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August 21, 2010

Stimulating Netflix?

By Clarice Feldman and Rosslyn Smith

In Southwest Virginia, where a veteran Democrat is facing a tougher than usual reelection challenge, your tax dollars are helping his re-election -- typical of something now happening across rural America.  Ninth District Congressman Rick Boucher (D) says the Commerce Department will give a grant of $9,237,760 to Citizens Telephone Cooperative so the company can expand its broadband network.  The company's headquarters is in Floyd. The money will be used to add 186 miles of fiber-optic cable.

Similar grants are being made in rural North Carolina, some $83 million in total as part of a huge nationwide stimulus program.

Overall, the federal Recovery Act was to invest $7.2 billion in expanding broadband access nationwide - $4.7 billion through the U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA) and $2.5 billion funded through the U.S. Department of Agriculture's Rural Utilities Service (RUS).

Regional utility cooperatives are a favored recipient. The French Broad Electric Cooperative in Heath Shuler's district in Western North Carolina also received a stimulus grant to provide broadband. This co-op includes a newsletter with the monthly bill that has been known to praise Democrats for all the good things they do and which blamed Republicans for high energy costs when Republicans controlled Congress.

This expansion of high speed Internet access is claimed to produce huge economic benefits.  Unfortunately it is hard to argue that these rural areas are under served. There is, after all, a readily available existing private sector alternative called Hughes Net for those who truly need the speed.  The gas stations at many rural interstate exits run their credit cards off of such satellite feeds, as you may learn if you try to fill up in a heavy rainstorm.  My neighbor, a home based architect, uses HughesNet to download and e-mail huge design files. It's no more difficult or expensive to install and maintain than the satellite TV dishes that every rural residence seems to have these days.  

The fact is that for many rural users, this $7.2 billion stimulus will produce no more benefit than making it easier to download movie and music files

The reaction of one of my neighbors to the French Broad Co-op announcement  may be typical of supporters of such spending programs. A retired government employee who moved to the area, she sent out an excited e-mail to her 40 people distribution list that at last she can ditch Hughes Net for subsidized service!  That she freely chose to move here upon her retirement is beside the point.  That HughesNet pays the income taxes that fund her government pension while the local coop operates on a break even basis seems beyond her comprehension.  She's entitled to high speed Internet access at taxpayer expense and let's all celebrate!  

Rural areas are the last to be upgraded for sound economic reasons.  In our valley there are maybe 20 customers or fewer per mile of utility trunk line. At that density there isn't a reasonable rate of return for a utility to rush to upgrade facilities to accommodate broadband so people can download off of Netflix.  As it so happens, for the last two years I have had broadband via Verizon but this is solely due to an act of God. Lightening hit the control box serving the land line I'm on.  Maybe 100 customers were affected and of course, when they replaced what nature destroyed it was with new technology.  But in the absence of lightning strikes, it doesn't pay for them to upgrade the whole area.  Long time rural residents tend to understand that.  Political activist and many newcomers don't.  
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