Washington Insider -- Tuesday

Rural Internet, the Modern REA

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

US, Mexico Agree On Labor Dispute Resolution

One of the actions that emerged from sessions last week between the U.S., Mexico and Canada after marking the one-year anniversary of the U.S.-Mexico-Canada Agreement (USMCA) was that the U.S. and Mexico agreed to allow a vote by workers at a GM plant in Mexico on forming a union.

The complaint was brought under new provisions in the USMCA.

There was no resolution to other labor-related issues as of yet and key agriculture trade matters were also left unresolved between the U.S. and Canada over dairy and the U.S. and Mexico over GMO crops and glyphosate.

FY 2022 Spending Plans Up For Action In House

House Appropriations subcommittees have several markup sessions set for this week on the Fiscal Year (FY) 2022 spending plans under their jurisdictions, seeking to complete the effort and set the stage for full House consideration of the plans ideally before the August congressional recess.

Subcommittee markups tend to lack much controversial activity and even the full committee action seen thus far has not resulted in any major tweaks to the FY 2022 spending plans. However, the Senate has not yet acted on their versions and has only held hearings thus far on a few areas.

That ups the odds that a temporary spending resolution will be needed to keep the government funded when FY 2022 starts October 1.

Washington Insider: Rural Internet, the Modern REA

The House Agriculture Committee this week will markup the Broadband Internet Connections for Rural America Act (HR 4374), a measure to bring Internet to rural areas of the country.

“Rural broadband is critical for the growth and development of our rural communities, and it is essential that we act to finally close the digital divide that has kept so many of our rural communities from reaching their full potential, which is why the House Agriculture Committee is leading the charge on this effort,” said Chairman David Scott, D-Ga. “This bill will direct $50 billion toward critically needed infrastructure for rural broadband and also includes resources to ensure that this funding is used in a timely manner and accessible to rural communities with limited resources.”

Indeed, rural Internet systems clearly were tested during the pandemic with students taking their classes from home and many working from their homes remotely, using Internet connections to make that happen.

But many also found out the limitations of broadband Internet access in rural America.

While the effort is likely to easily clear the House Agriculture Committee and potentially the full House, it would appear the hasty effort to get the measure pushed through – the markup was only announced Monday afternoon for the Wednesday session – may be one that has lawmakers eyeing the bipartisan infrastructure package as a potential vehicle to put the measure in motion.

What some are opening suggesting is that a Rural Electrification Administration (REA) effort is what needs to take place. And the concept of the REA was sparked by the rise in electricity in urban areas. It was estimated that in 1935 when the REA was formed, 90% of farms still relied on kerosene lanterns and candles for light and they relied on wood burning stoves to heat their homes. And they did not have electric power to provide them running water.

While there were several systems that would use wind power to collect and store electricity in large glass-enclosed batteries in what many called “Delco Systems,” those were the exception rather than the norm and were found on the farms of those that were more well to do.

In the late 1920s and before he left office in 1933, President Herbert Hoover agreed that the electrification of rural America was important, but he wanted to leave it to the private sector to make it happen. Then came the Great Depression, and many of the private efforts folded up as the economy crashed.

Enter the REA which was created in 1935. The cost of delivering electricity into rural areas was still not cheap when the REA was launched, estimated in 1935 to be around $2,000 per mile. By the time we reached 1939, the cost had gone down to around $600 per mile. Put in today's dollars, the cost dropped from $38,740 per mile down to $11,622 per mile.

And the concept of the REA was developed by Morris Llewellyn Cooke, a mechanical engineer who had come up with the plan to distribute power in New York and Pennsylvania. When REA was launched, President Franklin Roosevelt tapped Cooke as the first administrator. By 1937, some 1.5 million farms were electrified through 350 rural cooperatives in 45 of 48 states. Almost half of all farms had electricity by 1942 with nearly all farms electrified by 1950.

However, there were still a handful of those who didn't trust power coming through a wire into their house and they did not opt to have it installed. Those farms were few and far between, but they were still a factor in the situation.

Congress started the effort with $410 million, the equivalent of $7.9 billion in today's dollars. The REA was essentially a government financing project that was subsidizing loans to private companies, public agencies or cooperatives for the construction of the electrical supply infrastructure. The repayment terms were over 25 years and eventually the interest rate was fixed at 2% after 1944.

Money lent by the REA was also largely repaid, with a default rate of less than 1%. Telephone service was added to their effort. The REA and its successor the Rural Utilities Service (RUS), has organized nearly $57 billion in federal guaranteed low-interest loans for the development of electric and telephone cooperatives.

And now the focus is shifting to the Internet. Indeed, agriculture has already seen what a government-subsidized system can do in terms of providing what is an essential service to rural America.

It is no coincidence that RUS is again being eyed for the effort to help bring rural America up to par with urban areas of the country.

So we will see. The pandemic revealed what many already knew, few have been willing to push broadband Internet into rural areas and efforts like those under consideration could hold great potential provided that the end result does not produce a system that truly does bring that service into areas that need it, and so the situation needs to be watched closely as it comes closer to becoming reality, Washington Insider believes.

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