael Bowman, ALEC senior director of policy, told Sullivan. "It's an effective way to find good legislation." ALEC operates as a non-profit because the organization is not restricted by the regulations that govern lobbyists in state governments.

If ALEC were classified as a lobbying group, "corporations wouldn't be able to reap tax benefits from giving donations to the organization or write off those donations as a business expense," Sullivan writes. "And legislators would have a hard time justifying attending a conference of lobbyists." ALEC doesn't disclose how much money it spends or where it spends it, and Bowman wouldn't tell NPR what legislators were members. When asked if the conferences constituted lobbying, Bowman responded,  "No, because we're not advocating any positions. We don't tell members to take these bills. We just expose best practices. All we're really doing is developing policies that are in model bill form." (Read more)

Private prison industry played role in crafting Arizona immigration law

Arizona's controversial immigration law was pushed along behind the scenes from one group that stood to benefit heavily from its passage: the private prison industry, National Public Radio reports. Benson, Ariz., City Manager Glenn Nichols remembers two men showing up in his town with an ambitious plan to build a prison to house only illegal immigrant women and children, but Nichols said he couldn't understand how the men planned to stock such a prison. The men were confident they would have no problem finding prisoners, "because prison companies like this one had a plan — a new business model to lock up illegal immigrants. And the plan became Arizona's immigration law," Laura Sullivan of NPR reports.

"NPR spent the past several months analyzing hundreds of pages of campaign finance reports, lobbying documents and corporate records," Sullivan writes. "What they show is a quiet, behind-the-scenes effort to help draft and pass Arizona Senate Bill 1070 by an industry that stands to benefit from it: the private prison industry." The private prison industry stands to earn hundreds of millions of dollars in profits if the law withstands court battles and sends thousands of illegal immigrants to prison that wouldn't have been there without it. Arizona Republican State Sen. Russell Pearce maintains the bill was his idea, telling Sullivan it is about what is best for the country not private prisons.

Two sources present for the drafting of the bill said officials from the private prison company, Corrections Corporation of America, were included in the approximately 50 people there. Pearce said CCA officials had been coming to meetings of the American Legislative Exchange Council, where the bill was drafted for years. NPR's review of CCA reports show the company believed immigrant detention is its next big market, writing last year that CCA expected to bring in "a significant portion of our revenues" from Immigration and Customs Enforcement. 

ALEC is a "membership organization of state legislators and powerful corporations and associations, such as the tobacco company Reynolds American Inc., ExxonMobil and the National Rifle Association," Sullivan writes, noting nothing about it is illegal. Michael Hough, who was staff director of the meeting, said it wasn't unusual for private companies to get to write model bills for legislators. "Yeah, that's the way it's set up," he told Sullivan. "It's a public-private partnership. We believe both sides, businesses and lawmakers should be at the same table, together." (Read more)

With little government oversight, producers pay for own food-safety inspections

The food industry has faced considerable losses over the past few years as a result of food-safety recalls. So, citing little oversight from the Food and Drug Administration, many food processors are taking matters into their own hands, hiring government inspectors to help with self-regulation. For example, the Leafy Green Products Handler Marketing Agreement pays the State of California for auditors to inspect the crop's producers, after the industry lost $100 million following a 2006 outbreak of e.coli in spinach. (Times photo by Peter DaSilva shows workers spraying chorine on freshly picked produce)

"It’s an understandable response when the federal government has left a vacuum,” said George Washington University professor Michael R. Taylor, who was formerly an officer in two federal food-safety agencies. But he and other critics warn that the approach is not ideal. “We want every inspector to be paid by and owe their loyalty to the people who eat, not to the owner of an unsanitary produce packing operation. You can’t work for both," said safety advocate Carol L. Tucker-Foreman of the Consumer Federation of American. (Read more)

This 'Pickens plan' is for wild horses, and federal officials say it's problematic; money short, too

Last year, Madeleine Pickens, wife of oil tycoon T. Boone Pickens, proposed a sanctuary for the more than 30,000 wild horses and burros. This week she discussed her plan with a House subcommittee and said it would be good for the country while also saving the government almost a billion dollars over the next decade.

Despite being initially welcomed as a way to save the horses from euthanization, the Pickens plan is being regarded as "problematic," Matthew Daly reports for the Associated Press. "We really appreciate Mrs. Pickens' proposal, but it has presented some problems," said Ed Roberson, assistant director of renewable resources and planning for the Bureau of Land Management, which runs the wild horse program.

"Roberson said officials are willing to continue talks with Pickens, but face 'unique challenges' in trying to care for wild horses while keeping down costs that topped $36 million last year," Daly writes. The integration of private and public funds also has some officials concerned. The BLM says annual costs could grow to $85 million by 2012 if the program is not changed.

Pickens told the House Natural Resources Subcommittee on National Parks, Forests and Public Lands the sanctuary would function as a "living museum" of the American West, while preventing the slaughter of thousands of horses. In addition to federal land use for the reserve, Pickens is seeking a federal stipend of $500 per horse per year -- $15 million per year for 30,000 horses -- in return for caring for them, which she estimated would save the government $700 million by 2020. Read more.

UPDATE, March 7: She had hoped to get foundaiton and other private support for the project, but "As the economy worsens by the week, Pickens says philanthropic donations are as dry as tumbleweed," reports Lyndsey Layton of The Washington Post. "Pickens still intends to spend $25 million to $50 million to purchase land for the ecosanctuary, but the deal is unworkable without government help, said Lee Otteni, who is retired from the [BLM] and working on the project for Pickens." (Read more)

Technology can boost the rural economy, if government and business cooperate, studies say

Government and business working together to "onshore" information technology services can bolster rural economies, say two studies released today by an IT-focused public policy initiative.
The CGI Coalition for Mission Results says that the increased "offshoring" of high-skill jobs can be countered if governments and corporations partner to promote U.S.-based job creation, activity which could have a significant impact in local communities. "Information technology is our newest national resource," said Donna Morea, president of CGI Group, Inc., in the press release. "High quality jobs with proximity to clients create enhanced productivity and value for all of our stakeholders while supporting our rural communities across the country."

One of the studies highlights the opening of two major IT facilities in Russell County, Va. (pop. 30,000) through a public-private collaboration. Since the opening of CGI's Southwest Virginia Center of Excellence in December 2007, 230 IT jobs have been created. By 2010, CGI anticipates that number will grow to 750, and that the project will add more than $65 million to the local economy. (Read more; for the full studies, click here and here).

Ky.'s public-private partnership for rural broadband setting example for other states

"Largely rural, Kentucky is best known for its bourbon and horse racing; it rarely ranks in the top tier of states on any measure of 21st-century success," The Economist reports. But it has one of the most successful public-private partnerships to bring broadband Internet service to rural areas. It's called ConnectKentucky and it's headed by Brian Mefford, right.

The weekly British magazine (which calls itself a newspaper and doesn't use bylines), reports from the "remote farm" of Lajuana Wilcher, former state environment secretary, checking "an online database for local ranchers demanding alfalfa. She can specify at what price she is willing to sell, which counties to search and whether her hay is square-baled or rolled. Without her high-speed internet connection, Ms. Wilcher insists, it would take far too long to find the most generous alfalfa prices, order spare tractor parts and locate the best breeding stock for her small cattle operation" in Southern Kentucky, near Bowling Green.

Five years ago, "Internet service providers could not be sure that there were enough Lajuana Wilchers in the Kentucky countryside to justify new investment in cabling or wireless transmitters," and "the state had among the lowest rates of broadband availability in the country," The Economist reports, citing Mefford. "But by the end of this year, Mr. Mefford boasts, 98 percent of residents will have access to inexpensive broadband services."

Other states are talking about copying Kentucky to overcome what the magazine calls "the poor design of federal loan and grant schemes by Congress" and come closer to the goal President Bush set in 2004, "to provide every American with access to broadband by this year. . . . ConnectKentucky might beat Mr. Bush to fulfilling his own goal. The group is morphing into a company called Connected Nation, and is helping to wire up the neighbouring states of West Virginia and Tennessee." (Read more)