SamPratt.com

It’s hard to imagine any company turning up its nose at nearly $3,500,000 in free money... especially in this economy, and if that money would both expand the company’s customer base and also perform a vital community service.

But apparently, Mid-Hudson Cablevision is one such company.

As a result, potential rural customers in hard-to-reach “last mile” locations—including Yours Truly—are being told they’ll have to pony up thousands of dollars each just to get connected. Customers in densely-settled cities like Hudson or within 200 feet of existing lines typically pay no such fee.

During last year’s hotly-contested Congressional race between Scott Murphy and Chris Gibson, Murphy announced the award of a $3.5 million “rural broadband” grant to MH Cable. According to the then-U.S. rep’s August 2010 press release, the funds would come from the Department of Agriculture’s Rural Utility Services programs.

Now, this funding was not forced upon Mid-Hudson. The company applied for, was awarded, and at the time celebrated the grant. MHC President James (Jim) Reynolds crowed last year that

We are very pleased to receive the news that we are being awarded this grant. These tax payer dollars will help us to continue the work we have been engaged in for 30 plus years. This government support will help make it possible to extend service to rural marketplaces that would otherwise be very difficult reach. We will be moving as quickly as possible to move forward with the outlined in our proposal and certainly appreciate all of the support and assistance that we received from Congressman Scott Murphy.

Murphy in turn gushed that the towns of Ashland, Cairo, Catskill, Coxsackie, Jewett, Lexington, New Baltimore and Windham in Greene County, plus Austerlitz, Copake, Claverack, Ghent, Chatham, Hillsdale and Taghkanic in Columbia County would benefit from this Federal program, stating that

Expanding rural broadband in our Upstate communities is key to building businesses and creating jobs. This is one of the most critical issues for our rural communities. This project will benefit everyone from farmers and small businesses looking to sell their products online, to volunteer firefighters needing high-speed Internet to keep the public safe. Broadband investments like this are a critical component of my Renew Upstate New York plan, and will help ensure the 20th District becomes a leader in the 21st century economy.

Yet according to Mid-Hudson engineer David Fingar, the company has since decided not to tap into these funds—at least for the moment.

Asked why (during a cordial visit to my property recently, after I'd placed multiple calls over the past three months to MHC about availability in my area), Fingar stated that there were “too many conditions attached” to the funding, but did not rule out accessing the funds later.

Until then, potential customers are being asked to come up with rather large lump sums—in my case $1,870 plus tax—for the privilege of then giving Mid-Hudson about $1,000-$2,000 each year in subscription fees, depending on what services one orders. (Fingar—a member of the local insurance clan, which includes County Republican chair Greg Fingar—did offer that if I ordered a significant enough package, they might be able to work out an installment plan on the hookup.) Others in my neighborhood have been quoted figures ranging from $2,000 to $2,600 for getting hooked up. Meanwhile, with an estimated 20,000 subscribers, MHC’s annual revenues are variously reported as between $20 and $50 million.

At the time that the Town of Taghkanic negotiated its franchise agreement with the company in 2007, MHC provided service to only 5.5 of Taghkanic’s approximately 49 miles of roads. Though most residents can opt for Dish network TV service, internet access is glaringly lacking, as many homes are eligible for neither cable modems nor DSL. Making do with either wifi hotspots, satellite internet from the likes of Hughes or Wild Blue, or even 1990s-grade dialup from AOL, many of the innovations of today’s dynamic, video-driven web are not feasible. Streaming movies from Netflix? Forget about it.

But this past fall and winter, Taghkanic residents’ anticipation mounted as MHC trucks were seen stringing heavy black wires in various parts of the Town. Here on County Route 27, activity was spotted to the immediate east and west of my property. But due to a fluke in how telephone poles are sited, a roughly quarter-mile chunk of 27 has no poles on the road, with phone and electricity lines routed through woods. This places homes in “line extension areas,” some of them a good deal more than the typical maximum of 200 feet from existing wires, and thus in the position of having to pay a large “contribution in aid of construction” (or CAC) to get hooked up. These are precisely the type of conditions meant to be addresses by Federal programs like the one to which MHC applied for funding it now has spurned.

The problem is compounded by many rural governments being woefully uninformed about their ability to negotiate better agreements from cable companies, in effect turning over rights worth hundreds of thousands or even millions without negotiating for more community services (such as public access channels, production facilities) or coverage. According to Metroland, 

State law requires cable service providers to set aside public-access channels for home-grown programming [and] also give municipalities the opportunity to enter into contracts known as franchise agreements with these companies, whereby the cable-service providers must give up to 5 percent of their revenues to local governments.

The Town of Taghkanic demanded neither a franchise fee from MHC in 2007, nor secured any free goodies—besides one standard installation each for the town's handful of public buildings. The City of Hudson similarly made few if any requests from Mid-Hudson when they last came before the Council for renewal, despite getting expert advice from Troy media advocate Steve Pierce. In much the same way that insurance policies only get cursory review, many small towns and cities fail to realize how much more they are entitled to, deferring instead to highly-profitable cable enterprises as if they were doing the municipality a giant favor just by showing up. The Town of Ashland, by contrast, would appear to have taken a somewhat more responsible approach, asking Reynolds to answer a host of common-sense questions prior to approving a franchise renewal.

Still the larger questions remains: Since nearly $3.5 million was sought, received and touted by MHC less than a year ago, why not use it to overcome the obstacles to (in Reynolds’ own words) “extend[ing] service to rural marketplaces that would otherwise be very difficult reach”?

What about the stated reason—an excess of onerous grant “conditions”? Recipients do have to fulfill normal, routine responsibilities like keeping payroll documentation and other records; but typically grants cover the costs of such administration. A longer list of conditions can be found here.

One theory is that the decision is somehow ideological—that Mid-Hudson’s generally conservative and politically-connected leadership didn’t want to appear, in the age of Tea Party fanaticism, to be suckling at a government teat... But if that were the case, why did they apply in the first place—and why did they accept and use a $5.3 million loan (arranged with help from Murphy’s predecessor, John Sweeney) for expanding rural broadband access in much the same way? Back in 2009—while acknowledging the lesser-known costs of maintaining rural broadband networks—Reynolds predicted that his company would indeed seek more Federal funding opportunities in the future:

Based on [the Sweeney-backed loan] success, Reynolds said Mid-Hudson is likely to apply for stimulus  funding ... While the earlier buildout was to areas with 20 to 25 homes per mile,  the remaining unserved areas in his footprint are in locales with 10 to  15 homes per mile, butting up against the threshold for making the endeavor cost-effective. 

Indeed, MHC cites this past Federal partnership in most of its applications to area towns and the State's Public Service Commission. Some thus speculate that the reversal may be in some way entangled with the Murphy-Gibson rivalry, i.e. that maybe a grant or loan from the new Republican Congressman would be treated differently.

Another theory—and the one I find more plausible—is that Mid-Hudson is simply testing the waters to see how many people they can get to shell out cash up front before dipping into the Federal pool to cover the rest. Once they've maxed out the folks who are willing to foot the bill themselves, they can in theory then start using the grant funds to hook up the rest, and thus get the most new customers possible at the lowest possible risk to the company. When I asked Fingar—who was quite amiable and forthcoming during our visit—whether those who agreed to pay now would get a refund if they used the grants later, he appeared bemused by the question.

According to a telecom legal expert I spoke with, they can probably get away with such temporizing, as the USDA rarely “claws back” such funding even when it doesn't get used as intended. The Federal government oversees about $5 billion in similar programs, and evidently making sure they get spent wisely is low on the list of priorities... Meanwhile, at least one publication, CC Scoop, has expressed skepticism about the grant programs, and The Columbia Paper is expected to publish an article on the topic as well shortly.

So for now, I've reluctantly extended my satellite internet deal, paying for commercial-grade (but still pokey) service at a steep cost. I’d vastly prefer to do business with a locally-owned company, and to not have to deal with the bandwidth limitations and service headaches common to satellite. But at about two grand to get started, it’s hard to justify at this point. If Mid-Hudson Cablevision waits too long, though, to access those funds and provide this community service, they may get left behind by the ever-increasing capabilities of cellular and other over-the-air networks.

NOTE: Calls to the USDA RUS department which handles the Mid-Hudson grant were not returned in time for publication.