$6 to $9 Billion for Rural Broadband Soon? Maybe Not.

Don't get your hopes up that the $6 billion to $9 billion in potential "economic stimulus" spending to support broadband in rural areas will have any near-term measurable impact, either as a way of getting the country out of its current recession, or getting more broadband to rural users. 

Analysis from the Congressional Budget Office now indicates it will take seven years to get that money spent, and, at best, about 60 percent of the money might be spent in the years leading to 2011. In other words, by the time most of the money actually gets spent, the recession is likely to be over. 

The CBO projected that much of the $6 billion in broadband grants geared to underserved and unserved areas will be spent between 2012 and 2016.

Praiseworthy though the effort to extend rural broadband is, the current proposal does not seem to support the goal of "stimulus," which is to put money to work right now. For starters, any grantees would have to put up 20 percent of any project's cost from their own, or other sources. One might question the ability to do so, under current tight credit conditions. 

Then there are "open access" rules that might affect 100 percent of any grantee's business. And there is no definition of what that means. Right now, any executive would have to factor in the impact of those rules on the whole business as the price of getting grant aid. Depending on how "open access" is defined, service providers might well conclude they cannot accept funding. 

"CBO anticipates that funds provided to the National Telecommunications and Information Administration to administer the broadband grant program would take longer to spend--seven years--because the new appropriations would far exceed the agency's 2009 funding of $17 million, and the legislation would require, in most circumstances, that grant recipients provide 20 percent of the project's cost from non-federal sources," the CBO says. 

So an agency geared to disburse $17 million annually would have to suddenly gear up to disburse nearly $3 billion, an increase of two orders of magnitude. If you've ever had any hand in running any agency that does this sort of thing, you know that increases of that scale simply cannot be handled effectively, that fast. 

Under the House-passed bill, about $6 billion for broadband grants and loans, the National Telecommunications and Information Administration would distribute $2.8 billion in broadband grants with $1 billion going to wireless broadband. 

The Rural Utilities Service is expected to administer the remainder through its broadband loan program. The Senate is working on a $9-billion version that would include tax credits.