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| Apparently Inappropriate RUS $32M Grant |
| Tuesday, 31 August 2010 15:50 |
 Montana Opticom was approved for a $32M RUS grant to build fiber to 7K+ homes in Gallatin County that were said to be "underserved." I have data from Opticom's web site, local governments for a majority of the population, local news reporting and their competitors that the area is well served. If so, the grant should be immediately frozen. According to the map posted at Opticom's website the majority of homes they intend to cover can already get 10 megabit cable modem service from Bresnan. I checked this with Bresnan and with local officials for Belgrade, Montana; Manhattan, Montana and Four Corners, Montana. Those three contain a majority of the homes to be covered. They already have two broadband choices, at least one at 8-10 megabits. In addition, most of the additional area on the Opticom map has DSL service as well as a local WISP. I worked from a map on the Opticom site.
In addition, Opticom currently offers broadband to 300 homes at some of the highest prices in the world. Unless they firmly committed to offer honestly "affordable" prices, Julius Genachowski at the FCC should personally step in, review the situation with RUS, and make sure that this project will deliver his repeated promise of "affordable broadband."
While other RUS projects have guaranteed pricing of as little as $35 for true high speed broadband, I see nothing that suggests Opticom will be "affordable."
Opticom is charging $79.95 for a 2 meg download service and $149.95 for ten meg, similar to what Bresnan delivers to most homes in the territory for a third the price. Even 1 meg is $45.95. While past performance is no guarantee of future choices, I'd look very hard before giving $10K/home served to an outfit that charges prices like this.
If in fact the full $32M grant & $32M loan are spent building the network, as promised, I hope RUS has a guarantee from a rock solid outside party for the loan. Opticom would be doing remarkably well winning even half the market, or about 5,000 customers. The $32M loan is therefore debt of over $6K/customer. Broadband networks, including those as robust as FiOS, are currently valued at $1,000 to $4K per customer. The loan is therefore 50% more than the market thinks a successful company like this is worth. Perhaps the principals will offer a personal guarantee.
Dolans have contributed $hundreds of thousands, almost all to Republicans. I have no evidence any of this resulted in influence at RUS. I know most of the leaders at RUS and NTIA, They are politicians (quite good ones) but I do not believe they are for sale. It's more likely that this one slipped through the cracks. Mistakes happen. Since half the funding is loans, RUS may have assumed they wouldn't sign for the loans if they weren't confident they could be repaid.
The indicated cost of the project (5K+ per home passed, probably 10K+ per home served) is very high when I look at the territory. One third of the homes are in Belgrade, a town of less than 2 square miles with a population density of 3,429.8 people per square mile. Many of the others are in Manhattan and Four Corners, also reasonably dense. While there are some farms, from the Google satellite pictures this looks like many areas that companies like Verizon have fibered for under $2K/home. There are utilities throughout, so there are probably some ducts or poles that can be rented. Qwest was "able to see the proposed service areas in Opticom’s application and informed RUS that it would overbuild in most of our service territory."
There's more, including improbable estimates of how many businesses are in the territory and claims for an almost impossible number of jobs to be created.
Something is almost certainly rotten in the state of Montana.
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Larry Strickling, NTIA chief, said, "I will not approve any bad proposals." Jonathan Adelstein at RUS should be equally careful with public money. Without the application public, I don't know whether Opticom found a legal loophole or abused the process. This is clearly a "bad proposal," far too much public money to just upgrade folks from 8 meg cable to (probably over-priced) fiber, with half a dozen apparent problems. Jonathan has a choice: look more closely at the proposal or just let it go through even if a mistake was made. The odds are good that if he looked closely he would find grounds to cancel this one. It requires a great deal of courage for any politician to say "I made a mistake." I believe Jonathan has that courage.
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