GAO: Gov't funded broadband benefits small businesses

The agency finds government-funded service offers higher speeds and lower prices

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Government-funded broadband projects have led to higher speeds and lower prices for U.S. small businesses, despite opposition from some in Congress, according to an auditor's report.

Municipal broadband networks and federal broadband programs from the U.S. Federal Communications Commission, the National Telecommunications and Information Administration and the Rural Utilities Service generally have higher speeds and lower subscription costs than other broadband services, the U.S. Government Accountability Office said in a report released Monday. The GAO conducted the research at the request of a group of Democratic lawmakers.

Some of the federal programs were funded through the controversial American Recovery and Reinvestment Act, the US$787 billion economic stimulus package passed by Congress in 2009. Several Republican critics of the law questioned the need for $7.2 billion in broadband programs in the ARRA.

But the GAO's report "confirms the success of the Recovery Act's broadband programs," Representative Henry Waxman, a California Democrat, said in a statement. "Expanding broadband access and quality is critical for American competitiveness in the 21st century global economy. These were public dollars well spent."

Government-funded broadband services continue to be controversial. On Friday, Randolph May, president of free-market think tank the Free State Foundation, wrote a column in the Washington Times criticizing an FCC proposal to encourage more municipal broadband networks.

"Government systems pose inherent conflicts of interest with private-sector companies attempting to compete by investing tens of millions of dollars in building out new broadband networks," May wrote. "Government networks generally are subsidized directly by the taxpayers or are backed by government bonds carrying below-market interest rates. They are granted special privileges, such as favored rights-of-way treatment, which are unavailable to their private-sector competitors."

Some municipal broadband networks around the U.S. have experience financial problems, May wrote. "The proper way to encourage competition is to remove existing, costly regulations that no longer are necessary in today's competitive communications environment and to refrain from adopting or threatening to adopt new ones," he added.

The GAO's study compared 14 communities with government-funded broadband projects to 14 communities that haven't received government funding and found that six of the 14 with government-funded projects had download speeds of more than 51Mbps, compared to just three of the 14 communities that didn't receive government funding. Twelve of the 14 government-funded communities had download speeds of 26Mbps or greater, compared to nine of the other communities.

The government-funded broadband services charged about $11 less per month for 4-to-6Mbps service than providers in the same communities that didn't receive government funding, and about $20 less per month than providers in communities without federally funded projects, the GAO said. The price differences were greater for higher speeds of broadband service.

The ARRA broadband programs weren't aimed specifically at small businesses, but they have benefitted, the GAO report said. Agency investigators interviewed 27 small-business representatives in communities with government-funded broadband projects, and 20 of them reported higher speeds, the report said.

Eighteen of the 27 small businesses reported more reliable broadband service since the government funded networks were deployed, with many government-funded projects using fiber optic infrastructure. "These small businesses said they experience less network downtime and no significant slowdowns in speed at points in the day when usage increased," the report said.

In northwest Minnesota, a broadband provider used funds from the Rural Utilities Service to replace copper with fiber optic lines and increase download speeds from about 1Mbps to 30Mbps, the GAO said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.