Some providers who received state broadband grants last year installed service where a competitor was using federal money to do the same.
Gov. Kristi Noem created the Connect South Dakota program when she took office in 2019. Her goal is covering the approximately 12 percent of the state that lacks internet service fast enough to be described as “broadband.”
The Legislature put $5 million into the program. Noem’s administration divvied that money up among eight internet providers. The providers used the grants to connected 6,500 families and 150 businesses, according to Noem’s administration.
The Legislature approved another $5 million this year. But not before some lawmakers raised concerns.
Rep. Chris Karr, R-Sioux Falls, filed a bill seeking more legislative involvement in the program. The bill got tabled, but not before he revealed a problem.
“It sounded like there was some overbuild into areas that there was already some coverage,” Karr said while testifying on the bill. “And folks either simply didn’t know, it was an honest mistake, or there was no process for notification.”
Overbuilds happened near Mitchell and in the Beresford-Alcester area.
In the Mitchell area, Mitchell Telecom used a $441,470 state grant to install fiber-optic cable. Midco has $5 million in support from the Federal Communications Commission to deploy broadband in several under-served areas of South Dakota. That includes the Mitchell area, where Midco is installing fixed wireless towers that send broadband signals through the air.
Midco said it is not aware of the details of Mitchell Telecom’s project. Mitchell Telecom said the same about Midco.
Steve Westra, commissioner of the Governor’s Office of Economic Development, supplied a written statement for this story that said, in part, “we spoke with Midco several times prior to the program’s application process going live last spring, and there was no mention of federal money for build-out in that area.”
In the Beresford-Alcester area, Midco used $306,199 in state grant money to install fixed wireless towers. Premier Communications, based in Iowa, is using federal money to expand into that area with fiber-optic cable.
Premier Communications said it lacks details on Midco’s project. Midco said it eventually became aware of the overlap and considered using a federal process to challenge Premier’s project. But Midco said the size of the overlap is insufficient to warrant a challenge.
Westra, of the governor’s office, said the state declined to fund the third of Midco’s three towers in that area after learning of the potential overlap with Premier.
What it all means is that some customers who previously lacked broadband will now have a choice of broadband providers, said Public Utilities Commissioner Chris Nelson.
“They can choose between their types of technology, and hopefully because there’s a choice that may ultimately drive the price down because you’ve got a competitor there,” Nelson said. “But I think ultimately, looking forward, I think avoiding that kind of thing is ideal so that you can get broadband into as many new places as possible.”
At Mitchell Telecom, General Manager and CEO Scott Peper said the company’s fiber-optic network is doing what the governor hoped: bringing broadband to an under-served area.
“I think it should come down to this: Was the project needed?” Peper said. “And the only way that I can determine if a project was needed is how many people signed up. How many people raised their hand and said, ‘That’s something I need’? We had over 80 percent take-rate in these homes and businesses.”
A provider that has not received a state broadband grant, CenturyLink, has a different opinion. CenturyLink said in a written statement that it supports the use of state dollars to extend broadband to under-served areas. But the company added, “using limited state funds to overbuild areas that already have broadband defeats the purpose of the grant program and limits its impact on South Dakotans.”
The Legislature is out of session until next winter. Rep. Karr said he'll work with providers between now and then on a bill to prevent service overlaps and to address other aspects of the broadband program. One of the things he wants to include is a notification process so providers know who’s working in an area or has plans to work in an area.