Subsidizing Competition, Not Service

The CEO of a privately-held broadband company called on the federal government to end low-interest loans for broadband to rural phone companies that face competition from cable companies and other service providers using alternative technologies. Amy Tykeson, head of BendBroadband, a cable company serving rural Oregon, told a House subcommittee hearing yesterday the federal government had to stop providing loans to broadband providers interested in offering service to consumers who already have access to high-speed Internet access. Here’s how Multichannel News reported the story:

Tykeson, echoing concerns raised by cable officials for several years, took aim at a Rural Utilities Service (RUS) program, claiming that funds intended for areas truly unserved were flowing to companies that compete with cable competitors. The RUS is an arm of the U.S. Department of Agriculture. “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 said, noting that cable’s broadband lines pass about 94 million U.S. homes. Tykeson, whose Oregon-based company is privately held, appeared before the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies. The RUS, Tykeson said, made a loan to a company within BendBroadband’s own 60,000-home service area, which is also served by two other broadband providers, Qwest and wireless provider Clearwire. “Notwithstanding this information, the RUS granted the application for a loan to offer subsidized service there,” she said.