Wednesday, July 6, 2011

Further Evidence of Wasted Stimulus Dollars

I've written before about how the stimulus was a dismal failure, wasting billions with very little to show for it.  The folks at Navigant Economics recently published a study looking into another facet of the stimulus package, the portion subsidizing rural broadband deployment, $2.5 billion in total, dispersed by the Rural Utilities Service (RUS).  On the surface, bringing broadband to rural areas doesn't sound like a horrible idea as broadband can lead to productivity gains for businesses.  However, as we've seen with other government programs, even good ideas can be completely messed up by the government.  

The big problem is that many of the so called "underserved" areas already had broadband access, with a large majority of households having 2 or more providers to choose from.   The folks at Navigant looked at 3 different projects as case studies with $231.7 million in funding allocated, one in Kansas, one in Montana and another in Minnesota.  In the areas they looked at, 85% of households already had existing fixed broadband providers so only, 5,247 households were considered unserved by the RUS definition .  In one of the areas, 98.5% of households had fixed broadband service.  The government spent over $30,000 in taxpayer dollars (cost of grants and loan subsidies) per unserved house connecting them to the Internet!  If you take 3G broadband into account (which granted isn't as fast or as dependable as fixed broadband) the cost per unserved house climbs to almost $350,000!

Take a look at the Gallatin County, Montana project, which had $64 million in grants and loans allocated.  There were 9,035 total households in that area and only 136 (!) were considered to be unserved by current broadband providers, a total of 1.5%!  And there were only 7 households without 3G broadband access.  93.3% of households actually had a choice of 5 or more providers (3 3G and 2 fixed broadband).  Tell me how such a project stimulates economic activity over the long haul?  Sure it helped provide one time payments to those actually laying the cable, but what then?  Once the wire is laid you will have created no self-sustaining business that would help propel either the local or national economy forward.  Such a crazy waste of money.

h/t Nick Schulz

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