Broadband Stimulus: Questions, Questions and More Questions

Thousands to tens of thousands of applications are expected for the National Telecommunications and Information Administration $4.7 billion in new broadband project funds, and the Agriculture Department’s Rural Electrification Service $2.5 billion in grants and loans to promote broadband services for “rural broadband.”

One obvious problem, among many, many others is that thousands to perhaps tens to scores of thousands of applications now will hit agencies ill-equipped to process them. RUS has a staff of 130, about 24 working on the broadband stimulus program. Observers say they aren't even sure the NTIA has even 130 people, total. That has some proponents arguing for state-level review, whether or not states actually are delegated authority to make the awards. Others say that is an unnecessary hurdle.

Consider the enormity of the challenge: the statute requires that applicants receive funds received under one program, not both. That requires some way of identifying which projects are funded under each program. But nobody wants a complicated, burdensome, expensive application process. But the RUS program objectives are distinct from those of the NTIA program.

Mark Cooper, director of research at the Consumer Federation of America, argues that maximum coverage and sustainable projects are important. And though many observers probably are thinking about extending access, Cooper thinks investments in backhaul and mobile infrastructure are desirable. “Two that come to mind are mobile computing and Internet back bone to unserved areas."

“I would suggest a rough justice approach: the funds should be divided equally between physical infrastructure and human and social capital, and within the human and social capital area, it should be divided equally between the adoption, training, institutional network and stimulation aspects of the statute,” Cooper said

Mark DeFalco, Appalachian Regional Commission Telecommunications Initiative Manager, thinks it will be tough to create a unified application process, though. “We see each agency having a separate process for processing the loans and grant applications,” DeFalco says. “RUS has an existing process in place, and we expect the new stimulus dollars will flow through that process.”

“NTIA will need to develop their process and quite honestly, with the time limits on this, it is a daunting task to get that process in place and get the money out the door,” he noted. “But both processes should use the same definitions of broadband, un-served and under-served and we would like to see rules specifying minimum speed requirements for rural areas,” DeFalco said.

And though Ramsay favors state level screening, Owens disagrees. “If it comes to the point of the states actually making the determination on who's getting the funding, that may pose a problem for our members,” Owens said.

Cooper suggested there might be danger if the state level became a second level at which grant politics had to be faced. Arnold tended to agree. “Helping NTIA and RUS facilitate this and make it quicker, that's better, but I'm with Mark: if it becomes an impediment, it could be a real problem for us,” said Arnold.

“I honestly believe the only way this is going to get done” is to have the states rank the proposals, with NTIA making the final decisions, said Ramsay.

DeFalco says “the states are probably in the best position to know what rural areas need the coverage in the first round, so we would be strongly advocating the state role in this process.”

But Cooper argues that replacing consultants in Washington, D.C. with consultants at the state level does not represent a lot of progress. In fact, Cooper suggests that if states are to have a strong role, NTIA and RUS “have to come up with some very, very specific criteria, so that it's not really a lot of discretion to the governor or a public utility commission.”

“If they are truly just evaluating against a set of criteria, those criteria are going to have to be really, really carefully defined or else you get into what is essentially a lobbying bailout for PUCs,” says Cooper.

Ramsay predicts that larger states are where most of the proposals will be focused. “I would be surprised” if California did not get thousands if not hundreds of thousands of proposals. “People will go where the money is,” Ramsay says. “With the smaller states, with smaller populations, there will be correspondingly fewer projects.”

Arnold and DeFalco predict there will be thousands or proposals. Owens predicts that there are 1,000 or so rural companies that are interested and likely to submit applications.

“Assuming there would be thousands if not tens of thousands of applications, I have encouraged the entities I work with to make them statewide or regional applications, says Cooper.

DeFalco says what is not wanted is maximum coverage at minimum speeds. “We want to have good coverage in all rural areas.”

“We cannot afford to take these rural areas and give them adequate coverage today which is not going to be adequate for tomorrow,” he says. “If we do that, then we are going to be back in this same situation in a couple of years where they have broadband and they have low-speed DSL service and what they need is something far more robust, while the urban areas have FiOS in place or u-Verse or fast cable and these rural areas are left behind with a slow speed service.”

“We lack internet backbone in rural America, and no matter where the network eventually goes, we are going to need that backbone,” says Cooper.

Arnold suggests that at least in the first of three funding rounds, emphasis should be on infrastructure. “Let's stick with shovels in the ground; get this stuff deployed,” Arnold says.

Harmonizing the NTIA and RUS programs is going to be challenging. RUS loans go to rural telephone companies and private sector providers where NTIA guidelines are set for grants to public or non-profit entities, says DeFalco. “They can't be identical because quite frankly, they are reaching different audiences to a certain degree and they have different programs than the statutes.”

In any case, the application itself, and the sorting process, must, by statute, ensure that projects getting funds from one program do not receive funds from the other, implying some unified way of tracking applications and disbursements. Owens argues the simplest procedure is simply to modify the existing RUS application form, and use it as the vehicle for applying for either NTIA and RUS grants or loans.

Some issues are quite practical: what information does the application form require? How are applications tracked? Who does the tracking? How is the consultation process structured?

Others are practical but directly linked to fulfilling legislative intent. The definitions used for “un-served,” “underserved” and “broadband” are examples. Likewise, what rules govern regional projects that cross political boundaries, include rural and non-rural areas or that might require “prime” contractors to be entities of a certain type according to NTIA or RUS rules.

Cooper argues there is no single technology that best serves all areas and users. “We need to find a minimum standard that really meets needs, that delivers services that are going to be durable, and we need to do that allowing the technologies to compete on their costs,” he said.

Among the other unsettled issues is how disbursements in the first of three funding rounds might differ from second and third rounds, if at all. If the award philosophy is consistent, then applicants will have a better idea of what NTIA and RUS are looking for in the later rounds.

DeFalco pointed out that in the most difficult areas, grants are the only practical solution, as there never will be a payback from any commercial deployment.

Cooper argued loans and grants be linked in some way to the intended retail price of the service offered. “I am very concerned about loans and grants going out and then having people price their services to the market or commercially.”

Another issue is the requirement for a 20-percent project match. There is a waiver clause, and NTIA and RUS will have to figure out what conditions are sufficient to qualify an applicant for a waiver. Even where the match requirement is applied, it is not yet decided whether in-kind matches are permitted, or whether the match must be in cash.

One way or the other, fully rational or not, well-considered or not, there is little time. The statute requires that the first funds be awarded no later than June 2009. It is mid-March and we still are in the "comment" phase. And make no mistake, there will be huge battles over the rules, as there always are when large sums are to be awarded.