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RegisterBroadband company’s demise puts taxpayers on hook for $74 million loan
Broadband company’s demise puts taxpayers on hook for $74 million loan
by TexasBlue Fri Oct 28, 2011 8:22 pm
Broadband company’s demise puts taxpayers on hook for $74 million loan
Cecilia Kang
Washington Post
October 26, 2011
As the government prepares Thursday to commit billions of dollars to bring high-speed Internet to rural areas, the biggest-ever such project has collapsed.
The company Open Range, backed by a commitment of $267 million in loans from the Agriculture Department, filed for bankruptcy this month. Taxpayers are on the hook for $74 million that the upstart hasn’t repaid. And now the company, some analysts and a senior government official are blaming poor judgment and Washington bureaucracy as the reasons Open Range failed.
The two agencies that oversaw the venture defended their roles in Open Range’s demise, saying the circumstances that led to the bankruptcy were out of their control and highly unusual.
The decline of the Greenville, Colo., company comes as Republicans are criticizing the Obama administration for throwing taxpayer money at unproven ventures. The furor was sparked by the high-profile failure of solar-panel manufacturer Solyndra, which filed for bankruptcy after getting more than $535 million in federal loan guarantees.
While Solyndra has grabbed headlines, the spotlight on Open Range’s failure is intensifying. On Wednesday, Democrats called for the company to be included in a House investigation into the Solyndra affair.
Like Solyndra, Open Range aimed to use cutting-edge technology with a fragile business model, some analysts said.
“When trying to subsidize broadband in rural areas, there will be failures,” said Richard Bennett, a senior research fellow at Information Technology and Innovation Foundation, a think tank supported by major telecommunications companies. “That’s why technologies need to be carefully vetted — especially when they are unconventional, like in the case of Open Range.”
Goal deemed worthy
The federal loan given to Open Range was part of a long-standing policy objective, pushed by both the George W. Bush and Obama administrations, to extend high-speed Internet service to the most isolated parts of the country.
Advocates say the goal is worthy. Building the networks brings jobs, while greater access to the Internet can turn around local economies. And private companies have been reluctant to invest the resources to bring service to rural areas.
“There is a real role for government to play here,” said Joel Kelsey, a policy analyst at the public interest group Free Press.
The Federal Communications Commission will vote Thursday on diverting $4.5 billion, generated by consumer fees, to private companies that need the money to bring high-speed Internet service to the 18 million Americans who lack such access.
High-speed Internet “has gone from being a luxury to a necessity for full participation in our economy and society,” FCC Chairman Julius Genachowski said in a speech this month.
Yet, even supporters of the initiative caution that the government has had mixed success on such projects. In many cases, Kelsey said, cell towers are erected and miles of fiber are placed beneath roadways but consumers do not end up using the service.
The government has a “spotty track record,” Kelsey said. “When handing out ratepayer or taxpayer dollars, this need to be right.”
Cecilia Kang
Washington Post
October 26, 2011
As the government prepares Thursday to commit billions of dollars to bring high-speed Internet to rural areas, the biggest-ever such project has collapsed.
The company Open Range, backed by a commitment of $267 million in loans from the Agriculture Department, filed for bankruptcy this month. Taxpayers are on the hook for $74 million that the upstart hasn’t repaid. And now the company, some analysts and a senior government official are blaming poor judgment and Washington bureaucracy as the reasons Open Range failed.
The two agencies that oversaw the venture defended their roles in Open Range’s demise, saying the circumstances that led to the bankruptcy were out of their control and highly unusual.
The decline of the Greenville, Colo., company comes as Republicans are criticizing the Obama administration for throwing taxpayer money at unproven ventures. The furor was sparked by the high-profile failure of solar-panel manufacturer Solyndra, which filed for bankruptcy after getting more than $535 million in federal loan guarantees.
While Solyndra has grabbed headlines, the spotlight on Open Range’s failure is intensifying. On Wednesday, Democrats called for the company to be included in a House investigation into the Solyndra affair.
Like Solyndra, Open Range aimed to use cutting-edge technology with a fragile business model, some analysts said.
“When trying to subsidize broadband in rural areas, there will be failures,” said Richard Bennett, a senior research fellow at Information Technology and Innovation Foundation, a think tank supported by major telecommunications companies. “That’s why technologies need to be carefully vetted — especially when they are unconventional, like in the case of Open Range.”
Goal deemed worthy
The federal loan given to Open Range was part of a long-standing policy objective, pushed by both the George W. Bush and Obama administrations, to extend high-speed Internet service to the most isolated parts of the country.
Advocates say the goal is worthy. Building the networks brings jobs, while greater access to the Internet can turn around local economies. And private companies have been reluctant to invest the resources to bring service to rural areas.
“There is a real role for government to play here,” said Joel Kelsey, a policy analyst at the public interest group Free Press.
The Federal Communications Commission will vote Thursday on diverting $4.5 billion, generated by consumer fees, to private companies that need the money to bring high-speed Internet service to the 18 million Americans who lack such access.
High-speed Internet “has gone from being a luxury to a necessity for full participation in our economy and society,” FCC Chairman Julius Genachowski said in a speech this month.
Yet, even supporters of the initiative caution that the government has had mixed success on such projects. In many cases, Kelsey said, cell towers are erected and miles of fiber are placed beneath roadways but consumers do not end up using the service.
The government has a “spotty track record,” Kelsey said. “When handing out ratepayer or taxpayer dollars, this need to be right.”
TexasBlue
Re: Broadband company’s demise puts taxpayers on hook for $74 million loan
by TexasBlue Fri Oct 28, 2011 8:22 pm
More cronyism, Bubbles. You reading this? 
TexasBlue
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