Senators Thune, Luján Urge GAO to Revisit Broadband Funding

In a letter dated April 24, Senators John Thune (R – SD), ranking member of the Commerce Committee's Subcommittee on Communications, Media, and Broadband, and Ben Ray Luján (D – NM), subcommittee chairman, request that the Government Accountability Office (GAO) "conduct an additional review of federal, state, and local broadband efforts to determine the effectiveness of each program."

In a recent post to the FSF Blog describing an effort led by Senator Thune to compel the National Telecommunications and Information Administration (NTIA) to align with statutory intent its rules for the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program, I pointed out that in prerecorded remarks delivered to the Free State Foundation's Fifteenth Annual Policy Conference, he cited a May 2022 GAO report cautioning that "there are more than 130 federal broadband programs that are administered by 15 federal agencies."

As I noted in a June 2022 post to the FSF Blog, the GAO concluded that "[t]his patchwork of programs could lead to wasteful duplication of funding and effort" and therefore recommended that the "Executive Office of the President … should develop and implement a national broadband strategy with clear roles, goals, objectives, and performance measures."

To date, no such national broadband strategy has emerged. Fortunately, however, Senator Thune's ongoing broadband funding oversight activities maintain a bright spotlight on this multi-agency, multi-program recipe for duplication, waste, fraud, and abuse.

For instance, his December 2022 oversight letter, to which FSF President Randolph J. May helpfully provided a comprehensive response, brought focused attention to the GAO report's findings. Yesterday's letter to the Honorable Gene L. Dodaro, Comptroller General of the United States, treads a similar path.

Specifically, Senators Thune and Luján request that the GAO investigate a number of topics, including:

• Whether each of the 133 (and counting) federal subsidy programs "were … established in line with Congress' directive on the funding's intended purpose";
• The "statutory basis" for each program;
• The extent to which these programs have met their "specific policy goals";
• The frequency with which – and how – "federal programs' funding [has] overlapped other federal programs";
• The effect of "the fragmented and overlapping approach the federal government [has] taken" on the ability of these programs to accomplish their intended goals;
• Whether the goals set forth in the May 2022 Memorandum of Understanding between the FCC, Department of Agriculture, NTIA, and Treasury Department have been achieved; and
• The extent to which "federal agencies [have] coordinated their broadband programs with state and local broadband funding programs."

As the letter rightly concludes, "[a]ddressing weaknesses in each of these broadband programs will help ensure more Americans are connected to reliable broadband services."

Senate Broadband Oversight Focuses on Department of Agriculture

With the Department of Agriculture's ReConnect Program poised to distribute this fiscal year an additional $1.5 billion in broadband infrastructure subsidies and amid reports that the 2023 farm bill could provide that agency with even more construction funding, I am encouraged by the news that a bipartisan group of Senators is taking action to prevent (1) waste, fraud, and abuse, and (2) the use of federal dollars to overbuild existing, privately financed networks.

On January 30, 2023, Senators John Thune (R-SD), Ben Ray Luján (D-NM), Amy Klobuchar (D-MN), and Deb Fischer (R-NE), all members of the Senate Committee on Agriculture, Nutrition, and Forestry, reintroduced legislation designed to "streamline and bolster U.S. Department of Agriculture (USDA) Rural Development broadband programs and ensure that their funding is being targeted to rural areas that need it the most."

Seth L. Cooper, Free State Foundation Director of Policy Studies and Senior Fellow, detailed the specific provisions of the Rural Internet Improvement Act of 2022 in a December 2022 post to the FSF Blog. The Rural Internet Improvement Act of 2023, like the 2022 version, would combine Rural Utility Service (RUS) broadband loan and grant programs, specify that no more than 10 percent of locations targeted by a funded project already have access to broadband, encourage greater broadband provider participation, improve the challenge process, and promote greater interagency coordination with the FCC and NTIA.

The RUS manages multiple broadband subsidy programs, the largest being the ReConnect Loan and Grant Program, which to date has distributed more than $3 billion. In a recent interview, RUS administrator Andrew Berke stated his expectation that the ReConnect Program will dole out an additional $1.5 billion in 2023.

In addition, news reports indicate that the next farm bill could appropriate still more money to RUS – Representative David Scott (D-GA), ranking member of the House Committee on Agriculture, identified as his top priority that "[w]e must ensure that appropriate funding is given to USDA to help us bridge the digital divide between rural and urban America" (emphasis added) and argued that "USDA knows what works for our rural communities better than many other Federal agencies."

Considering that (1) tens of billions in taxpayers dollars have been appropriated for the expansion of broadband infrastructure but not yet put to use, and (2) the vast majority of those subsidies will flow to rural areas – after all, at this point in the rollout of broadband "unserved" and "rural" are virtually synonymous – regardless of the distributing agency, it is not at all clear that any additional funding is "appropriate" at this time.

In "Absent Oversight, the Broadband Funding Faucet Likely Will Overflow," a November 2022 Perspectives from FSF Scholars, I drew attention to the concerning potential that, given the large amount of money involved and absent better interagency coordination and oversight, the number of different agencies sharing responsibility for government-led efforts to extend broadband connectivity to those areas that remain unserved could lead to substantial waste and inefficiencies.

But as Mr. Cooper wrote, it is equally true that "intra-agency coordination of broadband deployment subsidy programs through streamlined processes or merging of disparate programs is no doubt essential to ensure that precious tax dollars are spent wisely and that duplicative efforts and other forms of fraud, waste, or abuse are avoided" (emphasis added).

As you may recall, Free State Foundation President Randolph May received a letter from Senator Thune on December 6, 2022, soliciting input on, among other things, the potential for waste, fraud, and abuse as a result of the sheer number of federal broadband subsidy programs, including those administered by the Department of Agriculture.

In his response, Mr. May wrote that "[g]iven the large number of separate programs, it seems self-evident that some of them should be combined and/or eliminated so that there are many fewer programs and fewer agencies disbursing subsidies. This would increase manageability and facilitate accountability and meaningful congressional oversight." He therefore referenced with approval the introduction the Rural Internet Improvement Act of 2022.

In addition, Mr. May drew attention to the fact that the ReConnect Program (1) opens the door to rate regulation via a preference for applicants that provide "at least one low-cost option"; (2) inappropriately encourages applicants to "commit to net neutrality"; and (3) permits grant and loan recipients to apply that assistance in areas where up to 50 percent of locations already are served, in many instances by privately funded networks, "thus disincentivizing further private investment." As noted above, the Rural Internet Improvement Act of 2023 would decrease that threshold to 10 percent.

Senators Introduce the Rural Internet Improvement Act

 On November 29, Senators John Thune and Ben Ray Lujan introduced S.5137 – the Rural Internet Improvement Act of 2022. The bill's purpose is to reform existing U.S. Department of Agriculture (USDA) Rural Development broadband programs and ensure that program dollars are directed to connect rural areas that are unserved or underserved.

According to a press release for the Rural Internet Improvement Act, the legislation would do the following: 

1. Streamline USDA's broadband authorities by merging and codifying the popular Rural e-Connectivity Pilot Program (ReConnect) with USDA's traditional broadband loan and grant program;
2. Ensure ReConnect funding is going to areas most in need of reliable broadband service by limiting funding to areas where at least 90 percent of households lack access to broadband service;
3. Enhance the participation of all types of broadband providers in the ReConnect Program by removing unnecessary barriers;
4. Increase transparency by improving the challenge process in the ReConnect Program;
5. Improve the coordination between USDA and the Federal Communications Commission (FCC) on broadband programs; and
6. Require USDA to enter into a memorandum of understanding with the FCC and National Telecommunications and Information Administration to facilitate outreach to rural residents and businesses of available federal programs that promote broadband access, broadband affordability, and broadband inclusion.

No House companion legislation to S.5137 has yet been announced. 

 

The Rural Internet Improvement Act appears to be a responsible and constructive measure for helping to ensure that broadband subsidy programs are efficiently and effectively implemented by USDA. Along with interagency coordination among USDA, NTIA, and the FCC, intra-agency coordination of broadband deployment subsidy programs through streamlined processes or merging of disparate programs is no doubt essential to ensure that precious tax dollars are spent wisely and that duplicative efforts and other forms of fraud, waste, or abuse are avoided. 

 

Congressional oversight is also necessary to help ensure that the billions in subsidies Congress has allocated to promote broadband deployment are well spent. Free State Foundation Senior Fellow Andrew Long addressed this important topic his November 10, 2022 Perspectives from FSF Scholars, "Absent Oversight, the Broadband Funding Faucet Likely Will Overflow." 

Broadband Funding Agencies Ink Data-Coordination MOU

On May 11, 2022, all four federal agencies responsible for distributing hundreds of billions in broadband infrastructure subsidies announced that they had agreed "to share information about and collaborate regarding the collection and reporting of certain data and metrics relating to broadband deployment."

Pursuant to their Memorandum of Understanding (MOU), and consistent with arguments I made in a recent Perspectives from FSF Scholars, the FCC, NTIA, Department of Agriculture, and Department of Treasury will work together to leverage the FCC's soon-to-be-released broadband service availability maps (among other resources) to disseminate and display publicly "information about projects that have received or will receive funding from" the various programs that they administer.

As I explained in "Overlapping Broadband Appropriations Demand Agency Coordination: New FCC Maps Can Track Grants, Avert Waste," a March 2022 Perspectives, the Consolidated Appropriations Act, 2021 directed NTIA, the FCC, and Agriculture's Rural Utilities Service to "share information with each other about existing or planned projects that have received or will receive funds under the programs" for which those three agencies are responsible. That statutory requirement led to the release of an interagency agreement on June 25, 2021.

Notably, however, Treasury, which was tasked by the American Recovery Plan Act to oversee the $350 billion State and Local Fiscal Recovery Funds as well as the $10 billion Coronavirus Capital Projects Fund, was not a party to that agreement.

The MOU released on May 12, 2022, which supplements rather than supplants the prior three-party agreement, addresses that concern by bringing Treasury into the fold.

Given the vast amount of money at stake in these overlapping programs designed to connect those Americans still unserved, effective coordination is essential to avoid redundant grants, overbuilds, and waste, fraud, and abuse. The transparency and enhanced oversight made possible by this latest interagency pact hopefully will ensure that such coordination indeed does take place.

Congress Disavows USDA's Misguided Favoritism of Municipal Broadband

Congress disapproved of the Department of Agriculture's (USDA) favoritism for municipal broadband in a nonbinding directive attached to the Consolidated Appropriations Act of 2022 passed last week. That nonbinding directive, which appears within a Joint Explanatory Statement, "encourages the Secretary to eliminate or revise the awarding of extra points…" to municipal broadband networks applying for ReConnect program deployment subsidies.

If followed, this nonbinding directive would improve the likelihood that ReConnect funds flow to states based on true need for broadband service rather than states' conformity to unrelated policy objectives. ReConnect is a multi-billion broadband deployment grant and loan program managed by USDA that generally targets unserved rural areas. Congress tasked ReConnect with distributing $3.15 billion in broadband subsidies over the next few years between the Infrastructure Investment and Jobs Act (IIJA) and appropriations made in 2021.

In response to this cash influx, USDA published "Evaluation Criteria" guidance last year explaining how it will review applications for ReConnect deployment subsidies. This guidance amounts to a points-based system that awards applicants with greater chances of success for meeting standards contained within.

As Free State Foundation Senior Fellow Andrew Long explained in a Perspectives from FSF Scholars, the portion of the Evaluation Criteria awarding 15 extra points for applications submitted by municipal broadband providers exceeds USDA's authority. This criterion intrudes into the FCC's jurisdiction to set communications policy "in the face of conflicting congressional intent" and should be repealed. And USDA didn't adhere to Administrative Procedure Act notice and comment requirements while adopting the municipal favoritism criterion, which foreclosed potential for public comment on whether USDA has authority to adopt such a criterion in the first place.

Further, the municipal favoritism criterion biases ReConnect funds to flow to states that lack prohibitions on municipal broadband, irrespective of actual need for broadband infrastructure, because only municipal applicants within those states will be eligible for these 15 extra points. This is an ill-advised policy choice. As Andrew Long explained in another Perspectives from FSF Scholars, municipal networks are often economic failures that cannot achieve financial viability, explaining why many states prohibit them. So biasing ReConnect funds in favor of municipal networks will reduce ReConnect's effectiveness for narrowing the digital divide.

Now, in the Consolidated Appropriations Act of 2022, Congress appears to agree. This law added nearly $550 million additional funds to ReConnect and other smaller broadband programs at USDA, and it included a nonbinding directive that disavows the Evaluation Criteria's municipal favoritism:

"In addition, the agreement encourages the Secretary to eliminate or revise the awarding of extra points under the ReConnect program to applicants from States without restrictions on broadband delivery by utilities service providers in order to ensure this criterion is not a determining factor for funding awards."

This disavowal should be unsurprising because Congress rejected similar municipal favoritism in the IIJA. Of course, nonbinding directives are, indeed, nonbinding, and amount to legislative history, which is disfavored and cannot substitute for the plain text of the law. But Congress's disavowal of municipal broadband favoritism is at least notable because no law authorizes the Department of Agriculture authority to set Communications Policy in the first place.

Also, a separate nonbinding directive in the Consolidated Appropriations Act of 2022's Joint Explanatory Statement encourages the Secretary of Agriculture to follow notice and comment rulemaking for "all program administration and activities" regarding ReConnect.

It will be interesting to see if the Secretary of Agriculture heeds Congress's wise advice to stop favoring often failed municipal networks for subsidized support.