Charitable tax-exempt group run by teleco industry reaps millions in taxpayer subsidies while pushing its expansion agenda

A non-profit charitable organization – organized and run by powerful telecommunication industry interests in Washington, D.C. – has collected nearly $33 million of taxpayer money to push its vision of expanding broadband communication strategies around the country including Iowa, paying six-figure salaries to its top officials and spending millions each year on advertising, legal and management fees, research and travel.

The tax-exempt 501(c)3 organization – Connected Nation, Inc. – has received $32.7 million to date in federal stimulus money, forming dozens of state spin-offs – including Connect Iowa – that develop broadband coverage maps and push its mantra that expanding the availability of high-speed Internet services to "overlooked" and "underserved" people and places will lead to "great economic and social advantages."

In the organization's most recent 990 federal tax return required of public charities, Connected Nation directors included the president of the Telecommunications Industry Association (TIA) in Washington, D.C., the CEO and president of CTIA - The Wireless Association and a vice president of World Ahead, an Intel Corporation subsidiary formed with the express purpose to expand broadband and technology around the world.

Previous members of the Connected Nation Board of Directors have included: Tom Tauke, a former Iowa congressman who recently retired as vice president of public affairs at Verizon; James Cicconi, head of AT&T's lobbying group and a former senior official on the White House staffs of Presidents Ronald Reagan and George H.W. Bush; Joseph Waz, Jr., formerly head of external affairs and public policy at Comcast; and Larry Cohen, president of the Communications Workers of America.

Connected Nation started as a Kentucky based organization in 2004 and many of its top paid officials were part of the ConnectKentucky initiative funded by that state's legislature. In 2007, the program was expanded under the auspices of the Washington, D.C. based coalition of telecommunication lobbyists and rolled out as Connected Nation just in time to obtain stimulus funds from the U.S. Department of Commerce for development of state-by-state broadband maps.

Since 2009, Connected Nation has been award $51 million in American Recovery and Reinvestment Act grants.

The taxpayer money given Connected Nation for Connect Iowa's mapping totaled $5.7 million, of which more than $4 million has been received for the Iowa program as of last September.

Connect Iowa, and its parent Connected Nation, have expanded their activities beyond compiling broadband maps to acting as an advocate for boosting state support and spending for expansion of broadband services – a strategy which would directly benefit the interests of the telecommunication industry.

In Iowa, Gov. Terry Branstad has embraced the broadband expansion vision of Connect Iowa, appointing its program manager to the state broadband committee and having the Iowa Department of Economic Development (IDED) partner with the group on business surveys. Not surprisingly, the IDED used Connected Nation's research vendor in Kentucky to conduct the Iowa broadband survey.

The the survey found 23,000 businesses and 680,000 residents were not using broadband services. However, availability was cited by only 5 percent of those businesses and residents for not having broadband service. Most say the cost , lack of education or interest in signing up for high speed internet.

A 2009 Federal Communications Commission study on broadband adoption in America found the primary reason cited by rural residents for not having broadband Internet service was cost (31 percent), followed by lack of digital literacy (23 percent), the service wasn't relevant to them (19 percent) and then lack of availability (10 percent).

Even Connect Iowa's maps (now online) show nearly total coverage (92%+) of the state with "broadband service*," albeit at connection speeds (3 megabits per second download and 786 kilobits upload) now considered on the low end compared with cable and fiber connections. The maps include wireless (cellular) coverage/access.

Connect Iowa and Connected Nation officials speak glowingly of their public/private partnership on their web sites and news releases, but the financial picture that emerges from the organization's tax returns shows nearly all of the funding for its operations is from taxpayers through the the federal stimulus grant money.

Unlike most charitable tax-exempt organizations, the federal tax forms indicate Connected Nation does no fundraising seeking private contributions. And, over the five years, 2007 to 2011, Connected Nation made grants totaling just over $900,000, with almost all of that coming in 20011 and occurring in Ohio.

By comparison, that's less than the organization spent for advertising expenses in 2011 alone and less than 2.5 percent of the company's stimulus subsidies over the same 5-year period. Over that same period, the firm spent more than five times as much on compensation for its top officers.

For 2011, the most recent year the firm's tax return is available, Connected Nation revenues showed $16 million in government (federal stimulus) grants and only $10,000 in program service revenue. During that same year, Connected Nation (which reportedly had 102 employees that year) paid 10 employees – 10 percent of its workforce – salaries in excess of $100,000.

Connected Nation's Chairman and CEO Brian Mefford was paid $215,000 and Chief Operating Officer Thomas W. Ferree was paid $214,000 in 2011. Other executive salaries included: $191,000 to Chief Policy Council Thomas Koutsky; $176,000 to Chief Strategy Officer Mark McElroy; $162,000 to Thomas Fritz, executive officer of Connect Ohio; and $135,000 to Treasurer John Hamm. Four other unnamed employees had compensation in excess of $100,000, according to the report.

That same year, Connected Nation also paid $448,000 to one of its directors and officers, attorney R. Eric Mills, for legal, financial and management services. Over the five years, 2007 to 2011, Mills' law firm was paid in excess of $1.7 million for legal, financial and management services.

The 990 tax reports available also note that CEO Brian Mefford's father, Joe Mefford, received $6,930 in 2011, $120,000 in 2010, $126,000 in 2009, $123,000 in 2008 and $82,000 in 2007 as a consultant for "project management services in outreach and management of the opportunity online broadband program. . . ."

The 2011 federal tax return also indicates Connected Nation made a $638,000 loan or loan guarantee to CN Ventures, Inc., a private for-profit company which lists its directors and officers as Mefford, Ferree, Mills (the attorney and officer of Connected Nation) and Connected Nation's Chief Strategy Officer McElroy.

Mefford stepped down as head of Connected Nation in mid-2012 and announced the formation of a new venture, 10/20 Digital, a private for-profit consulting firm "to help assess, plan and put into action competitive broadband-based growth for companies and higher education institutions," according to an article in the Bowling Green Daily News.

CLICK HERE to download a copy of Connected Nation's 990 Tax Return for 2011.

CLICK HERE to download a copy of Connected Nation's 990 Tax Return for 2010.

CLICK HERE to download a copy of Connected Nation's 990 Tax Return for 2009.

CLICK HERE to download a copy of Connected Nation's 990 Tax Return for 2008.

CLICK HERE to download a copy of Connected Nation's 990 Tax Return for 2007.

+++++++++++++++

• Broadband is the general term used for evolving digital technologies that provide consumers with integrated access to voice, high‐speed data service, video‐demand services, and interactive delivery services (e.g. DSL, cable Internet). Broadband Internet access is always on and faster than the traditional dial-up access greater than the primary rate, which ranged from about 1.5 to 2 megbits per second (MBps).