Hughes Network Systems Gets $59 Million Broadband Stimulus Award

Hughes Network Systems has been awarded $58.7 million to provide satellite broadband services to consumers and businesses nationwide, garnering the single biggest award under the The American Recovery and Reinvestment Act of 2009  "broadband stimulus" program.

Significantly, the award, as well as others gotten by Wildblue, Echostar and Spacenet, represent the first time Department of Agriculture Rural Utilities Service funds, traditionally used to support rural telco and cooperative projects, have gotten funding.

Hughes Network Systems estimates 258,685 people will benefit, as well as 3,200 businesses.

Echostar got a  $14 million award to offer satellite broadband service to rural residential and commercial subscribers. The funds will provide service to 42,478 people and 1,888 businesses.

Spacenet got an $8 million award, which will allow Spacenet to offer satellite broadband service to rural residential subscribers in Alaska and Hawaii.

Wildblue got $20 million to provide satellite broadband service to rural residential and commercial subscribers in the west and midwest United States. About 110,150 people and 4,896 businesses might be served.

How Many New Broadband Access Lines Will be Added by Broadband Stimulus?

For most applicants, Feb. 16, 2010 to March 15, 2010 is the window for filing "broadband stimulus" requests to the Rural Utilities Service and National Telecommunications & Information Administration programs. 

Satellite providers largely will be waiting for a new "third round" aimed at funding satellite projects, funded by the RUS.  A funding window will open "later" to provide grants for satellite service for premises that remain unserved after all other Recovery Act broadband funding is awarded, NTIA says. 

It isn't clear how much funding that might entail. The RUS will be disbursing about $2.2 billion in this funding round, while the NTIA will be awarding about $2.6 billion, of which approximately $2.35 billion will be made available for infrastructure projects, $150 million for public computer center projects, and $100 million for sustainable adoption projects. 

Most of the NTIA money is expected to support middle-mile projects, rather than access. Perhaps oddly enough, that decision by NTIA means there will not be a significant increase in new broadband access facilities,. since the middle mile projects, by definition, are "backbone" projects deemed necessary to get broadband backhaul facilities into place, not serve end users. 

The RUS, on the other hand, has said its $2.2 billion will be spent directly to expand access facilities. 

Assume each new broadband line costs just $3000, the figure suggested as an average for new rural broadband deployments. If all $2.2 billion is spent on access facilities, an additional 733,333 new broadband access lines would be added to the national total. Since there are additional costs, the total will be less than that. 

As the bulk of the total RUS funding ($2.3 billion out of a total of $2.5 billion) will be awarded in the second round, and using the same $3,000 per line assumption, of the $200 million awarded in the first round, 66,667 new lines could have been added, for a grand total of 800,000 lines. 

That is not to say the additional middle-mile facilities will not be foundational, and will result in potential new lines later. But there is no particular reason to believe an additional $3,000 per new access line will be required, when the time comes to actually install access facilities.

$7.2 billion for 800,000 lines might be an unfair way to characterize the program, as some of the money will be spent for public access facilities and training, and the middle-mile infrastructure is required for eventual deployment of new access facilities. 

But it is not far from the truth to point out this near-term conclusion: the immediate change in new broadband access lines from the whole broadband stimulus program will be on the order of 800,000. There will be some additional growth when wireless broadband networks funded under the program are able to finish deployment of their new networks, of course.

But the calculation of 800,000 new lines does not subject overhead and other administrative costs that will lessen the total number of added lines. In all likelihood, adding all fixed broadband lines will only bring the total back up to the 800,000 range. 

More "Middle Mile" Projects Funded by NTIA

The Department of Commerce’s National Telecommunications and Information Administration has announced grants totaling $63 million to expand broadband access and adoption in Massachusetts, Michigan and North Carolina.

Most of that money went to build new "middle mile" regional networks in Michigan and North Carolina.

In Michigan, Merit Network got a $33.3 million infrastructure grant with an additional $8.3 million in matching funds to build a 955-mile advanced fiber-optic network through 32 counties in Michigan’s Lower Peninsula.

In North Carolina, MCNC: $28.2 million infrastructure grant with an additional $11.7 million in matching funds and in-kind contributions to build a 494-mile middle-mile broadband network passing almost half the population of North Carolina in 37 counties.

Next Broadband Round Will Be Heavy on Middle Mile Projects

The National Telecommunications & Information Association and the Department of Agriculture's Rural Utilities Service have announced the second round of bidding, as well as a specialized third round specifically for satellite projects. These rounds will dispense about $4.8 billion in grants and loans  to expand broadband access and adoption.                    

NTIA’s program allocates $2.6 billion in this funding round of which approximately $2.35 billion will be made available for infrastructure projects. In this round, NTIA is adopting a “comprehensive communities” approach as its top priority in awarding infrastructure grants, focusing on middle mile broadband projects that connect key community anchor institutions – such as libraries, hospitals, community colleges, universities, and public safety institutions.

That is a significant development. NTIA projects, which have been seen as aimed more at metro areas than the Rural Utilities Service program, which exclusively aims to support rural projects, seems to have concluded that actual upgraded access projects are less valuable than middle-mile trunking services.

In other words, much of the spending in both the first and second rounds will go not to any new broadband access facilities, but to intermediate trunking networks that later can be used to provide actual broadband access.

The other interesting change is the new emphasis on a "third round" that specifically will accept satellite projects for the most-isolated locations.

In addition, NTIA plans to award at least $150 million of the funding for Public Computer Center projects, which will expand access to broadband service and enhance broadband capacity at public libraries, community colleges, and other institutions that service the general public.

NTIA also plans to award at least $100 million for Sustainable Broadband Adoption projects, which include projects to provide broadband education, training, and equipment, particularly to vulnerable population groups where broadband technology has traditionally been underutilized.

The separate Rural Utilities Service program will allocate $2.2 billion in this funding round. A second funding window will open later which will provide grants for satellite service for premises that remain unserved after all other Recovery Act broadband funding is awarded.

That round also will award grants for regional economic development projects using broadband, as well as make grants to rural libraries.

RUS will focus its round on last mile projects, which are anticipated to receive the vast majority of funding.

RUS will also fund middle mile projects involving current RUS program participants. RUS has decided to use a 75 percent grant, /25 percent loan model for all projects.

The application window opens Feb. 16 and closes March 15, 2010.

To Solve the "Broadband Access" Problem, You Have to Know What Causes It

Solving the problem "people who don't use broadband access at home" hinges on the actual barrier to usage. Some people don't use the Internet; some don't use computers; some are unwillingness to pay current subscription prices while others would buy but literally have no physical access at their remote locations.

All too often the problem is viewed uni-dimensionally, as though lack of supply is the key problem. But there is increasingly acknowledgement that there are other barriers to surmount, such as users who would like to use the Internet, and could afford it, but who do not own PCs, and are unlikely to buy one.

The U.K. government believes "lack of PCs" is among the barriers, and now plans to give away
270,000 low-income families with free laptops and broadband access, as part of its £300 million broadband stimulation program.

Since the fall of 2008 U.K. officials have been training "well off" families about the value of broadband for users who can afford to buy broadband, but do not see the value.

The new inititiative aims to address a different problem: people who would use the Internet and see its value, but cannot afford the PC or recurring cost of a connection.

The program is to be included in the Children, Schools and Families Bill for 2009/2010, which is yet to be debated in the House of Commons. The legislation aims to ensure that all families with children aged between seven and 14 will be able to apply for a grant to buy a computer and broadband connection.

Broadband Stimulus Won't Change Much, Firm Says

Some observers seem to have believed the "broadband stimulus" program, as helpful as it will be for some organizations and service providers, would somehow "fix" a "broadband" adoption problem in the rural and some other "underserved" areas of the country. It appears reality is setting in.

"The bottom line is that the stimulus money is going to change any of the access issues," says Robert Rosenberg, Insight Research Corp. president. "It is far to few dollars to make any impact."

But "access" is only part of the "problem." In fact, Insight Research says, there are four different kinds of households that must be considered when looking at broadband "adoption" and "availability," which are quite different issues.

There are households "unable to buy" broadband service, at least from a terrestrial provider (most analysts seem to forget that there are two national providers of satellite broadband). There are households that can buy broadband, but choose to buy dial-up service.

There are households that do not own computers and households that own computers but do not use the Internet.

"I don't want to over-play the 'I can't buy it' issue, says Rosenberge. "Yes there is some of that, but it is also the issue of 'no computers' or 'dial up is fine for me,'" he says.

Insight says 60 million U.S. homes buy broadband access service, while 12.6 million homes buy dial-up access, for a total of 72.6 milliion Internet access buyers.

Insight Research says that if one adds up the households without any broadband service at all, plus dial-up households, perhaps 58 million households, or 49 percent of all U.S. households, potentially are candidates for broadband service and have not yet bought it.

Insight Research estimates that at least 12 million rural and non-urban market households do not have access to any broadband service (terrestrial) due to the lack of supporting terrestrial infrastructure. Given a minimum cost of $1,500 per household, it is easy to see that the price tag for expanding broadband access to 12 million new households could exceed $18 billion.

By definition, the funding available under the broadband stimulus program is just a bit over $7 billion, and that includes funding for middle-mile projects, computing centers and other projects that do not directly add new broadband access capability. In fact, only a theoretical $6.4 billion actually is available for infrastructure.

Insight Research projects that non-governmental funding will provide the majority of the
growth in broadband penetration for the next five years.

With an estimated 40 million households still lacking broadband access by year-end 2014, the $6.4
billion in government funding would allow for an investment of $164 per household to provide broadband access to these non-broadband households.

The availability of such a small investment amount per household casts serious doubt that any significant expansion of broadband access will result from this government action, Insight Research says.

At the current estimate of $1,500 per household, at least $60 billion would be needed to deploy universal broadband access across the United States for 40 million households.

The broadband stimulus will not change much, it appears.

Another Broadband Stimulus Delay

The National Telecommunications and Information Administration told the U.S. House and Senate Appropriations Committees it will start awarding grants in February 2010, another slip from the revised timetable of December 2009.

The first round of grants was supposed to be issued in June 2009. All during the year, telecom suppliers who are thought to benefit from the program have been asked about when the funding would show up in company activity. Now we know the answer: not until 2010 and probably 2011.

The delay presumably means grants or loans issued by the Rural Utilities Service might also slip into next year. Both programs have experienced delays, perhaps inevitably, given the huge increase in workload.

The NTIA and the Rural Utilities Service say they have received roughly 2,200 applications for the $4 billion worth of grants available for broadband projects in the United States that is available in the first round of funding.

The applications ask for total of about $28 billion in broadband projects, or seven times the total funds available.

The $4 billion in grants currently available to applicants is just the first part of the $7.2 billion that the government has allotted to fund broadband infrastructure investment over the next two years.

Of that money, $4.7 billion has been given to the NTIA to award grants for projects that will build out broadband infrastructure in un-served or under-served areas; to deliver broadband capabilities for public safety agencies; and to stimulate broadband demand through training and education.

The remaining $2.5 billion in broadband stimulus money has been allotted to the Department of Agriculture to make loans to companies building out broadband infrastructure in rural areas.

Only 1 More Broadband Stimulus Round

As expected, the U.S. Department of Agriculture’s Rural Utilities Service and the Commerce Department’s National Telecommunications and Information Administration say they are streamlining the American Recovery and Reinvestment Act’s broadband grant and loan programs by awarding the remaining funding in just one more round, instead of two rounds.

The agencies expect to begin announcing funding awards for the first round in December 2009. The original plan had been for three rounds of funding, and observers noted that this would be valuable for applicants as they would have a chance to see what got funded, what did not, and then tweak their subsequent proposals accordingly.

Now they will get one chance to do so, not two chances. But “stakeholders will have the opportunity to provide us with well-informed feedback on how the first round worked for applicants, the agencies will be able to make improvements to the process, and potential applicants will gain more time to form partnerships and create stronger project proposals, the two agencies say.

In a Request for Information released today, the agencies are seeking feedback on procedural and policy aspects of BIP and BTOP. While inviting general input on the programs, the agencies identified specific areas for comment.

In terms of procedural matters, for example, the RFI seeks input on ways to streamline the application process. The RFI also asks whether the agencies can better balance the public’s interest in transparency and openness with stakeholders’ legitimate interest in maintaining the confidentiality of proprietary data.

The RFI also seeks comment on how to best target the remaining funds. Commenters proposing a more targeted approach are asked to quantify the impact of their proposal based on metrics such as the number of end users or community anchor institutions connecting to service, the number of new jobs created, and the projected increase in broadband adoption rates.

The RFI asks whether to focus second round funding on projects that create “comprehensive communities” by installing high capacity middle mile facilities between anchor institutions that bring essential health, medical, and educational services to citizens.

The RFI also invites input on various other issues, including whether the definition of “remote area,” which is used to determine grant eligibility under BIP, is too restrictive, how the agencies can best ensure that investments are cost effective, and ways the programs might impact regional economic development and stability.

RUS and NTIA will utilize the feedback received in response to the RFI to set the rules for the second funding round, which the agencies expect to announce through a Notice of Funds Availability early next year.

The American Recovery and Reinvestment Act provided a total of $7.2 billion to NTIA and RUS to fund projects that will expand access to and adoption of broadband services. Of that funding, NTIA will utilize $4.7 billion for grants to deploy broadband infrastructure in unserved and underserved areas in the United States, expand public computer center capacity, and encourage sustainable adoption of broadband service. RUS will use $2.5 billion in budget authority to support grants and loans to facilitate broadband deployment in primarily rural communities.

Is Rural Broadband Penetration Close to 100 Percent?

Is it possible that rural broadband penetration actually is pretty close to the penetration of Internet users? In other words, is it possible that use of broadband in rural areas now is close to 100 percent of Internet users?

New data from comScore suggests that might be closer to the truth than many believe. The latest estimates are that, in rural areas, broadband penetration is at 75 percent. If one assumes some rural users still use dial-up, that suggests perhaps 85 percent of rural households now use the Internet.

In 2007 the U.S. Department of Agriculture Economic Research Service estimated that 63 percent of all rural households had at least one member access the Internet.

If rural broadband penetration now is up to 75 percent, as comScore indicates, that would imply that Internet usage is at least that high, in other words.

That would seem to have implications both for setting of national broadband policy and policy in rural areas. For starters, the new data suggest that rural broadband is growing robustly, without any additional government activity.

Some might argue that broadband usage remains lower in rural areas than in metro areas, and that remains true. Metro broadband penetration is at 89 percent. But virtually every study has shown that Internet usage also is lower in rural areas. The point? Lower Internet usage obviously means lower broadband access penetration.

One has to be careful with statistics, though. By definition, a household with no ability to access the Internet would not be an Internet-using household. So a better way to describe comScore’s findings are that, when wired facilities are available, rural households are buying broadband at rates not dissimilar to urban users.
That isn’t to say adoption is equal to urban rates, but that the gap is closing awfully fast.

Broadband penetration in U.S. rural areas increased 16 percent from 2007 to 2009, while metro area broadband penetration grew 11 percent, according to comScore.

In part, that is because rural markets have more room to grow. The analogy is wireless voice growth, which is highest in places such as India, China and Africa, where penetration is lowest.

“With low-speed DSL priced at about the same level as dial-up in many areas, there is little incentive for households to remain on dial-up,” says Brian Urutka, comScore VP.

Rural markets with a population less than 10,000 grew broadband penetration by 16 percentage points. Areas with population between 10,000-50,000 grew penetration 14 percentage points while metropolitan areas with populations of 50,000 or more grew penetration by 11 percentage points.

Critics sometimes say that even if access is not a problem, access speeds are, and that is an argument that makes sense. The issue there, though, quite often is the “middle mile” trunking between major points of presence and the actual rural communities.

Basically, the problem is not the Internet backbones, and not even so much the local access networks, as it is the trunking network to backhaul traffic to the Internet PoPs. Many rural ISPs find, for example, that they have access to a T1 or two T1s in the middle mile. That makes it tough to deliver faster broadband access to customers on the local access networks, for obvious reasons.

The Internet backbone is a firehouse. So are the access networks, for the most part. But the middle mile is a straw.

Solve the middle-mile problem and broadband access probably ceases to be an issue in many communities. Yonder Media CEO Craig Vallarino estimates that half the cost of building fixed wireless networks in rural areas is in the core network and middle mile.

The radio infrastructure represents about 20 percent of cost while customer premises investment represents about 30 percent of cost. In other words, it isn’t the access infrastructure which is the main investment barrier: the middle mile is.

That said, there still will be some locations so isolated that only a satellite connection really will ever make sense.

Broadband Stimulus Delays Continue

It should not come as any surprise--given earlier delays--that the first project awards under the the American Recovery and Reinvestment Act's "broadband stimulus" program will be late. Some might not happen at all, unless they can adequately document that there is no existing provider able to provide service in project areas.

The program is supposed to allocate $7.2 billion to provide broadband services or training to rural and other underserved communities, through the Department of Commerce’s National Telecommunications and Information Administration and the Department of Agriculture’s Rural Utilities Service.

The problem is that the work load required to evaluate and award funds so vastly exceeds the volume of work either agency has handled in the past. The NTIA must now disburse sums that are about 4.7 times greater than normal, while the RUS faces the task of disbursing amounts 192 times larger than normal.

Those would be challenges under the best of circumstances, so it is no surprise that the first awards may not be made until December, about a month later than anticipated. There are other risks, says the Government Accountability Office, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance measures to ensure accountability for NTIA and RUS.

Some awards might never happen. The program rules relating to new services in "unserved" areas forbid projects in areas already served by existing providers. Comcast and other cable providers believe some projects violate just those provisions. Comcast says it will file supporting data Oct. 28, 2009, supporting its contentions.

The National Cable & Telecommunications Association claims funding has been sought in "hundreds" of areas where its members already provide broadband service.

California Wants $1 Billion in Broadband Stimulus Funds?

The good news is that 96 percent of California's households have access to a high-speed Internet connection, some note. The bad news is that 45 percent of Californians choose not to buy broadband.

Still, California officials are said to be contemplating asking for as much as $1 billion of the $7.2 billion in national broadband stimulus funding. For demand stimulation, possibly.

http://www.sacbee.com/politics/story/1833842.html?mi_rss=State%2520Politics

Will Some Broadband Stimulus Funding Follow Irish Example?

At least some homes in rural Ireland will be supplied with broadband using satellite connections, after a deal was announced between Avanti Communications, the U..K satellite company, and Hutchison 3G Ireland, according to the Financial Times.

Last year the Irish government awarded a contract to Hutchison 3G Ireland to supply broadband to the 10 percent of the population whose locations are remote enough that extending fixed line connections are not feasible. Most of the 220,000 homes are in rural areas, and the majority will connect to the Internet using mobile connections, starting late in April.

Hutchison 3G Ireland could supply Internet access to up to 6,000 Irish homes through satellite connections.

Satellite connections tend to be viewed as too expensive and too slow, compared to wired connections. But sometimes wired connections are financially unworkable. Avanti is using Ka-band spectrum, which allows powerful spot beams to be focused on small areas.

Hughes Network Systems and Wildblue Communications in the United States also use Ka-band technology, offering higher-power signals and bandwidth.

The new broadband satellite services should cost around £20 per month, bringing them into line with prices for fixed-line and mobile connections.

One wonders whether anybody is going to figure out that for the most-isolated locations, satellite might be the most-efficient way to rapidly extend broadband access. Perhaps it won't offer maximum bandwidth equivalent to a fiber to the home connection or VDSL.

But that isn't the point. If you want to get broadband to isolated locations fast and affordably, satellite sometimes is the only option.

http://www.telecomseurope.net/article.php?type=article&id_article=8470&utm_source=lyris&utm_medium=newsletter&utm_campaign=telecomseurope

Advice for NTIA Broadband Stimulus Applicants

Some would argue "partnerships" are going to be key for winners of broadband stimulus grants under the National Telecommunications and Information Administration's program.

You might think this a simple matter of taste or fashion. It isn't. The statutory language favors non-profit groups. But non-profit groups typically do not have the ability to create sustainable communication networks.

There are some possible exceptions. Municipalities might dust off older business plans for municipal Wi-Fi networks. Even there, partnerships would likely be helpful.

http://www.successful.com/msp/snapshot-4-09.pdf

Broadband Stimulus: Mapping Isn't the Issue for Rural Areas

Some people argue that the broadband stimulus funds should not be spent until we have better mapping to tell us where the problems are. People at the local level know where the unserved areas are.

You never will ever meet a rural telco or rural cable operator that isn't painfully aware of locations where broadband isn't available by wire.  Small communities aren't like big metro areas. People know each other, and that goes for anybody charged with providing broadband services using wires.

"Underserved" is a different matter. First you have to decide what that means, and what causes it. In some cases, lack of money, lack of PCs or lack of interest or knowledge are big issues there.

But lack of knowledge isn't the hold up in rural areas. Local people know where they need to get. Let them get there.

http://thelobbyist.net/lobby/archives/940

Broadband Stimulus "Ts and Cs" Might be Decisive

There's lots of speculation about whether large telcos will apply for American Recovery and Reinvestment projects to be sponsored by the National Telecommunications & Information Administration portion of the act. Much depends on the definitions and strings.

Though the precise meaning of "underserved," "unserved" and "broadband" are important, other apparently smaller matters, such as wholesale obligations, could be decisive. Carriers large or small are unlikely to apply if it means any new infrastructure, or an entire network, would be subject to mandatory wholesale rules, beyond those already in force.

At the moment, nobody can be sure what those terms and conditions might be.

http://www.dailytech.com/Broadband+Firms+Waiting+to+Apply+for+Stimulus+Funds/article14840.htm

Broadband Stimulus: Internal Contradictions

Not that it really will matter, but among the more-obvious internal tensions built into the "broadband stimulus" provisions of the American Recovery and Reinvestment Act is the difference between "create jobs" and "create broadband." ARRA is supposed to be about jobs, broadband is secondary.

The other obvious intellectual inconsistency is the preference for non-profit applicants for the National Telecommunications & Information Administration program, with the concomitant preference for projects that can be self-sustaining after program funds are exhausted.

The logical way to create self-sustaining capabilities is to allow for-profit entities to create a business case, and then fill a need by building new broadband infrastructure, or by creating other enabling mechanisms to encourage greater use or greater speeds and capabilities.

But that would be business logic, not political logic. There is a logic to political rationality. It just isn't the same thing as business rationality.

Investment Incentives Key for National Broadband Plan, McDowell Says

As part of the recently passed American Recovery and Reinvestment Act of 2009 ("stimulus package"), the Federal Communications Commission must create a national broadband plan.

Commissioner Robert McDowell says “it is essential that our plan give current and prospective broadband network and service providers the proper incentives to deploy new technologies."

"We must also provide entrepreneurs with the flexibility to make full use of all available spectrum, including the television white spaces, to backhaul broadband traffic," McDowell says. "In order to attract investors to fund the build-out of new networks, we must not engage in rulemakings that produce whimsical regulatory arbitrage."

"Rather, we must allow market players to succeed or fail on their own merits and not due to the government picking winners and losers," McDowell says. "In short, our rules must allow network operators to have a reasonable opportunity to pay back their investors. That’s the only way to improve existing networks and build new ones.”

Broadband is Partly an Availability Problem; Partly a Demand Problem

"Predominantly, even in contexts with reliable supply of broadband, it is consumer demand for broadband that is the tallest barrier to adoption and represents America’s competitive vulnerability," says Connected Nation.

It might be worth keeping that in mind as plans for the broadband stimulus program operated by the National Telecommunications & Administration and Agriculture Department's "broadband stimulus" rules are finalized.

There clearly is a physical access problem in rural areas (at least in terms of wired access: though some locations may not have clear line of sight, multiple providers of satellite access are available, and it is possible to supply speeds up to perhaps 5 Mbps using satellite), but broadband availability is not the same problem as lack of adoption. In fact, people have lots of reasons not to buy services they already have access to.

The largest barrier to broadband adoption is a lack of awareness about broadband’s benefits, Connected Nation says. Nearly one-half (44 percent) of those with no home broadband connection say “I don’t need broadband.”

Likewise, the top barrier to computer ownership is also a perceived lack of need. Nearly two-thirds

(62 percent) of those who do not own a computer say “I don’t need a computer,” Connected Nation says.

In other cases, perceived cost is an issue. Nearly one fourth (24 percent) of those who do not own a computer cite the up-front cost as a barrier. Similarly, nearly one-fourth of those without a home broadband connection say broadband is too expensive.

Four out of ten parents with children who are without a home computer see no need for having a computer in the home. And nearly one-third (30 percent) of parents with children who do not have a home broadband connection see no need for a broadband connection.

More than one half (56 percent) of people with disabilities who do not own a computer see no need for having a computer in the home. Four out of ten people with disabilities who do not have a home broadband connection see no need for a broadband connection, Connected Nation says.

Close to one half (42 percent) of rural residents without a home broadband connection say it is because they do not need broadband. This compares with 19 percent of these rural residents who say they do not subscribe because broadband service is not available in their area.

Additionally, 22 percent of these rural residents say broadband is too expensive.

http://www.nga.org/Files/pdf/0812BROADBANDCHALLENGE.PDF

More Qualms About Broadband Stimulus: This Time From Small Rural Telcos

Large U.S. telcos have their doubts about whether it will make any sense at all to apply for any funds under the National Telecommunications & Information Administration's portion of "broadband stimulus" funds, and generally are barred from applying under the Rural Utilities Service rules.

It appears small, independent, rural telcos have similar qualms. Attendees at a MetaSwitch Forum workshop on the broadband stimulus plan were shaking their heads in disbelief about "strings" attached to receipt of funds under the RUS plan, in particular the nebulous language about investments in access that allow multiple providers to compete.

Depending on how the final rules shape up, it is conceivable that most telcos and cable companies will decide not to participate directly.

Titanic Battle Shaping Up over Broadband

As busy as people are trying to prepare for the imminent opening of the first of three proposal submission windows for funds authorized by the American Reinvestment and Recovery Act ("broadband stimulus"), a bigger food fight will begin to break out next year as the Federal Communications Commission opens a new rule-making on a national broadband strategy. As much attention as the broadband stimulus program is getting, it is going to be dwarfed by any new framework that emerges from the FCC effort.

The stimulus money is a temporary "shot in the arm." In fact, some question whether there will be much of any long-term impact from the majority of the money that ultimately is allocated, in jobs, an identifiable uptick in broadband use or economic growth.

Any new national broadband policy will reshape the broadband marketplace, creating new winners and losers on the supplier and reshaping the financial terrain for existing and would-be contestants, in ways that contribute "in a material way," to use the financial term, to the health of virtually all service providers, software and hardware suppliers.

Specifically, the FCC now is charged, by statute, to determine how tax dollars will be spent on deploying and upgrading Internet access across the United States. Telcos large and small--and their suppliers--have huge stakes in how those rules are recast. And make no mistake: current business models, revenue streams and company valuations are at stake.

The FCC's responsibility is also to update policies and regulations that have conspicuously failed to keep pace with changes in communications technologies and the different ways in which the US public actually get their phone, cable TV and Internet services.

It would not be overstating the case to say we will witness the biggest single change to U.S. communications regulation since either the 1934 Communications Act, or the Telecom Act of 1996, each of which has been foundational for shaping the U.S. communications environment.

As some of us have been arguing for a half decade or more, it is likely that regulators will be looking at greater structural change involving a form of structural or functional separation, developments which already have occurred in Europe and now are happening in Southeast Asia, and which has happened on a small scale in the United States as well, principally in Rochester, N.Y., where Rochester Telephone agreed to form a new wholesale access company providing local loop services to all licensed providers.

That move will be fiercely resisted by most telcos, you can be sure, as it formally breaks up the vertically-integrated model historically the mainstay in the U.S. market. Cable operators have to worry that they will, for the first time, also be forced to provide widespread wholesale access to competitors as well, something the cable industry always has opposed but which will be hard to avoid if other key providers are required to do so.

Small telcos face equally-large challenges, as a shift to broadband concerns might necessarily reshape rural investment rules in ways that directly harm the existing voice revenue support many hundreds of companies now rely on to support their firms. For hundreds of independent and rural companies, that government support is the single largest income category, vastly outstripping actual direct end user revenues.

The other potential changes are new requirements for minimum bandwidth, control of network management practices and a wide variety of business-model-shaping changes.

If you have any familiarity with the on-going disputes about universal service funds, or the intense pressure created by the debates leading up to the Telecom Act, you have some idea of what is about to happen.

Oddly enough, you will find widespread sentiment that the Telecom Act failed. But you will not find many human beings that believe their own choices, value or communications richness now are worse than they were before the Act was passed. What is clear is the foundational impact any rules changes will have on competitor fortunes. Still, an early prediction: no matter what ultimately happens, no matter which sectors claim they have "won or lost," end users will have richer options than before, with or without rules changes. But rules changes are inevitable.