OSP's Broadband Stimulus Update #2: May 5, 2009

After a period of uncertainty, the telecom industry is beginning to understand the size and structure of the American Recovery and Reinvestment Act of 2009 (the "Act") that is intended, in part, to create jobs and increase broadband deployments in the rural parts of the United States. This phase of uncertainty was described by some as a "de-stimulus," as it seemed that projects were delayed in anticipation of funds. Despite the uncertainty, according to a recent survey by telecom-equipment maker Calix, nearly 60 percent of the polled 100 service providers are committed (started application or said they are definitely submitting) to apply for funds authorized by the Act for use in the deployment of broadband networks in rural areas. Almost 50 percent of the projects are anticipated to be greater than $10 million. More than two thirds of the survey respondents said they would submit comments to the agencies tasked with the implementation of the "Broadband Stimulus" package, the Rural Utility Services (RUS) of the US Department of Agriculture and the Department of Commerce's National Telecommunications and Information Administration (NTIA).(i)

The RUS and NTIA have communicated with the public and have made progress to define the rules and requirements to begin to eliminate uncertainties. The agencies' rules will allow applications for funds to be submitted and reviewed soon. In mid-March, they began to discuss the Act, published the request for information, and held a series of meetings at the end of March to start to collect feedback and input with an acceptance deadline of April 13, 2009. The transcripts and presentations from these meetings can be found at http://www.ntia.doc.gov/broadbandgrants/meetings.html.

However, the number of comments has been much larger than anticipated – at least by your devoted author – and they continue to be submitted, although the deadline passed several weeks ago. The NTIA and RUS have made those comments available for review by the public at http://www.ntia.doc.gov/broadbandgrants/comments.cfm. NTIA has also held numerous ex-parte meetings with interested parties and also published those on their Web site at http://www.ntia.doc.gov/broadbandgrants/exparte.html. Feel free to go there to look, but be aware that there are more than 1,000 comments filed. Let me try to give you a general overview of the situation.

There appears to be significant interest in the program in general and in influencing the rules in favor of different industries, technologies and procedures. The parties providing comments could be grouped as follows:
• Service providers from many industry segments such as AT&T, Sprint Nextel, U.S. Telecom, or Puerto Rico Telephone Company.
• Equipment vendors such as Alcatel-Lucent, Cisco, Intel, etc.
• Industry associations such as TIA, NCTA, FTTH Council, APPA or CTIA.
• Public Safety Entities such as Administration of Public-Safety Communications Officials – International, Inc. (APCO), National Emergency Number Association ("NENA"), or Public Safety Spectrum Trust Corp. (PSST).
• Rural, tribal, and state entities such as the National Association of Regulatory Utility Commissioners (NARUC), the National Congress of American Indians (NCAI), the U.S. Chamber of Commerce, several states (e.g., California and Missouri), or the National Rural Electric Cooperative Association (NRECA).

Other submitted comments included individual persons, consultants and journalists, as well as the Communications Workers of America (CWA) organization.

The comments in general are intended to help the agencies better define some of the criteria that were only outlined in the Act – primarily the terms "rural," "unserved," "underserved," and "broadband." Here, a fundamental difference in opinions seems to be to either support some form of broadband to as many people as possible, even at the cost of it being sub-standard ("anything is better than dial-up"), or to provide a broadband network to fewer people that is competitive for urban areas ("deploy a network that is as capable as those in the cities"). The first one is primarily supported by members of the wireless industry, the latter by members of the wire line, specifically the fiber optic industry.

NTIA and RUS plan to issue the rules and requirements soon – most likely on or shortly after May 18, 2009 when they have to report their progress to Congress. Both agencies expressed the intent to provide three rounds of funding, each of which start with a public Notice of Fund Availability (NOFA) lasting approximately three months. This ensures that entities that do not have "shovel-ready" projects still have an opportunity to prepare and present their case. It also seems likely that the application process will not be a "black-and-white" decision, meaning that applications need to meet a set list of requirements to get approved. Applications may be ranked in priority, measuring the impact an applicant's plan has on job creation, broadband capability, and sustainability of the business plan presented.

Since job creation is the most important argument, some of the comments centered around these topics. In their submission to NTIA, the FTTH Council, for example, commented based on a study by Empiris, LLC that "there is substantial evidence to support the conclusion that deployment of FTTH infrastructure (in unserved and underserved areas) best fits these objectives… $1 million of investment in FTTH deployment will result in almost 20 jobs, whereas a million dollars of investment in wireless broadband will result in fewer than 15 jobs."(ii)

They also proposed that "Advanced Broadband" be defined to ensure applicants can differentiate their networks' capabilities. The definition is "based on current performance characteristics for high-speed broadband services many customers receive or are about to receive." Don't forget that the networks applicants are receiving funding for will be installed over the next few years. With the current rapid increase in bandwidth demand and bandwidth availability increasing in urban areas, the networks should not be outdated by then.

In their submission to NTIA, the FTTH Council also proposed establishment of the following selection and scoring criteria for grant awards:
• Job creation
• Project feasibility, initiation and completion
• Infrastructure capabilities and long-term sustainability
• Cost-effective deployments
• Affordability
• State endorsements, community institution connectivity and support, and socially and economically disadvantaged small business concern

Scoring an application's performance against these criteria would allow the agencies to rank the projects to determine their degree of support of the purposes of the stimulus plan.

Several comments and submissions centered on the grant eligibility of an entity – please remember from my first column that NTIA left it a bit open with its definition – any other entity that the NTIA finds by rule to be in the public interest can apply in addition to government and non-profit entities. It is argued that projects can most efficiently and most expeditiously be executed by experienced entities – existing service providers such as independent telephone companies would probably fall under this category; rural telephone cooperatives may qualify as non-profit organizations anyway.

One other challenge brought up from multiple parties was the importance of "middle mile" networks for bringing broadband to rural areas. What good does it do to build an interstate within a rural area if it is not connected to the national network of interstates? So, it seems logical to request that broadband deployments (e.g., by wireless access technologies) ensure there is a capable backhaul network, ensuring the same speeds are available to the Internet and not only to the antenna. It also seems to make sense to request that funds be made available for those networks if they support the connection of the access network to the Internet.

Lastly, several comments requested that the government not impose too many restrictions on the grant recipients' business practices. They claim that if the requirements become too onerous, investments will be delayed, which is clearly against the Act's intent to stimulate the economy quickly. Adding (or not) a "Buy American" requirement has been requested by many, since the taxpayers' money is being spent to create jobs in the U.S. But, this is obviously a very controversial and emotional debate.

For any questions, please contact me at econstimulusinfo@corning.com

Endnotes
i. Calix Inc. provided data and CNN Money / FORTUNE magazine online http://money.cnn.com/2009/04/21/technology/rural_broadband.fortune/
ii. Comments of the Fiber-to-the-Home Council in response to request for information, Docket No. 090309298-9299-01.

Legal Disclaimer: This material is intended to provide general information about that portion of the American Recovery and Reinvestment Act of 2009 (the "Act") related to broadband deployments in the United States. These materials are based on information from multiple sources (e.g. USDA and USDC presentations, webinars by industry associations, the Act). Many factors, including the final provisions of the Act, any accompanying regulations and other government programs may change, delay or terminate public funds for broadband deployment. Corning Cable Systems makes no promises about, and does not assume any liability for, the accuracy or completeness of the information provided in this presentation. Corning Cable Systems does not assume any obligation to update this presentation or you about changes to the Act.