Will the U.S. Stimulus Package Boost Broadband Buildouts?

Not everyone thinks so.  Here are a few extracts of recently published on-line articles:

Obama’s Broadband Plan Disappoints Telecommunications Companies

The current House version of the $825 billion stimulus package sets aside just $6 billion for broadband deployment, about a third of the amount that some Democratic lawmakers had wanted. In addition, the money comes with conditions that some companies said discourage them from participating in the program.

That disappointment is shared by lawmakers such as U.S. Representative Anna Eshoo, a California Democrat, who had been pushing for as much as $15 billion in the stimulus proposal to extend the reach of broadband. “I don’t think it’s enough,” said Eshoo of the current plan.

Under the current plan, the government is going to administer two grant programs, one through the Department of Commerce and another through the Department of Agriculture.

Companies that accept grants would have to fulfill several conditions such as a timetable for starting and finishing completion of the networks.

The grants would be conditioned on companies building so- called open-access networks, which would allow other companies to offer competing service over the same lines.

Those requirements, which are still vague, are causing concern among the companies that would be most likely to participate in the program.

“We thought this effort was supposed to be about stimulating the economy and stimulating investment and not chilling investment, and frankly additional conditions would likely do that,” said David Zesiger, the senior vice president for public policy and external affairs for Embarq Holdings Co. LLC., an independent local phone company based in Overland Park, Kansas.

http://www.bloomberg.com/apps/news?pid=20601070&sid=aaLAwKRK4Sp…

Why the Stimulus Bill Discounts Broadband

Only $6 billion (out of the $825 billion proposal) was targeted at broadband, far short of the $12 billion to $30 billion that industry experts estimate it would cost to wire the nation. The House bill allocated the same amount of money to weatherizing the homes of low- and moderate-income people.

The stimulus proposal still has to make its way through the Senate and may be changed substantially before it’s signed by the President. (We have seen Congress turn a horse into a camel many times before). Many in the tech industry are contemplating some tough questions:
-Why did broadband get slighted?
-Will the technology get more government funding in the future?
-Does the debate over broadband foreshadow how the technology community will be treated in the future by the Obama Administration?

There’s also an information gap. There are no clear, comprehensive data on which regions need broadband investment, which fueled concerns that it would be difficult to spend money quickly and wisely

http://www.businessweek.com/technology/content/jan2009/tc20090127_8…

Obama’s broadband stimulus: throwing money at wrong target?

“The current draft of the broadband part of the stimulus package focuses on providing grants to companies that are willing to deploy wireless or wired broadband in underserved areas. The bill mandates open access to any services that result from such grants.

The Pew report says that some people (more than 15%) have no interest in getting online. Another 6% think the price is too high, and 5% have usability problems. The president’s plan is unlikely to change these numbers much.”

http://www.networkworld.com/columnists/2009/012709-bradner.html
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Our take: In addition to direct aid and tax incentives, the U.S. government needs to make more licensed spectrum available at a low enough cost for rural independent  telcos and WISPs, to enable them to build out broadband wireless networkr.  If little or no spectrum is made available, then the resulting unlicensed broadband wireless deployments will be based on mesh WiFi or proprietary techologies- not WiMAX.  And they won’t be always be reliable or even available, due to interference from the many appliances operating at 2.4GHz frequency, most commonly used for mesh WiFi networks.

This topic should be of keen interest to independent telcos.  What do you think the Obama Stimulus Package will do for broadband wireless growth in the U.S., particularly for WiMAX in rural or underserved areas?  Please weigh in with your opinion by using the Comment form below.

0 thoughts on “Will the U.S. Stimulus Package Boost Broadband Buildouts?

  1. Excellent summary Alan of what is happening with the so-called stimulus as it relates to broadband. This is a much different picture than the speculation from only a month ago. You make excellent points that there needs to be an application driver that motivates people to use the bandwidth. Otherwise, it will be like building, “A bridge to nowhere.”

  2. Thanks Ken!

    I hope your independent telco readers will comment and write their congressman/woman if they feel motivated to get more funds or tax credits allocated to broadband buildouts in underserserved areas.

  3. Presently, what could be a serious way to enhance broadband buildout in this country is to invest in WiMAX networks. Because the business models around WiMAX does enable open access thru the Mobile Virtual Network Operator (MVNO) model. Network sharing capabilities are relatively easier due to the All-IP network architecture.

    Also WiMAX does provide true broadband service as opposed to present 3G HSPA services that are advertised as such, but fall far short of it. Also as WiMAX is based on open standards and as equipment is available from numerous vendors, it is the best way to go for this Broadband build out effort.

  4. Agree with all points made by WiMAX friend.

    However, in this economy who has the financing to complete a reliable, robust, and high performance broadband wireless buildout. It requires carefully plotted cell sizes, strategicly placed base stations, backhauling, a mix of outdoor and indoor radio/modems, ISP agreements, roaming, new devices (MIDs) and adapters for notebooks and netbooks, and on and on.

    Do you think Clearwire will complete its mobile WiMAX buildout in 9 cities this year, when only one (Portland) is operational at this time?

  5. Reuters Update:

    Broadband stimulus unlikely to boost telecom profits

    Lawmakers are debating bills this week to bring broadband service to rural areas and to allow tax credits and grants for phone companies delivering higher-speed advanced Internet service.

    Analysts and telecommunications executives say the $6 billon to $9 billion packages being discussed appear too little to bolster spending in the industry, which is suffering a sharp cutback in consumer and corporate spending.

    http://www.reuters.com/article/newsOne/idUSTRE50S4S420090129?virtualBrandChannel=10112

  6. NYT-Verizon Could Get $1.6 Billion in Senate Stimulus Plan

    At issue is the part of the stimulus package meant to bring fast Internet connections to rural and low-income areas. The House bill that passed Wednesday provided $6 billion in grants to broadband projects. The latest Senate bill increases those grants to $9 billion.

    Most significantly, the bill before the Senate also includes tax credits for investment in broadband services to low-income neighborhoods, rural areas and places that don’t have any providers of high-speed Internet service.

    Companies would get a 20 percent tax credit on investments made on “current-generation” broadband — with speeds of at least 5 megabits per second — in “unserved areas” and 10 percent for investment in low-income and rural areas.

    “Next-generation broadband” service — at least 100 megabits per second — also gets a 20 percent credit for unserved, low-income and rural areas. But further down in the bill sits a significantly expanded definition of what sort of customers can be served by a company that qualifies for the tax credit:

    A qualified subscriber, with respect to next generation broadband services, means any nonresidential subscriber maintaining a permanent place of business in a rural, underserved, or unserved area, or any residential subscriber.

    http://bits.blogs.nytimes.com/2009/01/30/senate-looks-to-stimulate-verizon/

  7. Cyber-bridge to nowhere?

    NY Times: Internet Money in Fiscal Plan: Wise or Waste?
    Experts warn that the rural broadband effort could just as easily become a $9 billion cyberbridge to nowhere, representing the worst kind of mistakes that lawmakers could make in rushing to approve one of the largest spending bills in history without considering unintended results.

    http://www.nytimes.com/2009/02/03/us/politics/03broadband.html?_r=1&scp=3&sq=Broadband&st=cse

    “The first rule of technology investment is you spend time understanding the end user, what they need and the conditions under which they will use the technology,” said Craig Settles, an industry analyst and consultant who has studied broadband applications in rural and urban areas. “If you don’t do this well, you end up throwing millions or, in this case, potentially billions down a rat hole. You will spend money for things that people don’t need or can’t use.”

    Dozens of programs included in the stimulus measure could entail a similarly complicated cost-benefit analysis. But with Congress and the White House intent on adopting the economic recovery package by the end of next week, taxpayers are unlikely to find out whether these programs are great investments or a total waste — or something in between — until long after the money is out the door.

  8. Did anyone happen to notice what happened when the government passed legislation requiring housing loans in under-served areas? How about when the Telecom Deregulation Act was passed that left TelCos regulated, while it forced them to sell their private property for less than market value? Were you there when that bubble popped, too?

    Rural TelCos have been installing broadband services for their rural customers for over 10 years while maintaining solvency and a reliable network. They have often had new services to their customers before the RBOCs. The U.S. is number one in the world in wind and solar installations with sites in over 40 states. Wind farms are stimulating the local economy with populations increasing in areas where they were previously declining and farmers are enjoying the much needed additional revenue.

    In fact, things are going so well that the institutional investors that make a practice of stripping industries of needed capital, now want in. What this stimulus will do is throw billions of dollars out there for the grabs and another bubble will be created. When the money has been taken, the bubble will pop and the results will be just as catastrophic as they were before.

    The regulations that will come along with this money haven’t been written yet, but they will come fast and furious when they do and they will cost the TelCos and power companies more money and more nightmares as they try to wade threw them. With over 135,00 pages of federal regulations on the Congressional Record and only 60 days to check new ones for bad effects on existing ones, this is a disaster bound to happen. The reliability of the network will suffer as new technology is forced in before it is ready in order to meet government imposed deadlines.

    These industries have been brought to their knees by previous government intervention on behalf of the investment community in the recent past. They don’t need to go through it again.

  9. “WCAI is particularly pleased that under the final Bill, commercial entities are clearly eligible for direct grants from NTIA. WCAI members stand ready to move forward with plans to bring wireless broadband to rural and underserved areas. Having direct access to grant funding will allow them to do so in a timely manner, helping create jobs fast, enable productivity, and jump-start our economy.”

  10. The final stimulus bill allocated $7.2 billion for broadband, which was at least a few hundred million higher than several reports had suggested. The money will be split and directed toward projects benefitting underserved and rural markets. The National Telecommunications and Information Administration, overseen by the Department of Commerce, will distribute $4.7 billion, while the Department of Agriculture’s Rural Utilities Service will deliver $2.5 billion.

    How it all plays out remains to be seen.

  11. TIA has worked over the past several months to urge the new Congress and the new Administration to include broadband provisions in any stimulus legislation being considered and policy initiatives being developed.

    “Broadband networks directly impact the productivity of our industries and our economy, and unequivocally affect public safety, education, health care, and countless other functions in Americans’ daily lives,” said TIA President Grant Seiffert. “Like any other infrastructure project, the deployment and use of broadband will significantly increase and maintain job growth well beyond the initial investment in the infrastructure, laptops and computing devices themselves. Broadband incentives are a necessary component of a 21st century stimulus package.”

    Key initiatives that TIA has supported include grant funding for broadband deployment and the funding of the recently enacted “Broadband Data Improvement Act” (PL 110-385).

    “This is an important step to help ensure that the promise of broadband solutions will become accessible to all Americans,” said Seiffert. “Implementation of this legislation will help to expand much-needed deployment in areas of the nation where citizens might have otherwise gone without Internet access.”

    TIA also applauds Congress for moving this necessary legislation swiftly through the process. “We have every confidence that this investment in the nation’s broadband infrastructure will yield benefits today and put America on a path toward a brighter future,” said Seiffert.

    For more information, please contact Danielle Coffey at (202) 346-3243 or dcoffey@tiaonline.org.

  12. The U.S. stimulus package will award $7.2 billion for broadband, much of that ear marked for small rural telephone companies and WISPs.

    We understand that a bit more than a third of the money will be administered through the Rural Utilities Service (RUS), which has until Sept. 30 of this year to make awards. While rural telcos are not the only companies eligible to receive RUS money, they may be best positioned to receive it because many of them are already familiar with the grant/approval process. The $2.5 billion that the RUS will administer may be in the form of grants, loans or loan guarantees. It will be added to an RUS existing program, with a few additional stipulations.

    The key question for WiMAX stake holders, rural telcos and WISPs is the availability of licensed spectrum. Will the 3.65GHz “lightly licensed” spectrum be used or another frequency range? Will fixed WiMAX be the preferred BWA technology or long range/ mesh WiFi (which generally operates over unlicensed spectrum)?

    “For every project area, at least 75% has to be rural without sufficient access to high-speed broadband,” noted Phillip Brown, national policy director for Connected Nation, an advocacy group that has worked to help shape broadband legislation. Geoff Burke, director of field marketing for Calix, an equipment supplier with many rural telco customers, added that existing requirements to use products assembled in the US or another NAFTA country may be strengthened. Although that requirement already exists, RUS money recipients traditionally have been able to avoid it by essentially paying a penalty. “There’s no such ‘out’ in the bill,” said Burke.

    More info at:
    http://telephonyonline.com/independent/news/broadband-stimulus-rural-telcos-0223/#comment-6581913

    user id and pw required for access (free registration)

  13. While Clearwire and Digital Bridge Communications may benefit from the bill, due to their synergy with educational institutions and ownership of 2.4G-to-2.5GHz spectrum, the WISPs would be better equiped to provide wireless broadband to rural and underserved areas. WISPs are generally very small businesses operating on a shoestring budget. They have expressed a keen interest in building out wireless broadband in their serving areas, perhaps using WiMAX technology at 700MHz or 2.3G-to-2.5GHz licensed frequencies.

    WISPs (along with this author) believe that licensed spectrum is necessary to provide a carrier grade service- to eliminate interference, noise and signal distortion. Note that AT&T wireless broadband services operate on licensed spectrum.

    Some WISPs are considering the 3.65GHz lightly licensed band, but there is no method yet defined by the FCC (or anyone else) to resolve contention amongst multiple possible users of that band. The rural telcos would have to work out spectrum re-use zones or other sharing agreements a priori to turning on wireless broadband service. WISPs have not competed well at auctions for licensed spectrum, so a lightly licensed approach would be better for them. Rini said, “the FCC has one year to figure this out.”

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