Another round of miscalculations by project managers overseeing a $126.3 million federal broadband stimulus grant nearing expiration will cost nearly half of West Virginia’s anchor institutions their promised fiber broadband connections.

As a consolation prize, state officials are promising those left out will receive new routers paid for by federal taxpayers whether the institutions want them or not.

As the deadline nears for West Virginia to finish spending their 2010 federal broadband grant, the state has been on a spending spree. Just last week, officials designated 175 new sites as “community anchor institutions” qualified for upgraded Internet service. But the Charleston Gazette found just seven of them will receive fiber broadband upgrades. The rest are getting expensive routers that the state has been trying to unload for nearly two years or new routers the state will spend additional grant funds to purchase.

Among the top vendors paid with grant funds: Frontier Communications, which provides connectivity, and Verizon Communications, the company that supplied the overpowered routers.

“Due to the amount of time required for environmental assessments and fiber builds, we determined that we would limit most of the additional sites to ‘router-only’ so that we could complete the build on time,” Diane Holley-Brown, a spokeswoman for the state Office of Technology told the newspaper.

The state defended its decision to scale back on fiber upgrades pointing out many of the institutions targeted already had the service. That left the state scurrying to find new projects for unspent grant funds.

The state’s latest award of Internet routers is separate from the earlier revelation West Virginia had over-purchased equipment that either proved unnecessary or duplicated equipment already installed.

In 2011, then Gov. Joe Manchin promised that federal broadband stimulus funding would provide fiber connectivity to 1,064 schools, libraries, public safety and health care institutions. When the project funding expires at the end of January, only 639 institutions will be slated to receive fiber upgrades.

Schools are among the hardest hit institutions. At least 60 percent of those promised upgraded Internet service will only receive a new router instead.

The project has remained under scrutiny since the Gazette revealed $24 million of the grant was spent on 1,064 Cisco routers that were never intended for use at many of the institutions targeted to receive them. Hundreds of the $20,000+ routers were stored, unused, in state buildings for at least two years waiting for a new home.

The U.S. Department of Commerce’s Inspector General and West Virginia Legislative Auditor are reviewing the router purchase.

When the grant expires West Virginia officials have made it clear those institutions left without fiber upgrades should not hold their breath waiting for the state to pick up where the federal government left off. The reason? The grant money is nearly gone and the state is not interested in financing additional upgrades.

While rural West Virginia waits for broadband service, more than $1 million in federal tax dollars devoted to rural Internet expansion is instead paying for consultants, most who live out-of-state.

The Charleston Gazette-Mail reports state officials paid out huge sums to a network of consultants, many employed by Verizon Communications, ostensibly to assist with its $126.3 million federal grant to improve broadband to “anchor institutions.” But critics wonder whether the money, which will ultimately not deliver a single new broadband connection to any individual home or business, is redundant and an example of wasteful government spending.

Among the recipients:

• Perry Rios, a Verizon employee who resides in Denver, was paid $512,000 in 2011 and is on track to earn another $329,000 this year helping the state figure out how to spend the money before the clock runs out. Rios has traveled to West Virginia 47 times since the summer of 2010. Total tab to taxpayers: $731,770 so far for just over two years of subcontracting work;
• Verizon network engineer Lloyd Draper, who resides in Virginia, earned $252,075 in consulting work. Clarence Turning, who lives in Connecticut, has received $143,490. Two other Verizon workers contracted as project managers both earned nearly $100,000 each.
• Verizon demands $250/hour for consulting work in the state it abandoned in 2010 when it sold off its landline network to Frontier Communications.

Questions are being raised about the necessity of the Verizon contractors because Frontier Communications, tasked with building the institutional fiber network, already has project managers and other workers with nearly identical job responsibilities. State officials seem to suggest Frontier’s employees are not up to the task.

“This work goes far beyond our current staffing resources,” Gale Given, chief technology officer for West Virginia state government told the Gazette. “These professionals are necessary to provide engineering, project management and other functions, and to coordinate the various parties that are involved in the grant.”

In May, Stop the Cap! reported that the stimulus-funded broadband expansion project was already mired in controversy over earlier spending decisions that included high-powered, expensive routers for rural schools and libraries that sat unused for two years and fiber broadband built with taxpayer funds that rural institutions could not afford to maintain once taxpayer funding ran out.

The U.S. Department of Commerce’s Inspector General and West Virginia Legislative Auditor are reviewing the state’s use of the stimulus funds.

According to the newspaper, West Virginia is using its $126.3 million federal stimulus grant to purchase Internet routers and bring fiber-optic broadband to more than 1,000 “community anchor institutions” — schools, libraries, 911 centers, state agencies, police barracks, health centers, and other public facilities. The money, which was awarded in 2010, also will pay to upgrade an existing wireless Internet tower network. The network will not provide service to individual homes or businesses.

State officials also told the newspaper the $1.3 million spent on the Verizon consultants wouldn’t hamper the broadband expansion project. The state expects to finish the $126.3 project with $9 million in leftover funds. The state has until Jan. 31 to spend the stimulus money, or risk having to return unspent funds to the federal government.

The Republican platform on telecommunications and its criticism of the Obama Administration’s handling of broadband inspired a blogger at the Washington Post to ponder the question, “Whatever happened to Obama’s goal of universal broadband access?”

Brad Plumer sees the Republican criticism as valid, at least on the surface:

Does anyone remember when the Obama administration promised to bring “true broadband [to] every community in America”? The Republican Party definitely does, and its 2012 platform criticizes the president for not making any progress on this pledge:

“The current Administration has been frozen in the past…. It inherited from the previous Republican Administration 95 percent coverage of the nation with broadband. It will leave office with no progress toward the goal of universal coverage—after spending $7.2 billion more. That hurts rural America, where farmers, ranchers, and small business manufacturers need connectivity to expand their customer base and operate in real time with the world’s producers.

So whatever happened to the Obama administration’s plan to expand broadband access, anyway? In one sense, the Republican critics are right. Universal broadband is still far from a reality. According to the Federal Communications Commission’s annual broadband report, released in August, there are still 19 million Americans who lack access to wired broadband. Only about 94 percent of households have broadband access. Obama hasn’t achieved his goal.

Stop the Cap! has been watching the rural broadband debate since the summer of 2008, and believes the failure to do better isn’t primarily the fault of Republicans or Democrats — it lies with the nation’s phone companies — particularly AT&T and Verizon. But both political parties, to different degrees, have helped and hindered along the way.

Plumer slightly misstates the commitment of the Obama Administration at the outset. The Obama-Biden Plan never promised to successfully complete universal broadband access in the United States. Here is their actual pledge (emphasis ours):

Deploy Next-Generation Broadband: Work towards true broadband in every community in America through a combination of reform of the Universal Service Fund, better use of the nation’s wireless spectrum, promotion of next-generation facilities, technologies and applications, and new tax and loan incentives. America should lead the world in broadband penetration and Internet access.

Big Phone Companies Struggle to Abandon Landlines in Rural America

By far, AT&T and Verizon Communications are the most culpable for leaving rural Americans without broadband service. Over the last four years, both companies have diverted investment away from their landline networks into wireless. AT&T has also spent millions lobbying state governments to free itself from the requirement of serving as “the carrier of last resort,” a critical matter for rural landline customers, particularly because rural wireless coverage remains lacking.

In most states, the dominant phone company is still mandated to provide basic telephone service to every customer who wants it. Universal electric and telephone service goes all the way back to the Roosevelt Administration, who saw both as essential to the rural economy.

The Communications Act of 1934 that the Republicans today dismiss as outdated established the concept of universal telephone service: “making available, so far as possible, to all the people of the United States a rapid, efficient, nationwide and worldwide wire and radio communication service with adequate facilities at reasonable charges.”

The concept of universal service was reaffirmed, with the blessing of the telephone companies, under the sweeping deregulation of the landmark Telecommunications Act of 1996. Republicans call that law outdated as well.

Rural America Can’t Win Better Broadband If Their Providers Don’t Play

The American Recovery and Reinvestment Act provided the Department of Commerce’s National Telecommunications and Information Administration (NTIA) and the U.S. Department of Agriculture’s Rural Utilities Service (RUS) with $7.2 billion to expand access to broadband services in the United States. Of those funds, the Act provided $4.7 billion to NTIA to support the deployment of broadband infrastructure, enhance and expand public computer centers, encourage sustainable adoption of broadband service, and develop and maintain a nationwide public map of broadband service capability and availability.

This first round of serious broadband stimulus was designed to help defray the costs of bringing broadband to rural areas where “return on investment” formulas used by large phone companies deemed them insufficiently profitable to service.

Remarkably, America’s largest phone companies declined to participate. In March 2009, AT&T and Verizon delivered their response to the Obama Administration through Bloomberg News:

Verizon Communications Inc. and AT&T Inc. may have this response to the U.S. government’s offer of $7.2 billion for high-speed Internet projects: Keep it.

Unlike the businesses that welcomed the $787 billion stimulus package approved by Congress last month, the two biggest U.S. phone companies have reservations. They’re urging the government not to help other companies compete with them through broadband grants or to set new conditions on how Internet access should be provided.

The companies have remained noncommittal as they lobby to shape rules for the grants.

“We do not have our hand out seeking government funds,” James Cicconi, AT&T’s senior executive vice president, told reporters March 11. While the company is “open to considering things that might help the economy and might help our customers at the same time,” he said AT&T’s primary focus for broadband is its own investment program.

AT&T’s own financial reports illustrate its “investment program” was largely focused on its wireless services division, not rural broadband. Many other phone companies filed objections to projects they deemed invasive to their service areas, whether they actually provided broadband in those places or not.

When the final NTIA grant recipients were announced, the overwhelming majority were middle-mile or institutional broadband networks that would not provide broadband to any home or business.

The U.S. Department of Agriculture’s Rural Utilities Service managed the rest of the broadband grants and loans, and the majority went to exceptionally rural telephone companies, co-ops, and tribal telecommunications. AT&T did participate in one aspect of broadband stimulus — its legal team and lobbyists appealed to grant administrators to change the rules to be more flexible about how and where grant money was spent.

In the past year, both AT&T and Verizon have signaled their true intentions for rural landline service:

Verizon CEO Lowell McAdam: “In […] areas that are more rural and more sparsely populated, we have got [a wireless 4G] LTE built that will handle all of those services and so we are going to cut the copper off there,” McAdam said. “We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there and then I can focus the investment on that to improve the performance of it.”

AT&T CEO Randall Stephenson: “We have been apprehensive on moving, doing anything on rural access lines because the issue here is, do you have a broadband product for rural America?,” Stephenson told investors earlier this year. “And we’ve all been trying to find a broadband solution that was economically viable to get out to rural America and we’re not finding one to be quite candid.”

More recently, Verizon has nearly disinherited its DSL service, making it more difficult to purchase (impossible in FiOS fiber to the home service areas). In states like West Virginia, it effectively slashed expansion and infrastructure investment as it prepared to exit the state, selling its network to Frontier Communications. AT&T has shown almost no interest expanding the coverage of its DSL service either. If you don’t have access to it today, you likely won’t tomorrow.

A good portion of the broadband stimulus funding provided by the government is actually in the form of low-interest, repayable loans. Despite rhetoric in the Republican platform about supporting public-private partnerships to expand rural broadband, the Republicans in Congress launched coordinated attacks on the Broadband Access Loan Program offered by the USDA’s Rural Utilities Service in the spring of 2011. Various right-wing pundits and pressure groups joined forces with several Republican members of Congress attempting to permanently de-fund the program, starting with $700 million in federally-backed loans in April, 2011. The loans were targeted to public and private rural telecommunications companies attempting to expand or introduce broadband service.

Attacks on the effectiveness of President Obama’s broadband campaign pledges in the Republican platform ring a little hollow when Republican lawmakers actively blocked the administration’s efforts to keep those promises.

Killing Community Broadband: Priority #1 for Providers With the Help of Corporate-Backed ALEC and State Politicians

Stop the Cap! has repeatedly reported on the challenges of community broadband in the United States. Launched by towns and villages to provide quality broadband service in areas where larger companies have either underserved or delivered no service at all, publicly-owned broadband is often the only chance a community has to stay competitive in the digital age.

That goal is shared by the GOP’s platform, which states how important it is to connect “rural areas so that every American can fully participate in the global economy.”

Unfortunately, unless your local phone or cable company is providing the service, all too often they would prefer communities continue to receive no service at all.

AT&T is among the most aggressive phone companies lobbying state officials, often through the American Legislative Exchange Council (ALEC), to pass state laws hindering or banning community broadband development. ALEC supporters, overwhelmingly Republican, accept company-drafted legislation as their own and introduce it in state legislatures, hoping it will become law. Generous campaign contributions often follow.

In the past few years, AT&T and Time Warner Cable have been especially active in broadband backwater states like North and South Carolina and Georgia, where rural counties often receive nothing more than DSL service at speeds that no longer qualify as “broadband” under the Obama Administration’s National Broadband Plan. In North Carolina, Democratic state politicians well funded by Time Warner Cable helped push bills forward, but it took a Republican takeover of the North Carolina legislature to finally get those laws enacted. South Carolina presented fewer challenges for state lawmakers, despite protests from communities across the state bypassed by AT&T and other phone companies.

The efforts to de-fund broadband stimulus and tie the hands of communities seeking their own broadband solutions have done considerable damage to the rural broadband expansion effort.

Universal Service Fund Reform: Not Much Help If America’s Largest Phone Companies Remain Uninterested

The Obama Administration has also kept its pledge to reform the Universal Service Fund, recreating it as the Connect America Fund (CAF) to help wire rural America.

In its first phase of broadband funding, $300 million dollars became available to help subsidize the cost of rural broadband construction. Deemed a “mild stimulus” effort that would test the CAF’s grant mechanisms, only $115 million of the available funding was accepted by the nation’s phone companies — all independent providers like Frontier, FairPoint, CenturyLink, Windstream, and smaller players. Once again, both AT&T and Verizon refused to participate. There is no word yet on whether the two largest phone companies in the country will also effectively boycott the second round of funding, estimated to allocate over $1.8 billion to expand rural broadband.

“Getting to 100 percent is going to be a very difficult long-term goal, given the size of the U.S. landmass and the huge expense to reach those final couple of percentage points,” John Horrigan of the Joint Center Media and Technology Institute told Brad Plumer.

Politics and provider intransigence seem to be getting in the way just as much as America’s vast expanse. Many conservative and provider-backed groups have called America’s claimed 94% broadband availability rate a success story, and don’t see a need to fuss over the remaining six percent that cannot buy the service (and pointing to a larger number that don’t want the service at today’s prices).

Beyond the partisan obstructionism and middle mile/institutional network “successes” that ordinary consumers cannot access, the real issue remains the providers themselves. You can lead a horse to water but you cannot make him drink.

It seems as long as AT&T and Verizon treat their rural landline customers as hayseed relatives they (and Wall Street) could do without, the rural broadband picture for customers of AT&T and Verizon will remain bleak at current stimulus levels regardless of which party promises what in their respective platforms.

The Republican party platform on technology gives little credit to the Obama Administration’s handling of all-things-high-tech and demands a wholesale deregulation effort to free the hands of service providers, get rid of Net Neutrality, and sell off wireless spectrum to boost wireless communications.

The platform authors are particularly incensed about Net Neutrality, a policy that requires providers to treat Internet content equally on their networks. Some Republicans have previously called that “a government takeover of the Internet,” telling providers what they can and cannot provide customers. Vice-presidential nominee Rep. Paul Ryan (R-Wis.) fiercely opposes Net Neutrality. In 2011, he supported a resolution disapproving of the policy and in 2006 he voted against an amendment to a bill that would have codified it into federal law.

“The most vibrant sector of the American economy, indeed, one-sixth of it, is regulated by the federal government on precedents from the Nineteenth Century. Today’s technology and telecommunications industries are overseen by the FCC, established in 1934 and given the jurisdiction over telecommunications formerly assigned to the Interstate Commerce Commission, which had been created in 1887 to regulate the railroads. This is not a good fit,” the Republican platform states. “Indeed, the development of telecommunications advances so rapidly that even the Telecom Act of 1996 is woefully out of date.”

Mitt Romney is an ardent deregulator. Under a plan favored by the Republican presidential candidate, agencies like the Federal Communications Commission would be required to offset the cost of any new regulations by eliminating existing regulations. Additionally, Romney plans to issue an executive order as president telling all agencies they must notify Congress about any forthcoming regulations and wait for the House and Senate to approve them before they could take effect. With the current level of Congressional gridlock, a consensus to approve any new regulatory policy is unlikely. The end effect would likely be a near-moratorium on government regulation.

The Republican platform also attacked the Obama Administration for failing to expand broadband to rural areas, but offered nothing beyond generalities about “public-private partnerships” on how to expand broadband to the unserved.

“That hurts rural America, where farmers, ranchers, and small business manufacturers need connectivity to expand their customer base and operate in real time with the world’s producers,” the platform said. “We encourage public-private partnerships to provide predictable support for connecting rural areas so that every American can fully participate in the global economy.”

One can infer from the language in the document Republicans are opposed to public broadband initiatives.

The Republicans also promise to accelerate public spectrum sell-offs to private companies through auctions to expand the number of frequencies available for wireless communications.

The Obama Administration defends its telecommunications policies, noting the FCC’s National Broadband Plan and the American Recovery and Reinvestment Act’s broadband stimulus program have identified unserved areas, despite provider obfuscation, and targeted funding to open up new broadband opportunities. The administration also says it has effectively reformed the Universal Service Fund into a new Connect America Fund that will underwrite prohibitively expensive rural broadband expansion projects.

The White House also defends its spectrum policies noting existing spectrum still has licensed users that face lengthy and often costly transitions to other frequencies to clear space for cell phone companies. Still, President Obama ordered the FCC to find 500MHz of spectrum to reallocate to wireless communications and the FCC plans the first ever incentive auction that will let TV stations voluntarily surrender their frequencies in return for financial incentives.

Both the Obama and Romney campaigns oppose efforts to internationalize Internet regulatory policy through organizations like the United Nations or the International Telecommunications Union. Some governments have stepped up their efforts to lobby for a transition away from Internet policies they see dominated by the United States.

Democrats are also considering Internet language in their party platform for the party’s upcoming convention next month.

As Stop the Cap! first reported last summer, the state of West Virginia is embroiled in a growing scandal over how the state spent more than $126 million in federal institutional broadband expansion funds it was awarded in 2010.

Sources inside two small community libraries and a regional government office collectively contacted Stop the Cap! this week warning that some of the targets for broadband funding including schools, government offices, and libraries have been handed world-class broadband networks they cannot operate without ongoing support not included in the grant.  With little chance of funding, many institutions will be unable to pay the monthly service rates and maintenance fees charged to keep the networks running.

“We are getting a Hummer network on a Kia operating budget,” one community library official tells Stop the Cap! “The network sounds great, but in our case we have to find the money to pay the bill to run it every month, and that money is hard to find in a library with five outdated public terminals.”

Another source tells us installers left more than one library with equipment nobody knew how to operate.

“They installed it over the course of a few days and just left, and nobody here knows how it works,” the librarian tells us. “We’ve quietly gone back to our old Wi-Fi system until we can figure these things out. We don’t even have their phone number.”

At a library in Hurricane, librarian Rebecca Elliot said workers who showed up to install the router didn’t leave behind instructions or a user manual either.

“I don’t know much about those kinds of things,” Elliot told the AP. “I just work here.”

While the original purpose of the grant was to “improve broadband” in the Mountain State, the funding came with significant restrictions that targeted the money exclusively for institutional broadband networks that do not serve individual residences or businesses. While West Virginians languished with some the country’s worst broadband service, state officials were green-lighting spending on grossly oversized equipment that institutional users simply don’t need and sometimes cannot afford to operate.

One critic, Jim Martin, president of business broadband provider Citynet said last summer the state gave preferential treatment to Frontier Communications to construct networks that ultimately favored them as the logical choice of service provider, but left small institutions with service bills they can never hope to pay.

“Where is the accountability,” Martin asked this week.

His fears appear to be justified. This week, a consulting firm has been hired by the state to audit how more than $126 million in taxpayer funds were spent after reports in the Charleston press brought news the state paid millions to deploy equipment to facilities that did not need any service improvements.

The Charleston Gazette reports it found 366 unused routers valued at more than $22,000 each in storage.  They have been there for two years.  In fact, at least $24 million was spent on routers designed to be used by large corporations or universities that were installed in libraries and public safety centers with just a handful of personal computers. Experts say a basic retail router priced at $50 could have provided more than acceptable service to these locations.

West Virginia’s state Commerce Secretary Keith Burdette on Monday admitted, more than two years after the state won the grant, now might be a good time to hire a consultant that does not work for a company trying to sell the state broadband equipment or services.

Despite the suggestion the state designed its network improvements based on the recommendation of equipment vendors, Burdette sought to move on and avoid “finger-pointing” and “dwelling on past decisions.”

“I don’t want to spend a lot of time on things we cannot change,” Burdette told the Gazette. “If we made mistakes, then we need to look at how do we take lemons and make lemonade.”

“That’s the most expensive glass of lemonade in the history of West Virginia,” replies our source inside a regional government office. “Imagine what that money could have done extending broadband service to the homes and businesses that do not have it today.”

Our source says the state government is engaged in classic “butt-covering” with the announced state audit.

“Of course the report will blame people lower down in government while leaving the oversight failure for another day,” he tells us. “What’s a hundred million in taxpayer money, right?”

Burdette and other state officials might have listened to the state’s own Office of Technology, whose administrator warned that the routers — the Cisco series 3945 — “may be grossly oversized.”  Other state and library officials also questioned the purchases.  Burdette said the state should have hired a consultant before purchasing the equipment and launching the expansion project, which will not deliver a single broadband connection to any resident or business in the state.

Martin said in 2011 the entire grant process was wrong-headed from the beginning.  Martin says the state should have spent the money on a stronger middle-mile network to boost capacity for everyone in the state.

Now West Virginia is in a hurry to spend the remainder of the grant award — an undetermined amount — before the grant spending expiration date is reached. Unspent funds must be returned to the federal government.

State officials promise they will find a home for every unused router by the time the stimulus grant expires. That could leave a rural county sheriff’s office with a router designed to serve a minimum of 500 concurrent users in a facility with fewer than a dozen aging personal computers.