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House to Investigate Waste of Broadband Stimulus Funds

February 09, 2011 J

A hearing has been set for Feb. 10 in a House Communications Subcommittee to hear witness testimony regarding federal stimulus funding for broadband telecommunications networks.

The government stimulus package enacted in 2009 included over $7 billion to stimulate broadband infrastructure expansion. Government subsidies have been largely focused on the creation and expansion of municipal broadband structures. At least at the outset, the intent of the legislation was to develop these networks in unserved and underserved areas, such as rural communities.

However, there has been growing criticism of the government’s management of the stimulus funds. Unfortunately, it appears that taxpayer funds have been misused to overbuild already existing networks. The private sector has done an incredible job of expanding and improving broadband telecommunications at a very fast pace and at competitive prices. In contrast, broadband infrastructure projects funded and managed by government entities have tended to be costly and unwieldy, burdened by budget overruns and heavy bureaucratic administration. Also, these programs also tend to exhibit a lower quality of service.

In the private sector, such scenarios are simply priced out of the market by more competitive and innovative service providers. However, the government is not subject to this kind of risk. Projects subsidized through federal stimulus dollars inherently possess an unfair advantage over competitors in the private market, and taxpayers are the ones who end up footing the bill.

Some are concerned that the government’s entry into the broadband market creates a negative impact on private sector growth. In the broadband market, private capital investment is discouraged, as there is a disincentive to compete with firms that are on the receiving end of contracts subsidized by the government.

This impact will be felt by American workers. Many private firms stand to be priced out of the broadband market because other service providers have gained an unfair competitive edge in the playing field due to government subsidies. Overbuilding existing networks does the exact opposite of what the stimulus bill intended to do, as workers in the telecom industry face the prospect of losing their jobs as their companies struggle to compete.

As Republicans in Congress examine budget reductions and spending cuts, special attention will be given to the billions of dollars that have been allocated to broadband infrastructure expansion. Stimulus money should not be given to unsustainable projects, especially if such projects create an anticompetitive environment in the broadband market. As has often been the case, the American public is best served when the government plays a less active role in the private sector.

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