A federal program to bring high speed internet service to rural America will likely drive out many local private businesses now serving those very communities.
The U.S. Department of Agriculture (USDA) has awarded millions of dollars to private firms across the country with the aim of boosting the speeds of Internet connections available in rural areas.
Some of the federal largesse, however, has been awarded to companies not now providing broadband Internet connections, giving them a competitive advantage over existing firms who have invested their own money to serve sparsely populated areas.
For Bob Hrbek and his Logan, Iowa internet firm, the prospect tax dollars will be used to help build a new network for his competitor, Windstream Corporation* (formerly Iowa Telecom), makes him mad.
While Hrbek was investing $750,000 of his own money to build wireless internet service in the Logan area over the past 10 years, Windstream/Iowa Telecom chose not to upgrade its landline network to be able to provide higher speed connections. Now, with $5.2 million in federal grant money, the firm will upgrade the network to provide competing high-speed service.
Even more astonishing to Hrbek is his firm didn't qualify for the same USDA grant program because it has broadband service available to more than 50 percent of the Logan market.
Windstream, which serves 450 communities in Iowa, was able to average its broadband service availability over a larger service territory, qualifying for the grant program because of a less-than-50 percent broadband availability overall.
Hrbek's firm, which employs four people, objected to the awarding of the grant to Windstream and even provided detailed maps and figures on his situation to the USDA.
His comments were duly noted and sent to the USDA in Washington. In August, with no less than Vice President Joe Biden at the podium, USDA announced dozens of rural broadband initiatives, including the $5.2 million to Windstream to extend service to 2,900 residential customers and a "relatively small number of businesses" in the Logan area.
The 2,900 potential customers cited in the Windstream grant application would be if all rural households in the Logan area subscribed to its high speed internet service. However, a substantial number of those residents either get broadband from Hrbek's Loganet/Jagwireless, don't want an internet connection at any speed, or don't own a computer.
Based on Hrbek's experience in the Logan area, only about 1,300 households will take advantage of the new Windstream network, resulting in a federal subsidy of $4,000 per household for the enhanced service.
According to the USDA news release when the grants were announced, the "investment in broadband technology will create jobs across the country and expand opportunities for millions of Americans and American companies."
For Hrbek and his firm, the federal money will have just the opposite effect, eroding the business he has worked to build over the past decade.
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*Windstream Corporation, headquartered in Little Rock, AK, purchased Iowa Telecom in 2009 for cash and stock worth $1.1 billion. Windstream is the landline business spun off in 2006 by Alltel Corporation. Since its formation, Windstream has been buying up landline telecommunications firms and now has 3.4 million lines in 23 states.
