What the broadband stimulus package means to rural telcos

Telcos may have a bit longer to prepare to seek a portion of the remaining $4.7 billion in grants that legislators allocated for broadband. That money will be administered through the National Telecommunications and Information Administration, a division of the Commerce Department, which must award all funds by September 30, 2010.

A wide range of carriers--including large national companies as well as small rural telcos--are expected to apply. But only companies with some money of their own available for network investment will be able to participate. The NTIA program requires fund recipients to contribute 20% of the cost of the project—a requirement that may favor larger carriers, Burke said.

“We’ve talked to some larger operators who say, ‘We see this as narrowing the field,’” said Burke.

The states also could play a role in determining which companies receive NTIA funding. “As the bill was pulled together, there was a line of thought that the national programs would need to look to local and state governments for help in understanding the priority of projects,” Burke noted. “The way it was ultimately worded, it gave the NTIA not the obligation but the option to go to states for assistance in prioritizing.” He added that some states, including Minnesota, already have created broadband task forces with the goal of helping to prioritize projects.

Still uncertain are open network requirements. The act refers to “non-discrimination and network interconnection obligations” in connection with the NTIA program, and Burke believes that if those obligations are enforced too strictly, it may prevent some large carriers from seeking NTIA funding.

But Jorge Fuenzalida, vice president and general manager for consulting firm inCode Telecom, does not expect that to be an issue. “The way ‘open access’ has been defined has been sufficiently watered down with regard to what investors were fearing that even if it’s similar to the C-block requirements from the 700 MHz auction, it will not discourage companies from seeking funding,” he said.

The act does not specify a filing date for the NTIA program, and a spokesman for the NTIA declined to provide any additional details at this time, saying more information would be forthcoming.

Although the act does not define broadband speeds, Burke believes companies seeking funding will seek to offer fiber-level speeds. “Most people view this as a one-time opportunity to go and address parts of their network that they may never be able to address again, and they won’t be able to do that with a technology that’s not cutting edge,” he said. “They want to plan for the future and will propose pulling fiber.”

Fuenzalida added that the broadband program should achieve the goal of creating additional jobs—in the range of 10,000, according to inCode estimates. Although some of those jobs could go away when network projects are completed, he believes many will last beyond that time period.