Feds to audit Colorado broadband provider over how it spent $100M in stimulus funds

Greg Campbell | Contributor

The U.S. Department of Commerce’s inspector general will begin digging into allegations that Colorado educational consortium Eagle-Net mismanaged a $100.6 million stimulus fund grant to provide broadband Internet connections to the state’s rural areas.

For nearly a year, critics — including Republican Reps. Cory Gardner and Scott Tipton — have questioned why Eagle-Net has laid fiber optic cable in locations that are already covered by other providers.

One school on Colorado’s remote Eastern Plains has three broadband connections, including the latest from Eagle-Net, even though its 11 students have no need or desire for so many.

An article in The New York Times notes the elementary school in Agate, Colo., may have the most connectivity per student than any in the country — one broadband connection for every 3.6 kids.

Lawmakers are also concerned that Eagle-Net has spent almost all of its stimulus fund grant but has only connected less than two-thirds of the school districts it said it would.

The Denver Business Journal reports that the consortium will have connected some 100 school districts by the end of the year when it promised to connect 178, plus many more hospitals, city governments and other institutions. All but $7.8 million of the $100 million grant has been spent.

The group is trying to raise additional funds from the private sector to finish the work, which includes many rural mountain communities that critics say are in greater need of the service than comparatively well-connected plains towns.

“So far, Eagle-Net has overbuilt in areas that already have high-speed fiber-optic lines installed by private providers, blown through $100 million in taxpayer funds, and put needed projects in unserved areas on the Western Slope at the bottom of their list of priorities,” said Tipton in a statement.

“With this track record, it is truly astonishing that Eagle-Net is requesting additional funds to finish a project that falls pathetically short of the promises the company made to provide broadband access to unserved rural areas,” he said.

The American Recovery and Reinvestment Act of 2009 provided for about $7 billion in grants and loans for broadband buildout, but 42 funded projects have been suspended, revoked or faced inquiries as to how they spent their federal funds.

Eagle-Net’s activities were suspended in December by the Commerce Department’s oversight agency, the National Telecommunications and Information Administration (NTIA), because it had changed many of its plans without informing NTIA or requesting agency approval. The suspension was revoked just last week.

Now it faces an audit.

In a letter to the inspector general, Gardner, Tipton and Oregon Republican Rep. Greg Walden — the chairman of the House Subcommittee on Communications and Technology — asked that the audit focus on instances where Eagle-Net built fiber-optic lines next to existing services.

In the Times article, the owner of one of the businesses competing with Eagle-Net to wire the 11-student school said the competition could threaten his company.

“We employ local people,” said Daniel Hollembeak, general manager of Agate Mutual Telephone. “If Eagle-Net takes away these institutions, it will have a big negative effect on the company.”

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