Broadband stimulus: Is it really free money?

When the country’s biggest broadband providers suggested that they may pass on applying for a piece of the federal government’s $7.2 billion broadband stimulus package, some observers insisted the Bells must be bluffing. “They will apply,” one skeptic said. “It's free money, for goodness sake.”

It’s not necessarily free, of course. And it’s not yet clear what strings are attached, given the government’s preference for things such as competition among providers and “socially and economically disadvantaged small businesses.” But perhaps the most unappetizing aspect of broadband stimulus money as far as the Bells are concerned is not its potential Net neutrality requirements, as some have suggested, but the much more basic mission of bringing residential broadband to very rural areas, which the Bells have repeatedly demonstrated is not a particular prize for them. True, rural broadband is more appealing when it comes with “free money,” but much of telecom carriers’ costs are operational and persistent long after infrastructure builds are complete.

In a recent report, the U.S. Department of Agriculture’s inspector general took the Rural Utilities Service division — the same division now handling part of the broadband stimulus funds — to task for historically awarding rural broadband loans where some broadband already exists. “The overwhelming majority of communities … receiving service through the broadband program already have access to the technology,” the IG wrote.

In its response, the RUS argued that its actions were always consistent with whichever statute was in effect at the time. But perhaps more importantly, the RUS can’t control which applicants come to it asking for a loan and for which areas. While the organization “fully supports” financing broadband where none exists, the RUS wrote, “Regrettably, many applicants are unable to develop a viable business plan to serve unserved areas.”

Even where government loans are available, delivering broadband to 'unserved areas' is not an attractive proposition to many companies. That may be why so many of those chasing broadband stimulus funds are not profit-seeking entities. Maybe there really is no such thing as free money.

E-mail me at ed.gubbins@penton.com.

[Note: Telephony is conducting a Webcast today on the topic of deciphering the broadband stimulus process. You can register for it here.]