Commerce Warns of Strict Broadband Grant Audits

Grant recipients and even smaller local auditors will likely face intense Inspector General scrutiny, putting huge demands on government auditors with as many as 10,000 grants to be handed out. Bunting said his office will use “risk- based assessments” of the applicants to concentrate on the riskiest, such as first time providers. The warning came during the last of six public meetings that the NTIA and RUS held to gather information before doling out $7.2 billion in federal money to extend broadband to rural and underserved areas.

Consumer advocates pushed for increased openness in handling the applications and grants. They pointed to the Troubled Asset Relief Program as a model for how not to give out government money. The government gave TARP money to struggling financial institutions, only to find that much of the money was not being tracked. “We learned when looking at TARP that tailored oversight for each objective is very important,” said Amina Fazlullah, a lawyer with the U.S. Public Interest Research Group. “All participants must take part in oversight and not just biggest grantees. It is important that they all must meet same goals.”

Executive Director Beth McDonnell of the Media and Democracy Coalition said the NTIA should require broadband providers to collect information to gauge the effectiveness of each program in the government’s largest investment in Internet infrastructure ever. “Agencies need to know what is happening on the ground,” she said. “They should be required to record actual speeds [of the connection], the actual prices, and actual adoption to determine wether targeted consumers are actually be served.”

The speed with which the money is to be distributed makes waste, fraud and abuse inevitable, said Chris Murray, senior counsel at Consumers Union, but the government can prevent excesses by requiring “far more granular reporting” from recipients. “The public should be able to find out where money went and why it went there,” Murray said.

Others said the federal government will have to rely on local governments for help in streamlining the grants and staying closer to the action. “From the beginning in this process the state and public utility commission will have to be involved, not only because they are closer to ground but because the NTIA and RUS can’t handle that flow,” said Eli Noam, director, Columbia Institute for Teleinformation: “They have never faced that kind of pressure and don’t have the manpower.

Speakers agreed that the main tests for choosing applications should be job creation, how fast projects can be completed and how sustainable they are. The presenters offered mock scorecards also listing provider speed and feasability as considerations that should be used.

NTIA and the RUS must make grants for new technologies and business plans, said John Muleta, CEO of M2Z. “The idea here is to experiment,” he said. “They must have a diversity of ideas. Go out there and put in projects in things that will get you traction. You can say, ‘This worked in this community.'”

The NTIA should develop mostly objective grant criteria with very detailed requirements, said Steve Morris, an NCTA lawyer. “The closer toward that process, the faster the agencies can do their job,” Morris said. Lisa Scalpone, WildBlue vice president of legal and government affairs, representing the satellite broadband industry, urged NTIA and RUS to consider satellite service because the costs are the same for rural and urban areas, making estimates easy.

A third panel, the last of the series of public meetings, focused on the key role broadband has to play in community development and on how the federal government can make certain the stimulus dollars create jobs. “Communities with broadband are far more likely to develop,” said Sandra Rosenblith, senior vice president of Rural Local Initiatives Support Corp. Communities need to be patient, she said: “It takes a lot of time … As the people at USDA know, since they have an active rural development program, this is not something you can achieve overnight.”

Major companies won’t relocate to areas without redundant broadband service with back up if some lines go down, said Matthew Chase, executive director of the National Association of Development Organizations. Companies also demand flexible bandwidth to meet shifting demands and load, he said.

Broadband now is comparable to the interstate highway systems the U.S. built starting in the 1950s, said Maggie Elehwany, vice president of government affairs at the National Rural Health Association. “We saw the decline of towns that were not located on the highway system,” Elehwany said. “That’s the way our generation needs to look at the broadband capabilities in rural America.” In healthcare, broadband connections can tie medical personnel to hospitals in urban areas, Elehwany said. “The overriding problem that faces rural Americans is access to healthcare,” she said. “People will relocate to an area if they have a place where their children can attend schools and they have a place where they can get quality healthcare delivered to them.”

The broadband program must be to create not just lots of jobs “but good jobs” that “pay enough to support a family,” said Debbie Goldman, telecommunications policy director at the Communications Workers of America. It wants the government to keep track not only of the number of jobs created but the kinds of jobs and the ages of those hired, information on benefit packages and on whether those hired are part of a union.

Goldman said the NTIA and RUS face a big job and unrealistic expectations. “Your task is large and the expectations are great,” she said. “Not only to solve our multiple broadband gaps, but, based on what I have heard, to bring world peace and global prosperity as well.”

Several panelists conceded that broadband deployment can also cost jobs. “When we talk about productivity enhancement or productivity, that is often a euphemism for lost jobs,” said Robert Atkinson of the Columbia Institute of Teleinformation, who moderated the panel.

“I would say there is potential to lose jobs, but for … underserved and unserved areas, broadband is essential,” Chase said. “You can’t pursue an innovation economy and attract knowledgeable workers unless you have access to broadband.”