The Rural Utilities Service (RUS) is a division within the U.S. Department of Agriculture’s Rural Development agency responsible for providing public utilities, such as water, waste disposal, telephone, electricity, and broadband Internet to rural areas through public-private partnerships. The agency administers loans, loan guarantees, and grant programs to eligible populations. The Administrator for RUS is Jonathan Adelstein.
President Franklin D. Roosevelt established the Rural Electrification Administration (REA) in 1935 to bring electric power to rural areas for the first time through loans to rural electric cooperatives. The policy was controversial, and faced great opposition from private utility companies, threatened by the cooperatives. The REA would also later give loans to rural telephone cooperatives in 1949.
In 1946, Congress established the Farmer’s Home Administration (FmHA), which provided water and wastewater management assistance for rural areas. In 1994 the REA and the FmHA were merged to form the Rural Utilities Service during a department reorganization. In the years since, other programs have been included, such as distance learning and telemedicine initiatives, and the rural broadband program in 2002.
The Rural Utilities Service (RUS) helps to provide the basic foundations of rural infrastructure including water, waste treatment, electric power, and telecommunications. Aid is in the form of direct payments, grants, loans and loan guarantees for programs including increasing access to broadband, financing electric systems, and developing rural water systems.
The RUS Water and Environmental Programs provide financial and technical assistance to communities for drinking water, sanitation, waste management and storm drainage operations. The Electric Program, which aids more than 700 active borrower entities in 47 states, insures loans and provides loan guarantees to nonprofits and co-ops, public bodies and other utilities, for the construction of facilities and distribution of power in rural areas, including renewable energy. Eligible recipients include corporations, states, territories and subdivisions, and municipalities, utility districts, and cooperative, nonprofit, limited-dividend, or mutual associations.
The RUS Telecommunications Program oversees the Traditional Telephone Loan that provides loans for telephone service and for broadband service with DSL. Broadband Access Loans and the Community Connect Grant program also provide loans to build or improve broadband service to rural communities. The Distance Learning and Telemedicine program also provides electronic support for educational programs.
From the Web Site of the Rural Utilities Service
Administrator Bio (pdf)
Recipients of Rural Utilities Service (RUS) aid include rural residents, rural and urban farm workers, individuals or groups with special needs, non-profit organizations and local governments. Between 2002-2012, the RUS provided more than $9 billion in grants, according to a query of USAspending.gov.
Top recipients and their percentage of all grants include:
1. Windstream $181,328,163 (1%)
2. State of Alaska $106,816,951 (1%)
3. VTel Wireless $81,664,754 (1%)
4. American Samoa Telecommunications Authority $81,034,763 (1%)
5. Denali Commission $72,275,000 (1%)
The RUS also provided more than $1.3 billion in nearly 7,800 loans from 2002-2012, and spent nearly $370,000 for 27 contracts in that time period.
Open Range Bankruptcy Scandal
Begun during the Bush administration, a controversial Rural Utilities Services (RUS) program intended to bring broadband to neglected areas of the country collapsed during the first term of President Barack Obama.
Bush-appointed officials approved government financing so two companies, Open Range and Globalstar, could team up to use satellites to provide high-speed Internet service to rural communities.
The arrangement required a special waiver from the Federal Communications Commission (FCC), which approved the deal 3-2. One FCC commissioner who opposed the plan accused Open Range of relying on bad technology.
Problems enveloped the project. Open Range did indeed have trouble with its technology, while Globalstar fell behind on launching its satellites. FCC deadlines were missed by Globalstar, which requested extensions. The FCC declined.
The troubles prompted the RUS under Obama to reduce Open Range’s loan commitment. The company then filed for bankruptcy. Lawmakers in Congress demanded answers to explain what went wrong. Meanwhile, a bankruptcy trustee sued the RUS and FCC in 2012, claiming the government was at fault for Open Range’s financial failures.
Broadband Company’s Demise Puts Taxpayers On Hook For $74 Million Loan (Washington Post)
Congress Wants Details on Open Range RUS Loan Default (by Joan Engebretson, Telecompetitor)
Trustee Sues Agencies Over Open Range Communications Bankruptcy (by Greg Avery, Denver Business Journal)
RUS Should Stop Giving Loans Out of Universal Service Funds
A cable industry organization called upon the RUS in 2011 to stop using a special fund dedicated to phone service for the purpose of financing broadband expansion.
The National Cable & Telecommunications Association issued a study that urged the RUS to stop allowing Universal Service Fund (USF) money to go toward securing loans for high-speed Internet development.
The trade group said 78% of monies for RUS broadband loans was being underwritten by USF subsidies. The USF was established to help pay for phone service in high-cost and out-of-the-way areas. If the Federal Communications Commission were to cap the USF, the loans would not be “financially feasible.”
NCTA Study: Stop Allowing USF to Secure Rural Broadband Loans (by John Eggerton, Broadcasting & Cable)
Does USF Reform Put RUS Loans at Risk of Default? (by Joan Engebretson, Telecompetitor)
Republican Lawmakers Question Broadband Program
In February 2011, just weeks after President Barack Obama called for all Americans to have access to high-speed Internet in his 2011 State of the Union address, Republican members of the U.S. House of Representatives criticized two agencies, the RUS and the U.S. National Telecommunications and Information Administration (NTIA), saying that they provide more than $7 billion for broadband deployment and should reexamine grants to projects that overlap existing broadband service. They added that these agencies should return any funds that go unspent. In response, the NTIA and the Federal Communications Commission released the nation’s first broadband map, showing that large swaths of the western and southern United States, comprising 5–10% of the country, do not have access to wired or fixed wireless broadband.
Broadband Plan Debate: Federal Bureaucracy or Local Initiative? (by Dan Rowinski, Federal Computer Week)
Republicans Question Broadband Stimulus Program (by Grant Gross, IDG News)
Broadband Falls Short in U.S. (by Grant Gross, IDG News)
Changes in Electric Loans
Anticipating changes in rural energy lending practices and climate change regulation, the RUS announced suspension of a low-interest lending program for rural electric co-ops to build coal-fired power plants in early March 2008, saying the loans would be too risky. The program has been criticized by budget experts and environmentalists who claim it subsidizes coal plants without providing corresponding financial or environmental assessments of risks. At the time of suspension, there were at least four utilities expecting loans totaling more than $1.3 billion for projects in Kentucky, Illinois, Arkansas, and Missouri. Plants awaiting federal loans might be able to find funding from the private sector, but the higher interest rates would be passed on to the consumer. In March 2008, several major banks announced they would require plant developers to assess climate change when seeking private funding. In 2008, Henry A. Waxman (D-California), then Chairman of the House Committee on Oversight and Government Reform, said that the “RUS needs to account for the financial risks associated with global warming regulations when it considers these applications. Citibank, Morgan Stanley, J.P. Morgan Chase and Bank of America all factor in these financial risks, and RUS should be just as protective of taxpayer funds.”
U.S.D.A. Study Raises Questions about Electric Deregulation (by Blair S. Walker, Stateline.org)
Government Suspends Lending for Coal Plants: Risks Cited To Economy, Environment (by Steven Mufson, Washington Post)
Rural Utilities Explains Funding Pullout (by Karl Puckett and Richard Ecke, Great Falls Tribune)
The Beginning of the End for Coal (by Lester R. Brown and Jonathan G. Dorn, Earth Policy Institute)
Broadband Program Effectiveness
Some have argued that federal investment in broadband for rural populations interferes with private-sector investment, and that alternatives such as deregulation, tax incentives, or changes in spectrum policy might be more effective.
Supporters of the federal aid say that the private sector only invests where it can expect the greatest return, which are areas of high population density and income. Recent reports show that broadband deployment lags behind in rural areas. According to an audit report by the U.S. Department of Agriculture Office of Inspector General, broadband programs have shifted focus away from rural communities, as the definition of rural is “too broad to distinguish usefully between suburban and rural communities.” Meanwhile others argue that the eligibility criterion of 20,000 or less in population is too narrow, as some rural towns in need exceed that population limit yet still need aid. Grants are also limited to underserved areas, which may exclude communities with existing but limited access.
Broadband Loan and Grant Programs in the USDA’s Rural Utility Service (by Lennard G. Kruger, Congressional Research Service) (pdf)
Broadband Internet Access and the Digital Divide: Federal Assistance Programs (by Lennard G. Kruger and Angele A. Gilroy, Congressional Research Service) (pdf)
Should the RUS continue to try to bring broadband to rural communities?
With the advent of high-speed Internet service, a divide has opened up between urban and rural America. The development of broadband services has largely occurred in cities and suburban communities, while unincorporated parts of the country have struggled to receive the same services. Some argue that the government should take an active role in helping rural communities obtain high speed Internet. The Obama administration has embraced this policy, and as part of the 2009 federal stimulus package, $2.5 billion was appropriated to the Rural Utilities Service (RUS) for establishing broadband technologies in non-urban regions. But critics object to the RUS taking charge of this responsibility, citing its past mistakes in wasting taxpayer money.
Broadband Internet Access and the Digital Divide: Federal Assistance Programs (by Lennard G. Kruger and Angele A. Gilroy, Congressional Research Service)
It is absolutely critical for the government to invest in rural broadband development, supporters contend. They say it is necessary to spend billions of dollars to get small communities and farmers plugged into the World Wide Web because, without this capability, they will suffer economically. High speed Internet is now considered the “norm” in urban America, thus how can officials in Washington not come to the aid of those in the countryside? No broadband could very well mean fewer job opportunities for non-urban areas, and the nation cannot afford this problem if it wants a strong U.S. economy once again.
Lack Of Broadband Has Crippling Effect (by Sharon Strover, University of Texas at Austin)
Rural Broadband Access: There’s an “APPalachian” for That! (Benton Foundation)
Critics acknowledge that it is important for rural communities to have high speed Internet access. They just don’t trust the RUS to do the job properly. Too often the agency has been caught wasting tax dollars by paying private companies to build broadband networks over ones that already exist. At other times the RUS has allocated funds for rural broadband to build networks in affluent suburban communities. “We simply cannot afford such excesses if we are to stand any chance of creating a sustainable fiscal future,” wrote critic Andrew Moylan at Breitbart TV).
USDA Prime Cuts: Rural Broadband Subsidies (by Andrew Moylan, Breitbart TV)
James M. Andrew, (2005-2009)
Hilda Gay Legg, (2001-2005)
Christopher McLean, (2000-2001)
Wally Beyer, (1993-1999)
A Democrat who hails from South Dakota, Jonathan S. Adelstein spent seven years serving as a member of the Federal Communications Commission (FCC), advocating for greater Internet services for rural America. As the head of the Rural Utilities Service, Adelstein will be in a position to distribute $2.5 billion in grants to promote greater broadband access for small towns across the country. He was confirmed by the Senate as the administrator of the Rural Utilities Service in July 2009.