End Broadband Loans in Competitive Areas, House Committee Told

Published December 1, 2007

The CEO of a privately held broadband company has called on the federal government to end low-interest loans for broadband to rural phone companies that face competition.

In an October 31 hearing, Amy Tykeson, head of BendBroadband, a cable company serving rural Oregon, told the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies that the federal government should stop providing loans to broadband providers interested in offering service to consumers who already have access to high-speed Internet service.

The Rural Utilities Service (RUS) program, Tykeson said, made a loan to a company within BendBroadband’s 60,000-home service area, which is also served by two other broadband providers, Qwest and wireless provider Clearwire.

The RUS provides loans at below-market rates to encourage the spread of broadband in areas where market forces have failed. The fact that there are at least three companies investing in the area counters the assertion government assistance is needed to assure universal service, Tykeson argued.

“Subsidizing competition is a waste of scarce RUS loans funds that should instead be targeted to areas where a market-based solution has not developed,” Tykeson told House members.

Steven Titch ([email protected]) is The Heartland Institute’s senior fellow for telecom and information technology and managing editor of IT&T News.