Fiber to the Golf Course--At Taxpayers' Expense

Fiber to the Golf Course--At Taxpayers' Expense
June 1, 2008

Steven Titch

Steven Titch is a policy analyst at Reason Foundation focusing on telecommunications, Internet and... (read full bio)

If you live in Brunswick County, North Carolina, you just might get fiber-to-the-home courtesy of the U.S. government--provided your home is in a pricey development beside a golf course.

Like many rural telephone cooperatives, ATMC, Inc. of Shallotte, North Carolina (formerly Atlantic Telephone Management Systems) receives low-interest loans from the U.S. Department of Agriculture's Rural Utilities Services (RUS) agency, which provides taxpayer-backed loans for universal broadband service.

ATMC's work illustrates the inherent problems with current federal broadband programs: The company is applying the funding to high-density residential developments where there is already competition from at least two other broadband providers.

Kris Ward, ATMC's business development manager, was frank about the cost-versus-revenue issues of deploying FTTH. "We're building fiber to high-density areas. We can't afford to drop fiber just for voice," he told attendees at the Southeast Information and Communication Technology (ICT) Symposium.

Of course, this is the criticism leveled at the build-out process of larger incumbents, and precisely the reason programs such as RUS were created.



Chasing Wealthy Customrs

But extending FTTH to areas unserved by broadband is not on ATMC's agenda. Currently, ATMC has built FTTH systems in 22 new developments, some attached to golf courses and all in areas already served by cable TV companies offering broadband service via cable modem.

Although parts of North Carolina are struggling economically, it is difficult to make the case that Brunswick County, located in the extreme southeast corner of the state, is among them. Ward cited U.S. census data showing the county is the 17th fastest-growing in the nation, fueled by retirees moving to the Carolina coast. "Growth is expected for years to come," Ward said.

Although other providers are building broadband networks without government help, Ward said ATMC is using its FTTH network as a competitive differentiator. "FTTH is our selling point." But, Ward admits, "We couldn't do it without [the RUS loans]."

Ironically, if ATMC wanted to build out fiber in unserved areas, it might have had a problem getting the funds. The whole RUS process adds up to a classic Catch-22, says Hance Haney, director and senior fellow of the Technology & Democracy Project at the Discovery Institute.

"If you tried to obtain an RUS loan to deploy broadband facilities in an unserved area, you probably couldn't get it because RUS sees itself as a bank. You'd have difficulty proving your creditworthiness since, after all, it's probably uneconomic to serve an unserved area with current technology," Haney said.

-- Steven Titch

Steven Titch

Steven Titch is a policy analyst at Reason Foundation focusing on telecommunications, Internet and... (read full bio)