Iowa Cable & Telecommunications Ass'n v. United States Department of Agriculture

469 F. Supp. 2d 711, 2006 U.S. Dist. LEXIS 89599, 2006 WL 3590182
CourtDistrict Court, S.D. Iowa
DecidedDecember 11, 2006
Docket4:06-cr-00256
StatusPublished

This text of 469 F. Supp. 2d 711 (Iowa Cable & Telecommunications Ass'n v. United States Department of Agriculture) is published on Counsel Stack Legal Research, covering District Court, S.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Iowa Cable & Telecommunications Ass'n v. United States Department of Agriculture, 469 F. Supp. 2d 711, 2006 U.S. Dist. LEXIS 89599, 2006 WL 3590182 (S.D. Iowa 2006).

Opinion

ORDER

ROBERT W. PRATT, Chief District Judge.

On May 30, 2006, Plaintiffs, Iowa Cable and Telecommunications Association (“ICTA”) and Mediaeom Communications Corporation (“Mediaeom”), filed a Complaint for Declaratory and Injunctive Relief (Clerk’s No. 1), challenging decisions made by Defendant, the United States Department of Agriculture (“USDA”), to issue certain loans under Title 7, United States Code § 950bb. On July 31, 2006, Defendant filed a Motion to Dismiss (Clerk’s No. 3), pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction. Plaintiffs resisted the motion on September 6, 2006 (Clerk’s No. 6) and Defendant replied (Clerk’s No. 9). A hearing was held on Defendant’s motion on November 21, 2006. The matter is fully submitted.

I. FACTUAL BACKGROUND

A. The Plaintiffs

Plaintiff ICTA is a corporation established under the laws of the State of Iowa, with its headquarters in Clive, Iowa. ICTA’s members include companies providing cable television, high speed internet, and telephone service to communities throughout the State of Iowa. One purpose of ICTA is to represent its members’ interests in ensuring the fair and efficient deployment of communication technologies in Iowa.

Plaintiff Mediaeom is a corporation established under the laws of the State of Delaware, with its headquarters in Middle-town, New York. Mediaeom is a member of ICTA and specializes in providing cable and broadband services to communities *713 whose relatively low population densities make them unattractive to many other providers.

B. The Statute

The Rural Electrification Act (“REA”) was originally established in 1936 in an effort to provide electrical services to rural parts of the United States. It was amended in 1949 to include telephone service. In 2002, Congress again amended the REA by enacting the Farm Security and Rural Investment Act (the “Farm Bill”), designed to further the spread of broadband technologies in rural areas. See Pub.L. 107-171, 116 Stat. 134, codified, as amended at 7 U.S.C. § 950bb. Consistent with general provisions of the REA, Section 6103 of the Farm Bill authorizes the USDA “to provide loans and loan guarantees to provide funds for the costs of construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities.” The USDA administers the statute through its Rural Utilities Service (“RUS”).

Under the Farm Bill, “broadband service” is defined as “any technology identified by the Secretary [of Agriculture] as having the capacity to transmit data to enable a subscriber to the service to originate and receive high-quality voice, data, graphics, and video.” 7 U.S.C. § 950bb (b)(1). An “eligible rural community” is “any area of the United States that is not contained in an incorporated city or town with a population in excess of 20,000 inhabitants.” Id. § 950bb(b)(2). The Farm Bill also provides that “the Secretary shall give priority to eligible rural communities in which broadband service is not available to residential customers.” Id. § 950bb(c)(2).

To implement the provisions of the Farm Bill, the RUS established the Rural Broadband Access Loan and Loan Guarantee Program (the “RUS Program”), and in 2003, issued regulations setting forth eligibility criteria and application processes for RUS Program loans. The RUS Program regulations provide, amongst other things, that “priority will be given to loans to finance service to eligible rural communities in which broadband service is not available to residential customers in the applicant’s proposed service area.” 7 C.F.R. § 1738.11(a). In determining whether broadband service is “not available,” the RUS must consider the following criteria: (1) whether broadband service is “not being provided to residential customers in the applicant’s proposed service area and no entity is committed to provide such service before the service would reasonably be expected to be available pursuant to the loan application”; (2) whether broadband service “is not provided at rates comparable to those of similar services in neighboring urban and suburban areas”; and (3) “the quality of existing service, including ... the availability of specified data rates, system latency, and date rate restrictions, is not satisfactory as determined by RUS.” Id. § 1738.11(b)(l-3).

In applying for a loan under the statute, the RUS requires applicants to submit a completed application, which must include a certification of the extent to which broadband service is available or not available to residential customers as provided in § 1738.11(b)(l-3). Id. § 1738.11(c). The applicant must also publish legal notice stating an intent to offer broadband service in a particular community, setting forth the proposed service area, and requesting incumbent broadband providers to submit to RUS within 30 days various information regarding the incumbent’s broadband services in the area. Id. First priority is to be given to applications in areas where broadband service is not available to residential customers. 7 C.F.R. § 1738.15. The regulations also pro *714 vide exclusivity to the first approved applicant, i.e., “RUS will not approve loans to more than one applicant to provide broadband service within the same eligible rural community, nor to an applicant proposing to provide service in a community served by a borrower using funds under this part regardless of the definition of broadband service at the time of loan approval.” Id. § 1738.19(h).

Plaintiffs note that the RUS regulations do not provide any means for incumbent broadband providers, or for the public, to intervene, comment on, or otherwise participate in the loan application process, even when material misstatements and omissions have been made about the incumbent’s service. Compl. at ¶ 13. The regulations do not provide a mechanism for incumbent service providers or the public to determine the scope of the applicant’s proposed plan, who would be served, who would not be served, the technology used, the level of service proposed, or anticipated pricing. Id. Finally, the regulations do not provide a mechanism for submission of competing proposals or for RUS to conduct a comparison of competing proposals. Id. Plaintiffs also point out that, while the RUS regulatory program is designed to make broadband service available in otherwise unserved or underserved areas, in practice it has become a means of subsidizing new providers of cable television. Compl. ¶ 14.

In September 2005, the USDA’s Office of the Inspector General (“OIG”) issued a report after conducting an audit of the administration of the RUS Program.

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469 F. Supp. 2d 711, 2006 U.S. Dist. LEXIS 89599, 2006 WL 3590182, Counsel Stack Legal Research, https://law.counselstack.com/opinion/iowa-cable-telecommunications-assn-v-united-states-department-of-iasd-2006.