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$6B Broadband Bill Calls for Open Access

1/24/2009 2:00 AM Eastern

High-speed Internet services play a supporting role in the Obama administration’s proposed $825 billion spending plan to boost the U.S. economy.

But the $6 billion set aside for broadband loans and grants in the House version of the stimulus package includes a requirement that the networks provide “open access,” which analysts said would discourage many providers from applying for the funds.

The broadband funds — targeted at rural and other underserved areas — are part of the House’s American Recovery and Reinvestment Act of 2009. The broadband portion of the bill was approved by the House Energy and Commerce Committee last Thursday.

The bill says networks built using the federal money must provide service on an “open-access basis” and adhere to the Federal Communications Commission’s Internet policy statement adopted in 2005. It directs the FCC to define what “open access” means within 45 days of the bill’s enactment. That’s considered a very short time frame, especially given the FCC’s current state of flux with Michael Copps appointed as interim chairman last week (see page 2).

If the FCC interprets open access to mean unbundled networks that must provide access to competitors, “you can kiss that money goodbye,” said Robert Atkinson, founder and president of the Information Technology & Innovation Foundation, a Washington, D.C., think tank. “The incumbents would not want that money.”

With respect to the FCC’s principles promoting the open nature of the Internet, “there isn’t a broadband company in the U.S. that doesn’t support those,” said David McClure, CEO of the U.S. Internet Industry Association, which represents telcos and other Internet-service providers. “But we have a problem with adhering to requirements that don’t exist.”

Another potential inhibitor: The House bill specifies that 75% of the funds for wireline broadband must be dedicated to providing 45-Megabit-per-second access networks. “I don’t see many carriers capable of doing that in a rural area,” Atkinson said. “You either won’t get any takers because they can’t change the business model that fast, or the network costs will be two to four times what a lower-speed network would provide.”

Beyond the strings attached, observers say, the money is a drop in the bucket.

“There’s no denying broadband spurs economic growth,” said Jim Warner, deputy chairman of telecommunications trade group TM Forum. “But generally speaking, $6 billion is nothing.”

According to research firm Jefferies & Co., the figure would represent around 13% of the estimated $27 billion in wireline and $19 billion in wireless capital expenditures of North American providers in 2008.

The Senate will release its own version of the stimulus plan as soon as this week, and the expectation is that it will include fewer restrictions on how the broadband funds are used, said Gregg Elias, partner with Washington, D.C., law firm Wiley Rein. In addition, he said, the Senate is rumored to be considering increasing the broadband portion of the spending package, by 15% to 20%.

“There will be a significantly different version coming out of the Senate,” Elias said, speaking last week on a call hosted by Jefferies & Co. A final spending bill will probably not emerge until well into February, or possibly March, he said.

Regardless of how much the government funding initiative increases broadband availability or speeds, about 51% of Americans who don’t have high-speed Internet service — 16% of all adults — are simply uninterested in obtaining it, according to John Horrigan, associate director for research for the Pew Internet & American Life Project.

“When half of dial-up and non-users cite reasons such as 'not interested’ or 'nothing could get me to switch,’ it seems clear that networked digital resources do not play enough of a role in their lives to justify a broadband connection,” Horrigan wrote in a report last week.

Added McClure: “Broadband [penetration] is an adoption problem, not a deployment problem.”

Broadband bucks
The House economic stimulus bill designates:
Source: Multichannel News research
$2.825 billion for wireline and wireless broadband wireless, administered by National Telecommunications and Information Administration.
$2.825 billion for rural broadband development, administered by the U.S. Department of Agriculture.
$350 million to identify and track the availability and adoption of broadband services within each state.
$650 million for the NTIA digital-to-analog converter box coupon program for the digital TV transition.

September