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Law360 (November 30, 2020, 4:20 PM EST) -- FCC Commissioner Michael O'Rielly has written a letter to Wyoming Gov. Mark Gordon requesting more information from the state regarding allegations that COVID-19 relief grants were being used in "overbuilding," or the allocation of government subsidies to more than one internet provider in a given area.
O'Rielly wrote Friday that several "local fiber and cable-based broadband providers" in the state had raised "legitimate concerns" to him that their own broadband networks are in danger because their competitors received federal funds from the Coronavirus Aid, Relief, and Economic Security Act though the state's Connect Wyoming program.
According to the letter, such allocation of funds is a "wasteful subsidization of network builds where competitors are already providing service" and threatens other networks in the area.
"I was, therefore, quite concerned to learn that Wyoming may be using scarce federal CARES Act dollars in this very manner and funding the duplication of broadband networks in communities where providers are already offering service," the commissioner wrote, adding that the allocation of funds in this manner "siphons funding away from projects that could otherwise help reach unserved areas and threatens the viability of existing providers' private investments."
"This type of inefficient spending is especially problematic when there are millions of Americans, and tens of thousands of citizens in your state alone, that do not have access to any broadband at all," O'Rielly said.
The commissioner said the Wyoming Business Council, which runs the Connect Wyoming program, has not yet taken any measures to assure the public that subsidized overbuilding didn't happen with the CARES Act funds. The program, according to the letter, has not publicly released the applications or proposed coverage maps that grant recipients submitted. There is also no formal process to challenge grants given out, he said.
"I am concerned that this lack of guardrails and needed transparency with respect to the applications will weaken public support for state-administered federal grant programs while perpetuating real broadband gaps in Wyoming," O'Rielly said.
He also claimed the Connect Wyoming grants could undermine the FCC's own Universal Service Fund subsidies — since there have been allegations Wyoming's grants would overbuild on networks that were previously subsidized by the commission's fund.
"This would not only artificially impair the value of the FCC's past and current subsidies but would also undercut providers' willingness to compete in future FCC reverse auctions," O'Rielly wrote, adding this overbuilding would be unfair to those who pay fees towards the fund and "expect their hard-earned investments to be spent efficiently and not wasted on account of government coordination failures."
The commissioner asked the governor, who is co-chair of the Wyoming Business Council, to "immediately" release the coverage maps for networks that received a Connect Wyoming grant. He also told the state to let competing providers challenge grants on "duplicative projects," and cease funding for projects that would result in overbuilding.
The letter comes after O'Rielly sounded off earlier this month on allegations of overbuilding made by a family-owned broadband company in the state. He said it was "shameful" the company appeared to be facing hardship due to its competitor getting a Connect Wyoming Grant, and said he was "interested" in seeing the "evidence" of "overbuilding efforts" in Wyoming.
He was also outspoken about overbuilding earlier this year, when he told reporters he was concerned that funds dedicated to expanding broadband were focused on increasing internet speed rather than being put toward places where internet access is nonexistent.
Gov. Gordon's office confirmed that they received the letter on Tuesday and said they were "reviewing it." They also stated that Connect Wyoming program "relied on the most current information available from the FCC" in determining "existing broadband capacity in the grant award areas."
The FCC said they have yet to receive a response from the governor's office, but declined to comment further.
--Additional reporting by Stephen Cooper and Kelcee Griffis. Editing by Marygrace Murphy.
Update: This article has been updated with comment from the FCC and Gov. Gordon's office.
For a reprint of this article, please contact reprints@law360.com.
