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Federal money available for rural broadband – but is it enough? And, for what?

Tens, or hundreds, of millions of dollars needed to fill gaps
Posted: 9:57 PM, Sep 05, 2019
Updated: 2019-09-06 00:16:54-04
Federal money available for rural broadband – but is it enough? And, for what?

This is the third and final segment in a three-part series on access to high-speed Internet and cell-phone service in rural Montana.

When it comes to financing expanded access to high-speed Internet or cell-phone service in rural Montana, just about everyone agrees it will take some form of public subsidy to reach areas that are not profitable for most telecom providers.

“If you want to make it a market-based solution, my customers’ rates would quadruple,” says Craig Gates, CEO of Havre-based Triangle Communications, which serves about 20,000 customers in rural areas from the Hi-Line to the Wyoming border.

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Craig Gates, CEO, Triangle Communications, which is headquartered in Havre

Yet the amount of money needed is vast – tens, or even hundreds, of millions of dollars, and that’s just Montana – and the programs are few.

The primary public funders of building out fiber-optic networks are federal universal service funds, administered by the Federal Communications Commission, and the U.S. Department of Agriculture’s Rural Utilities Service, which offers low-interest loans to rural tel-coms.

In 2018, the FCC distributed almost $5 billion in universal service funds, including $132 million in Montana, primarily for building out fiber-optic broadband in rural areas, for Internet service.

That money went mostly to rural telephone cooperatives. However, many areas unserved by high-speed Internet in Montana are not served by the co-ops.

The FCC is preparing a new fund that will distribute $20 billion over 10 years to larger companies, based on an auction. “Qualified providers” will be competing for the money to serve underserved rural areas.

And, U.S. Sens. Steve Daines and Jon Tester helped secure $600 million in the current USDA budget for a pilot program offering grants and loans to telecom companies and co-ops, utilities, cities, counties and Internet-service providers to connect unserved rural areas to high-speed broadband.

It’s restricted to communities with less than 20,000 people – or, all but a half-dozen cities in Montana.

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U.S. Sen. Steve Daines, R-Mont.

Daines, R-Mont., also has secured language that requires USDA programs to focus on unserved areas, rather than upgrading areas that may already have access to broadband.

Yet most telecom industry officials say this level of funds is not enough to bring affordable high-speed Internet and adequate cell-phone coverage to the many areas of Montana without it.

Tester also says he worries about competing pressures for scarce federal money.

“Now this country is running trillion-dollar deficits every year, so it’s really hard to find the money,” he told MTN News. “We’ve got to figure out ways where we prioritize our spending in this country, and broadband should be at the top of the list. If it isn’t, we’ll get left behind in the world economy in which we live.”

Jason Williams, the CEO for Blackfoot Communications, a rural telecom headquartered in Missoula, says fiber-optic infrastructure simply hasn’t been made a priority in Montana – and it should be.

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Jason Williams, CEO, Blackfoot Communications, Missoula

“If you were to go and ask anybody, any community in Montana, whether or not broadband is just as important as basic infrastructure, I think the answer you’re going to hear is `yes,’” he says. “Every time we’re having the infrastructure conversation, the thing we need to do, is to include broadband in the conservation.”

Williams also has an idea on where to get more money to finance expansion of fiber-optic networks, which transmit signals both for high-speed Internet and cell-phone traffic: The multinational, multibillion-dollar companies that are the primary users of the networks, but who pay nothing for it.

“Of all the traffic on Blackfoot’s network, 40 percent of that is Netflix traffic,” he says. “Netflix pays us nothing to use our network, to provide those services.”

Netflix, Facebook, Amazon and Google, which owns YouTube TV, have about $500 billion in annual revenue, Williams says. A mere 1 percent of that revenue would be $5 billion, which could close the broadband funding gap in a significant portion of the country, he says.

Telecom and local officials in Montana say the effectiveness of any funding depends on who gets it and how it’s targeted, to make sure it pays for infrastructure that will reach those without adequate service – rather than paying for duplicative or substandard service.

“Just because you live in rural America doesn’t mean that you should have substandard roads, or schools, or infrastructure or broadband,” says Paul Tuss, executive director of Bear Paw Development, an economic-development agency in Havre. “We need to prioritize investing in rural America, just like we prioritized investing in rural America for decades. …

“It doesn’t matter if it’s Havre, Big Sandy or Seattle – in today’s economic environment, if you don’t have access to reliable broadband, high-speed Internet? I don’t know how you can do business.”

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Cell-phone service in Montana: Large chunks of the state still uncovered
Access to high-speed Internet, cell service in rural Montana: A long ways from adequate