CHARLESTON, W.Va. -- West Virginia's largest Internet provider is questioning whether the state Broadband Deployment Council should distribute $3.15 million in grants next week to make broadband service available to an estimated 2,600 homes in rural communities.

The $1,200-per-household cost is about $500 more than what a federal grant program spends to subsidize broadband expansion in rural areas. One Pocahontas County broadband project recommended for state funding would cost about $10,000 per household.

"Clearly West Virginia taxpayers have an interest in the prudent use of their funds," said Frontier Communications executive Dana Waldo, who also serves on the Broadband Council. "Cost should be a concern."

Waldo also predicts the grants could discourage private investment. Telecommunication firms might choose not to expand broadband service on their own, if they believe the government plans to subsidize competitors, he said.

"State code cautions that the council should respect market forces and avoid duplicating or displacing existing service or getting involved in projects where companies will serve the market in the reasonably near future," said Waldo, senior vice president and general manager of Frontier's West Virginia operations.

But council member Lee Fisher, a Braxton County farmer, said Frontier's objections shouldn't stop the board from handing out grants to the company's competitors next week.

Fisher said West Virginia law requires the governor-appointed council to find ways to bring broadband to the state's most rural communities.

"People in rural parts of the state deserve that service," Fisher said. "The council was put in place to determine how to get service to these people."

Fisher noted state law and council rules don't set a per-household limit on broadband project costs. He said West Virginia's broadband construction costs top most states because so many people live in rural areas here.

"The per-household cost is always going to be higher because you don't have many urban areas, and you don't have as many households to put into the bottom of the equation," Fisher said Monday. "You just don't have as many people in West Virginia."

The Broadband Deployment Council never attached any stipulations about project costs when it solicited grant applications from telecommunications firms and nonprofit organizations.

"Cost per household is obviously something you look at, but the council, from the beginning, made it clear that anybody was open to apply," Fisher said.

A Broadband Deployment Council grant review committee has recommended that board members distribute $3.15 million for 14 projects -- a dozen of which would provide Internet to rural households via wireless towers. The other two projects would offer broadband through telephone wirelines.

Wheeling-based StratusWave Communications, Buckhannon-based 3Wlogic and Spruce Knob-Seneca Rocks Telephone Inc. have applied for grants.

The projects' costs range from $740 to $10,000 per household.

The council, which meets Dec. 12, also is expected to award $923,000 for four projects designed to increase demand for high-speed Internet in rural areas.

"The council has a role to play promoting the advantages of broadband," Waldo said. "That is a mission it can take on right now."

The state Legislature established the Broadband Deployment Council and allocated the broadband expansion grant money four years ago. Much has changed since then.

In 2010, West Virginia received $126.3 million in federal stimulus funds to expand broadband and bring high-speed fiber-optic cable to more than 1,000 "community anchor institutions" -- schools, libraries, health centers, county courthouses, 911 centers, state agencies and other public facilities. Frontier is building the fiber network, but the state has pledged to allow other Internet companies to use the network to serve customers.

Companies such as Frontier also now offer satellite Internet service, so technically every household in West Virginia has access to broadband.

"The latest generation of satellite broadband service -- called 'Frontier Broadband' -- currently provides coverage to all unserved areas of West Virginia," Waldo said.

What's more, the federal government has established a broadband expansion program of its own -- called the Connect America Fund.

In July, the Federal Communications Commission announced plans to spend $115 million to subsidize broadband Internet providers that extend services to rural parts of the U.S.

The FCC said the subsidies would prompt broadband companies to serve rural areas that lack customers.

FCC Chairman Julius Genachowski declared the program "the most significant effort ever undertaken to connect rural America to broadband."

Frontier accepted a $71.9 million subsidy from the FCC to bring broadband to nearly 93,000 new households in 27 states, including in West Virginia, where Frontier is the state's largest Internet provider by far.

Next year, the FCC is expected to expand the Connect America Fund and make $1.8 billion available to bring broadband to the nation's most rural areas.

Within the next several months, Frontier plans to offer broadband Internet to 85 percent of its West Virginia customers -- a percentage that will climb higher with the Connect America Fund subsidies. Frontier has spent more than $250 million and brought broadband to more than 136,000 additional households in West Virginia since 2010, Waldo said.

"The council's mission cannot and should not be the same today as it was four years ago," Waldo said. "We do not have the same environment. The private-sector investment in broadband deployment, including the new satellite-based service, and the emergence of the Connect America Fund have changed the landscape."

At a Broadband Deployment Council meeting last week, Waldo said the grant review committee recommended funding projects in multiple areas where Frontier already offers broadband service. The committee plans to review Frontier's new information about broadband coverage before the Dec. 12 meeting.

Fisher said he expects the council to award the entire $4.1 million next week.

"We need to get these things voted on and approved and processed," Fisher said. "We're going to do the best job we can."

Reach Eric Eyre at erice...@wvgazette.com or 304-348-4869.