What was the basis for Senate Bill 140? Follow the money to higher speed internet in rural Alaska favoring cable fiber, not satellite speeds

Although Senate Bill 140 is now a comprehensive education package with provisions for student transportation, correspondence schools, charter schools, teacher bonuses, and basic funding for school districts, it started out as a simple bill: Higher speed internet for schools in rural Alaska.

The text of the original bill is simple, and just 56 words:

“Each fiscal year, a district in which one or more schools qualify for a discounted rate for Internet services under the federal universal services program is eligible to receive an amount for each school that is equal to the amount needed to bring the applicant’s share to 100 megabits of download a second of the Internet services.”

What those 56b words mean is that rural schools with internet speeds of under 100 megabits of download time will be eligible for massive federal-state grants. Before, those grants were for rural schools that were only at 25 megabits.

But then, because it was an education bill, it got the Christmas-tree treatment in the House, which has a Republican majority that wanted to tackle a number of education issues, not the least of which is dealing with funding for schools. With a new majority in charge, now was the time to act on a variety of education priorities. The bill is now 19 pages long.

A look at the underlying bill doesn’t reveal much, until one looks at who may benefit: The bill’s prime sponsor is Sen. Lyman Hoffman, who is the paid board president of Bethel Native Corporation, a for-profit village corporation that, during the last round of rural fiber-optic grants, was a big player and made millions of dollars. He’s also co-chair of Senate Finance. He’s also on the Statewide Broadband Advisory Board.

Bethel Native Corporation in 2022 was awarded a $42.4 million grant from the National Telecommunications and Information Administration Tribal Broadband Connectivity Program to lay a 405-mile fiber optic network from Dillingham to Bethel.

“The project, to be completed in partnership with Alaska telecommunications provider GCI, will bring urban-level 2 gig internet service to consumers in Bethel and Yukon-Kuskokwim (Y-K) communities along the fiber route,” said the announcement in 2022, when the grant was awarded to BNC.

The BNC/GCI fiber project will follow a submarine route from Dillingham, where it will join an eventual Nushagak Electric & Telephone Cooperative long-haul fiber project, to the mouth of the Kuskokwim River, then follow an overland route the remainder of the way to Bethel. GCI was to be upgrading its local access network in Bethel and installing fiber to homes in Platinum, Eek, Napaskiak and Oscarville.

Bethel Native Corporation is a Hoffman family enterprise. Sen. Hoffman’s niece-in-law, Ana Hoffman is the CEO. Members of his family — a brother, a sister, and first cousins all make up the board of directors. There are only two or three members of the board not related to the Hoffmans in some way. The for-profit company has subsidiaries involved in the fiber-optic expansion business, such as AIRRAQ.

Read more about GCI’s partnership with AIRRAQ.

If SB 140 passes, school districts all across rural Alaska will be paying hundreds of thousands of dollars each to “last mile” companies like GCI to provide the higher-speed internet service. That cost will get passed along to the state of Alaska, as schools clamber for more money to pay for higher speeds.

“The Alaska School Broadband Assistance Grant (BAG) program was created to assist schools to increase internet download speeds. Established in 2014 by the Alaska State Legislature, this grant originally allowed schools to reach download speeds of 10 Mbps. In 2020, the State Legislature revised the statute to help schools reach 25 Mbps download speeds. SB 140 seeks to increase the download speeds to 100 Mbps,” wrote Sen. Hoffman in his sponsor statement last year.

In other words, the section now buried in 19 pages of other legislation is a gift to companies like GCI.

“New and improved technologies and increases to internet services have allowed for more and faster delivery of internet services. Because the cost of internet in some rural districts has decreased, the annual internet costs have fallen below benchmarks established by state law. To allow school districts to utilize these advances, SB 140 will increase the minimum requirement of Mbps from 25 to 100 which will increase the amount of Broadband Assistance Grants (BAG) to help school districts reach increased download speeds. Increasing the funding available through the BAG program in future years will allow schools to leverage more E-Rate funds to bring Alaskan schools in line with national standards for broadband connectivity,” Hoffman wrote.

In 2023, 151 Alaskan schools in 27 school districts benefited from the school BAG awards, many of them in the Bethel Native Corporation work zone.

Because of Hoffman is co-chair of the Senate Finance Committee, and because he is a member of the majority, little attention has been paid to the original bill and whether he has a financial conflict of interest, with Bethel Native Corporation deeply involved in fiber-optic internet. The mainstream media has ignored this section of SB 140 and who gets the money.

And Sen. Hoffman doesn’t seem to care what else is in SB 140 — he just wants it passed immediately.

The way megabits are paid for in Alaska is unique. The schools could already get the higher speeds, but in Alaska, broadband companies have a system where they get paid for every single megabit that goes through their lines. The amount they get paid per megabit is astronomical, compared to the Lower 48. This could be seen as a megabit hostage taking — they could release those megabits but will only do so if paid for them.

All the while, none of this funding goes to a cheaper and faster alternative: Satellite-based internet such as Starlink, which is designed for places like rural Alaska. Must Read Alaska has learned that in one far-west village in Alaska, teachers are not using the fiber-optic cable internet, but are bringing their Starlink dishes to work with them, setting them up outside the building, and running a line inside to their class.

In Scammon Bay, GCI provides 10 Mbps, while Starlink, for a fraction of the cost, provides 50-220 mbps to homes, although they have different speeds for the school. GCI could offer faster internet at the school, because it gets paid more.

During a recent bid to provide service to the Lower Yukon-Kuskokwim School District, Microcom won the bid using Starlink terminals over GCI. Microcom came in at about one-tenth of the price.

But SB 140 favors fiber optic for some companies, while others, already providing satellite internet at high speeds and low prices, are not part of the money trail from the federal and state governments.