March 4, 2009

What the broadband stimulus means to Rural Telcos

by Joan Engebretson, Telephony

About two weeks after the American Recovery and Reinvestment Act of 2009 was signed into law, some additional details about the program to award $7.2 billion for broadband have emerged, underscoring the widely held belief that small rural telephone companies — initially at least — may have the most to gain.

A little more than a third of the money will be administered through the Rural Utilities Service, which, like other divisions of the Department of Agriculture, has until Sept. 30 of this year to award that money, a close reading of the act reveals. The remaining $4.7 billion will be administered through the National Telecommunications and Information Administration, a division of the Commerce Department, which has until Sept. 30, 2010, to award its funds.

Although rural telcos are not the only companies eligible to receive RUS money, they may be best positioned to receive it because many of them already are familiar with the process. The $2.5 billion that the RUS will administer — which may be in the form of grants, loans or loan guarantees — is essentially being added to an existing program, with a few additional stipulations.

“For every project area, at least 75% has to be rural without sufficient access to high-speed broadband,” said Phillip Brown, national policy director for Connected Nation, an advocacy group that has worked to help shape broadband legislation. Geoff Burke, director of field marketing for Calix, an equipment supplier with many rural telco customers, added that existing requirements to use products assembled in the U.S. or another NAFTA country may be strengthened. Although that requirement already exists, RUS money recipients traditionally have been able to avoid it by essentially paying a penalty. “There’s no such ‘out’ in the bill,” Burke said.

Recipients of RUS funding traditionally have been required to use equipment approved by the RUS, and that requirement is not expected to change. As Burke explained, the approval process relies heavily on the experiences of fund recipients, which must install and use a product for six months before it can be approved. That requirement effectively will preclude equipment manufacturers that do not already have RUS approval from being used in deployments funded by new RUS money, said Teresa Mastrangelo, telecom analyst for Windsor Oaks Group. Companies such as Adtran, Calix, and Occam Networks, which already have RUS approval, are likely to be the biggest beneficiaries on the manufacturer side, she said.

Gary Bolton, Adtran’s newly appointed vice president of global marketing, said the company expects to work closely with rural telco customers seeking RUS funding to help them construct plans. “We’ll help make sure customers know how to get access to funds and that they choose the right solution that is as cost-effective as possible,” Bolton said.

A spokeswoman for the RUS said no additional information beyond what was included in the act was available at this time — and the act does not specify filing dates for funding or a time frame for when that deadline must be announced. The RUS, the FCC and the NTIA will hold a joint public meeting on March 10 to discuss broadband initiatives in more detail.

In the meantime, Brown said, “We’re hearing that if people are planning to apply, they should be ready to go by May 1.” Brown added that if the RUS disperses some of the money in the form of loans or loan guarantees rather than grants, the additional amount available to the organization to disperse actually could exceed $2.5 billion.
 

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