Money well spent?

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Two weeks ago, the federal government announced that Gallatin Gateway-based Montana Opticom would receive $64 million in stimulus money to bring world-class broadband access to rural parts of Gallatin County.

The plan is to bury fiber-optic cable throughout a 153-square-mile area, from Manhattan to Belgrade and south along U.S. Highway 191 to the mouth of Gallatin Canyon. Specifics of how that will be accomplished have not been released.

Opticom says the three-year broadband project will make high-speed Internet available to more than 18,000 people and 11,000 homes and businesses, bringing economic development, education and entertainment opportunities to an underserved area.

“It’s a good day for Montana,” Opticom spokesman Dean Genge said Aug. 4 when the stimulus award was announced. “More than jobs, it’s going to affect lives for a long time.”

But in the days after the award announcement, local Internet service companies began to question the wisdom of the government’s funding decision.

Those companies say the area in question is far from underserved and that the feds have wasted stimulus funds on a project that will only duplicate work they have already done to lay broadband infrastructure in northwestern Gallatin County.

 

Opticom’s money — half loan and half grant — came from the U.S. Department of Agriculture. It was part of $1.31 billion in broadband stimulus funding given to 126 broadband infrastructure projects in 38 states, the second round of such funding the USDA has issued.

The 2009 Recovery Act gave $7.2 billion to the USDA’s Rural Utilities Service and the National Telecommunications Information Administration to bring high-speed Internet to rural America. It’s a goal the federal government sees as critical to maintaining America’s future competitiveness in an increasingly wired world.

“It will escalate the economic development of rural Montana and enhance the quality of life for subscribers and connect people public services,” said USDA spokesman Bart Kendrick. “We’ve always been out there to help the farmers and rural America.”

‘Wait a minute’

The size of Opticom’s award and the company’s ties to a Pennsylvania firm did not sit well with Scott Johnson, president of Global Net in Bozeman.

“For $64 million, they could fill in 90 percent of the (broadband coverage) holes in this state,” Johnson said. “There can’t be a single person with any kind of background that looked at this and didn’t go, ‘Wait a minute.'”

Johnson pointed to the other major USDA award for Montana announced Aug. 4 — roughly $26 million for Nemont Telephone Co-operative to bring fiber-optic service to the Fort Peck Indian Reservation.

“The other project is pretty good-sized, fairly sparse in population, and all of a sudden, there’s $64 million to cover this little section in Gallatin County,” he said.

Johnson also said giving the money to a company with out-of-state ties is a slap in the face to purely Montanan businesses whose infrastructure work is not being subsidized by the government.

Founded in 2005, Opticom is a subsidiary of Pittsburgh-based Ascent Data, which is owned by Jim Dolan, founder of The Club at Spanish Peaks, a private ski and golf community in Big Sky. According to a 2008 company newsletter, Opticom has buried 2,000 miles of fiber-optic cable inside Spanish Peaks.

Information posted to the Montana Secretary of State’s website lists Opticom’s business address as being in Gallatin Gateway.

“This mindset that we’ve got to give a Pennsylvania company $64 million to run Montana companies out of business is ridiculous,” Johnson said.

Garrett Talbot, general manager of Bridgeband Communications in Bozeman, said he couldn’t understand how the USDA could look at northwestern Gallatin County and deem it either “unserved” or “underserved” with broadband.

“I’m questioning how the USDA awarded it when the services already exist,” he said. “That area is already lit up.”

The Recovery Act says money provided for rural broadband improvements must go to areas where at least 75 percent of the area is rural and “without sufficient access to high-speed broadband service.”

The USDA defines “broadband” as having download speeds of at least 768 kilobits per second. “High-speed” access is about five times faster, a minimum of 5 megabits per second.

Between his company and others, Talbot said Opticom’s planned service area already has plenty of broadband access and that the government could have spent that $64 million in places that needed it more.

“To me, it seems like this money should have gone to an area like Reed Point or Greybull that doesn’t have anything,” he said.

David Gibson, state president of Qwest Communications, expressed similar thoughts.

“If they are going where we already are or where someone else already is, then that’s a waste of government money, of taxpayer dollars,” Gibson said.

“We’re heavily invested in that area,” he added.

Scarce details

Gibson noted, though, that neither Qwest nor any other company knows exactly what Opticom is planning to do. Only a summary of Opticom’s application is available from the USDA.

The full application will not be released until all contracts have been signed, said USDA spokesman Kendrick, because the application contains trade secrets.

The first round of broadband funding, which ran from July 2009 to April 2010, funded 150 projects for a total of $2.2 billion. The rest of the money must be awarded by Sept. 30, and Kendrick said the USDA has about 600 applications left to sort through before the deadline.

Geoffrey Feiss, manager of the Montana Telecommunications Association, an advocacy group for the state’s small telecommunications companies, called Opticom’s award “misguided” and “unfortunate.”

Giving $64 million to a project in an area that already has broadband is evidence, Feiss said, that the USDA is in too much of a hurry to spend its remaining stimulus funds before the September deadline.

“They’ve started to put on blindfolds and hike up their boots to start shoveling money out the door,” he said.

A recent report from the U.S. Government Accountability Office lends credit to Feiss’s opinion.

The GAO report examined the first round of broadband stimulus funding and found that the USDA consistently verified information in the program’s first-round funding applications. However, the second round of funding, of which Opticom’s award was a part, was a concern.

The GAO noted that the USDA would have two fewer months to verify second-round applications, which, though they are fewer in number, tend to be more detailed and complex.

Another concern was that the USDA, to streamline the application process, began using U.S. Census data to confirm the availability of broadband service in areas. The GAO called this method “cumbersome” and noted that the USDA found the census data to at times be wrong.

The GAO report urged the USDA and NTIA to make sure they have enough people and time to properly oversee stimulus-funded projects.

Oversight is a concern for Bresnan Communications, said spokesman Shawn Beqaj.

“We would hope that the agencies that are spending taxpayer dollars … would monitor the recipients of the public’s money to make sure it is not spent to subsidize one provider at the expense of another, particularly one who has invested private money,” Beqaj wrote in an e-mailed comment.

Beqaj said Bresnan has spent $1.4 billion to bring high-speed Internet to Belgrade, Bozeman and Manhattan, among other places.

Opticom’s defense

Opticom spokesman Genge said he could understand the criticism from other companies. But, he said, Opticom followed the USDA’s rules and provided the required information for its funding application.

“Under the application process and the subsequent review and examination of the application, the USDA determined that this application and this program area qualified for funding,” Genge said.

The federal oversight and rules for the funding require it be spent in the project area around Gallatin Gateway, he said, addressing concerns over Opticom’s Pennsylvania ties.

Genge also said the money will allow Opticom, a 22-employee company, to hire an additional 60 people. He stressed, despite his competitors’ concerns, that Opticom’s stimulus funding is good for Montana.

“We are very pleased that we are able to bring this funding to the citizens of western Gallatin County,” he said.

Michael Becker can be reached at [email protected] or 406-582-2657.