USA - Concerns over whether the broadband stimulus funds are achieving value for money

[argus leader] When Congress appropriated $7.2 billion in 2009 to bring high-speed Internet service to unserved areas of America, South Dakota didn't miss out.

One of the first projects nationally to get under way came via a $20.5 million grant to SDN Communications. SDN chipped in more than $5 million of its own money to enhance its high-speed fiber network, linking 75 communities and 300 so-called "anchor institutions," government buildings, health centers and other important institutions. Work started in Rapid City, and projects also were started in Vermillion, Watertown and Yankton.

SDN's grant application was supported by the state, the congressional delegation, the Avera Health System, Sanford Health and Mitchell Technical Institute.

But such projects also have drawn criticism, both in South Dakota and nationally. Critics argue that in many cases, the broadband grants are funding projects where high-speed Internet already exists. Thus, the federal money is subsidizing some companies to compete against others. In April, the National Cable & Telecommunications Association released a study that analyzed three projects in Montana, Minnesota and Kansas. The study concluded that companies which received grants and loans were establishing service in communities where high-speed Internet already existed.

"They were successful in getting Uncle Sam to subsidize them and make it cheaper to compete against their cable company competitors," said Jeffrey Eisenach, an author of the study who is an adjunct professor at George Mason University School of Law.

Rep. Greg Walden, R-Ore., the chairman of the House Subcommittee on Communications and Technology, has made oversight of broadband grants one of his top priorities. Walden says he's concerned by the potential for fraud and abuse in the program, and he thinks Congress allocated more money than necessary to reach unserved areas.

The money came as stimulus funding in the American Recovery and Reinvestment Act - the $787 billion spending measure intended to prop up an ailing economy. The funding went to the Rural Utilities Service - part of the Department of Agriculture - and the National Telecommunications and Information Administration, where SDN received its grant.

Is stimulus for rural broadband effective?