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Firms snare cash with Web loans

Thu., Aug. 9, 2007, midnight

With more than $1.2 billion in federal funding on the line, there’s been a gold rushlike frenzy of loan applications to provide high-speed Internet service to rural America, including towns such as Cheney that don’t need the help.

Last December, the U.S. Department of Agriculture approved a $24.5 million loan to a Salem, Ore.-based business promising to deliver broadband Internet service to 121 small communities in Oregon and Eastern Washington, including the university town 18 miles southwest of Spokane.

The USDA’s Rural Development Broadband Loan program is intended to bring broadband service to rural communities with little or no high-speed Internet service. However, Cheney is well-connected with a state-provided Internet connection to Eastern Washington University, dedicated fiber-optic cable to City Hall and at least four private companies offering service to businesses and residents.

When The Spokesman-Review placed calls last week to Cheney city officials, EWU and existing Internet service providers, it found no one who knew anything about the government loan.

A call to the loan applicant, CTURN, revealed it doesn’t know much about Cheney.

“We haven’t contacted anyone,” said William “Skip” Liebertz, CTURN’s vice president of marketing. The company currently doesn’t serve anyone, Liebertz said, though he said he expects that will change once its loan money is in hand.

He said he wasn’t aware of exactly how much service Cheney has, but he indicated CTURN’s wireless service would provide access capable of transmitting medical data from a moving ambulance to doctors waiting at the hospital – a level of service that is available now.

Liebertz also said CTURN’s service would be based on WiMax, a wireless technology capable of delivering T-1 speed connectivity. Similar-quality service already is available in Cheney.

Liebertz said he isn’t sure when his company would begin providing service in the university town.

The USDA has come under fire recently for directing millions of dollars in subsidized loans to companies where service already exists. Last month, Congress added language to the 2007 farm bill that would make towns with at least three high-speed Internet service providers off-limits to broadband loan applicants.

In May, members of a House committee took the USDA to task over the loans after the Washington Post reported that more than half the program’s money had gone to metropolitan regions or towns a short drive from midsized cities.

A Houston Internet provider received $23 million to connect well-heeled developments, including one with an equestrian center and million-dollar homes.

“They gave a lot of flexibility to the USDA, which is a good service, but the agency probably used its discretion a little too much,” said one House Agriculture Committee aide speaking on background.

USDA responded to House concerns by proposing that communities be eligible for inclusion in loan applications if they had no more than four Internet service providers, each serving at least 10 percent of the area.

Existing Internet service providers have been the most vocal critics of the broadband loans, which, they say, create government-subsidized competition, especially when the money goes to companies from outside the area.

“I don’t think it’s fair unless they’re already providing service in these areas,” said Bill Geibel, owner of Spokane-based Air-Pipe, a wireless high-speed Internet provider.

Air-Pipe serves Cheney now. Geibel was unaware of CTURN’s approved loan, but his company did object recently to an application by Crossroads Wireless RDUP Broadband, an Oklahoma company that wanted to provide service to Hope, Idaho where Air-Pipe already does business.

The company also has contacted the USDA about a $529,340 grant awarded last year to Ecliptixnet, a local firm planning to deliver broadband service to Springdale just west of Loon Lake. Air-Pipe already serves the Springdale area, although the town of Springdale sits in a hard-to-reach area where locals say service is not great to nonexistent.

The Crossroads application contested by Air-Pipe covered not one rural community but rather, more than 900 rural towns spread across 20 states.

In Washington, the application proposed coverage to Rockford, Waverly and Latah. Those rural communities could be included in a loan application under the rules proposed by House Agriculture Committee members.

However, town representatives in those communities said they knew nothing about the loan or Crossroads.

“I have no idea. I know it’s a computer world, but I’m not a computer person,” said Ed Crockett, Latah mayor. “I hear my wife talk to ours quite a bit.”

Companies with applications to serve hundreds of rural towns have not been as successful as applicants seeking to provide service to a smaller number of communities, according to the committee aide contacted by The Spokesman-Review.

USDA records requested by the newspaper under the Freedom of Information Act show 39 loans of less than $10 million each. Another 31 loans were issued for $10 million or more, including three loans for more than $100 million each. Some of the largest loans were to provide service to fewer than than two dozen cities.

Some of the loans go to startup companies, a spokesman for the USDA said. A company such as CTURN with no customers is given five years to start providing service.


 

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