IP Democracy: Mediacom, Iowa Cable Operators Sue over Rural Loans

Small market-oriented cable operator Mediacom filed suit today in Federal court against the USDA over how that government agency has administered the Broadband Loan and Loan Guarantee Program, a program authorized by Congress to grant low-cost loans to companies willing to bring broadband services to rural America. The Iowa Cable and Telecommunications Association was also a party to the suit, which was filed in the U.S. District Court for the Southern District of Iowa.

In addition to reiterating problems with the USDA’s Rural Utility Service (RUS) program overseeing the loans already documented by the agency’s Inspector General, the complaint raises specific allegations about an entity called Local Internet Service Company (LISCO), which obtained approval for a $9.475 million RUS loan to build a fiber-to-the-premises system in Fairfield, Iowa.

The cable guys claim, with what appears to be convincing back-up, that LISCO misrepresented to USDA the nature of the broadband service already available in Fairfield, which, they claim already has a lot of broadband competition, a situation that runs counter to the spirit of the loan program.

By approving LISCO’s application, RUS diverted loan program money to build duplicative facilities in an area which already has at least three incumbent providers, at least one of which provides high-quality broadband service at reasonable cost. Frustrating the intent of the Farm Bill and its own implementing regulations, RUS acted to improve LISCO’s competitive position rather to increase rural broadband access.

This is all well and good — if only the complaint weren’t coming from cable operators. I must admit that the RUS program sounds sloppy, inefficient and, most dangerously, really not open to public comment. Mediacom and its representatives had a devil of a time getting information on the loan application and plans of LISCO and ultimately resorted to a Freedom of Information Act request.

Moreover, Mediacom even attended a meeting with USDA Under Secretary Thomas Dorr and RUS Adminstrator James Andrew hosted by Senator Charles Grassley (R-IA) and still can’t get a grip on what, exactly, LISCO said to get the loan or what LISCO is promising.

So, while it’s easy to dismiss the complaint because it’s coming from a rival that obviously wants to limit competition, I think it’s hard to justify what seems to be an opaque, closed process of handing out loans.

Posted by Cynthia Brumfield on May 30, 2006 6:13 PM to IP Democracy