[August 05, 2010] Stimulus fails to link Texas' small towns and rural areas with high-speed Internet service Tweet WASHINGTON, Aug 05, 2010 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- Even with $7.2 billion to spend on expanding broadband to rural America, the government has made progress on enabling high-speed Internet for just a fraction of the homes and businesses that need it. The billions for broadband in last year's stimulus law was a down payment on universal broadband. After that money is spent, large swaths of Texas will remain unserved by broadband providers, according to federal officials. Telecom regulators say the answer rests on reforming a complex and politically entrenched system of local phone subsidies that support telephone service providers, including Dallas-based AT&T. In the meantime, residents and business leaders in rural and thinly populated parts of Texas say they've lost potential employers, including call centers, and educational opportunities without broadband access. "It's critical we have broadband access for business," said Amanda Nobles, executive director of the Kilgore Economic Development Corp., which unsuccessfully pressed Verizon Communications Inc. to extend DSL service to city-owned business parks. "Basically, Verizon said, 'You'll never get it. We'll never do it. We can invest in a higher density city like Garland or Mesquite and get our money back. Y'all can go home now.' " Verizon spokesman Bill Kula said the company continues to evaluate upgrades that would extend DSL service to East Texas. Verizon's service area in East Texas is a "patchwork quilt" of small cities and towns that makes it more difficult to get a necessary return on investment, he said. "That is the largest swath of territory in Texas where we haven't yet built out our network for DSL," Kula said. "We are continually evaluating the opportunity to make broadband more widely available in the state, and we have had our eyes focused on East Texas for some time." One of the state's first oil boomtowns, Kilgore has just 11,000 residents but an outsized number of employers, including regional offices for big oilfield-services firms. Its sales-tax revenue is more than twice what many cities of its size collect, according to data from the Texas Comptroller of Public Accounts. Even so, the town has had trouble recruiting some employers because broadband isn't available everywhere, Nobles said. Just across Gregg County, residents of Longview have broadband service from AT&T. In parts of Kilgore, a cable provider offers high-speed Internet, but residents need a cable TV package to get it. The cable provider didn't wire parts of town where industrial businesses are concentrated, nor residential areas beyond the city limits, according to Nobles and other residents. Lou Anne Morse, a small-business owner who lives outside Kilgore, said she pays $65 a month for wireless Internet service at her house, with maximum download speeds of 512 kbps. The Federal Communication Commission's minimum threshold for broadband service is 4 mbps, or seven times as fast as Morse's connection. A cable provider doesn't offer service in her neighborhood. A company offers satellite Internet service where Morse owns two Sonic restaurants outside Kilgore, but it isn't fast enough to stream security-camera video to her office, she said. "I am paying double [at my house] what most people pay for Internet from a telephone or cable system," Morse said. "They said that's because they only go to city limits. But we have 358 houses in my neighborhood." Some Texas communities thought the stimulus would help close the broadband gap. Kilgore hoped to benefit from a $51 million stimulus grant requested by the East Texas Council of Governments. But a contractor who wrote the grant proposal didn't submit the application on time, said Luke Kimbrough, a council spokesman. The FCC's latest estimate of the broadband gap -- its most accurate assessment so far, according to officials -- says as many as 24 million Americans lack quality broadband service. That total includes 2.5 million Texans and 142 Texas counties that are unable to get true high-speed connections. Telecom and cable providers say the number of potential customers in rural and thinly populated areas is too small to justify the expense of upgrading networks. The average population density of U.S. residential areas is 154 people per square mile, compared to just 14 per mile in areas unserved by broadband, according to the FCC. "It costs a lot more money to provide that type of bandwidth," said Greg Harrison, vice president of regulatory affairs for Allegiance Communications. The company won a $28 million stimulus grant to wire parts of four states, including near Lake Texoma in Grayson County. "The only way they were ever going to see high-speed data service in their particular communities is through something like this." It's unclear how many unserved households will get broadband as a result of the stimulus grants. Congress divided the money between two agencies, the National Telecommunications and Information Administration and the Rural Utilities Service. On Wednesday, the utilities service announced four grants for broadband projects in Texas, although none are in the vicinity of Kilgore. The NTIA has focused on "middle mile" projects that connect hospitals, schools and other community institutions but don't directly bring the Internet into unserved households. NTIA officials can't estimate how many end users will benefit from their projects, while the utilities service says its projects will connect as many as 1.2 million households nationwide. NTIA officials said a one-time dose of stimulus isn't enough to bring service to all rural areas that lack it. "Not nearly enough," NTIA chief of staff Tom Power said. "What would be needed in some areas is an ongoing subsidy." That's why reform of the Universal Service Fund is necessary, according to the FCC. Lawmakers say the fund, a complex system of local phone subsidies, wastes money -- spending more than $10,000 per line in some areas -- and should be redesigned to support broadband instead. The FCC's National Broadband Plan calls for redirecting $15.5 billion over 10 years from the Universal Service Fund to broadband investments. AT&T says it supports that proposal. AT&T got $435 million from the fund in 2009, second only to Verizonaccording to FCC data. But the universal-service revenue is less important for AT&T than for its smaller, more rural competitors, which receive more money on a per-line basis. Reforming the fund causes anxiety among small, rural phone companies, which want to make sure their total funding isn't reduced. Even so, lawmakers are pushing to reform the fund, possibly as soon as next year. "It is a very poorly designed system," said Hank Hultquist, AT&T's vice president for federal regulatory affairs. "Virtually everybody recognizes that now." To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2010, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com, e-mail [email protected], or call 866-280-5210 (outside the United States, call +1 312-222-4544). [ Back To TMCnet.com's Homepage ]