What the first broadband stimulus awards tell us about how to win

It’s too soon to say how well the first broadband stimulus fund awards will represent the awards that follow (they represent less than 10% of the first-round funds, and the rules may change for the second round), but given how publicly the White House touted these first picks, it would seem they’re intended to be exemplary, to some degree, of what the administration wants in an applicant.

Assuming that’s true, what do these early winners tell us about how to win broadband stimulus funds? Here are a few rough observations.

1. Middle mile gets money.
Middle-mile projects took two thirds of the nearly $183 million in awards announced on Thursday and 70% of the funds devoted to broadband infrastructure. That’s not surprising, since middle-mile networks comport with the project’s "open access" imperatives. For example, the recipient of the biggest single award, the North Georgia Network Cooperative -- a group of electric utilities – plans to sell capacity on its eight-county network to independent telcos interesting in providing their own last-mile services. Middle-mile projects may also be easier to approve than last-mile projects: To qualify as serving an unserved area, a middle-mile project need only have one interconnection point in an area deemed underserved by last-mile connections. (Interestingly, the National Economic Council, in its report highlighting winners, cited Virginia’s Mid-Atlantic Broadband as an example of a successful open-access wholesale network, but Mid-Atlantic’s own $16-million middle-mile project proposal wasn’t among the winners Thursday.)

"The realities of time pressure and staff sizes make it likely that middle-mile projects are viewed more favorably, though it'll never be stated policy," said Craig Settles, an industry consultant with Successful.com. "That's because it's easier (read: faster) for a reviewer to make award decisions to fund five middle-mile projects, each covering 10 counties, than to make decisions for 50 individual county proposals. Less pain for the same gain. When it's near drop-dead time in February to disburse all funds, and if there's still a backlog of applications, I expect you'll see more middle-mile projects among the February announcements."

2. Telcos take the lead.
The vast majority of broadband infrastructure funds went to private telecom service providers. Cable companies were largely absent among the winners. Municipalities received relatively tiny awards for public computing and adoption projects but none for networks. And other government entities that won did so in partnership with the private sector. That would seem to address some of the fears expressed by telco execs that money would be wasted on people with insufficient experience delivering broadband. And it bodes well for telcos such as TDS Telecom, which won an $8.6-million grant to deploy broadband in its Chatham Telephone Company exchange and also has a dozen other applications for stimulus pending in nine other states.

3. Public/private partnerships appease.
The program’s overseers have been upfront all along in their preference for public/private partnerships, such as the one between ION (Independent Optical Networks, a group of small independent telcos) and New York State’s Development Authority for the North Country, which won the second-biggest award of the day: nearly $40 million.

4. State borders matter.
The vast majority of projects that won funding were contained (or mostly contained) within a single state. That may be partly the result of the program’s structure, in which state governments recommend projects to the feds (state governments could favor projects that keep all funds within their borders), and the rules that dictate at least one award per state. It remains to be seen whether this will put a damper on projects spanning multiple states.

5. Don’t panic over protests.
Program administrators had promised that it wouldn’t be easy for challengers to disqualify stimulus applications, and they may be making good on that promise. More than one of the projects that won funding was opposed by companies claiming to already serve the area in question. For example, ION’s upstate New York proposal was opposed by Windstream and Time Warner Cable, which claimed its broadband network already passed most of the homes in the proposed areas and that total-industry broadband penetration there was above 40%. It didn’t stop ION from collecting nearly $40 million.

"The fact that an existing provider offers some level of broadband service somewhere within the project’s proposed service area does not disqualify the project from funding," an NTIA spokesperson said in an email. "Our review concluded that none of the service providers commenting on the ION Hold Co. application provided sufficient information to overcome the applicant’s assertions that the proposed project was eligible for funding."

Those are just some initial observations about yesterday’s announcements. If you have your own opinions about what the early award winners indicate about future stimulus awards (a preference for wireline over wireless technologies, for example?), please leave a comment below.