By Dr. Judy Reed Smith (judyrsmith@atlantic-acm.com)

Background:

A year ago, the Obama Administration announced a $7 billion stimulus for broadband initiatives, allotted through the National Telecommunications & Information Administration (NTIA) and Rural Utilities Service (RUS).  After millions of hours invested in proposals, reviews, legal support, quantitative assumptions, analysis, and sorting of ideas, the first few hundred million dollars has been allocated for improvement of broadband in the USA, with Round Two on deck.

Analysis:

• Round One Review: Most countries already have tremendous government involvement in their broadband deployments, so the idea of government help with this powerful economic tool is not unusual in-and-of itself. The tricky part for the U.S. is trying to help populations that are underserved without undermining private enterprises working on their own business models. In Round One, rules discouraged most incumbents from proposing with significant oversight regulations that would be very costly and intrusive to the carriers. Moreover, most had already evaluated those business models to serve a particular rural area, and had invested in what they determined was a model without unreasonable losses. (Basically, the rural areas remain expensive to serve.) Others did not apply because there were going to be three sessions of applications, so legal and other advisory firms suggested that some players wait to see what happened in the first round, then offer a more refined application with the wisdom and writing time gained in the meantime. (This advice, however, has not panned out, as there are now only two opportunities to apply instead of three, with the second application due March 15, within weeks of the first set of winners being announced.) Recent RUS winners announcements included investments in community partnership proposals in Alaska, Missouri, and Alabama. All three will serve to connect community anchor institutions with broadband.
  
• Lessons for Round Two: The awards to date favor projects that have strong middle-mile components, and are public/private partnerships. This appears to be more of an emphasis for NTIA's second round as well. The Rural (RUS) grants will still offer more last-mile access funding, and some satellite technology. Another trial for those filing in the first round was a requirement for broadband penetration at the census block level. As bids for mapping broadband connections currently available had not been given out at the first round, the data was not available in any accurate form. This created a scenario of building models on assumptions developed from the scant information one could glean from past analysis. As this data is still not available at an accurate level, the block-level requirement has been lifted.
  
• All Costs Count. Winners of grants must manage their businesses well and keep some change in the till, lest they risk suffering the "winners curse" in which grant money helps to construct some network, but the owners must invest in managing and maintaining those assets until sales ramp up enough to cover operational costs. At ATLANTIC-ACM we are cautioning participants that a winner's curse outcome has the potential to lead to distressed assets, which theoretically are not allowed to change hands for ten years under grant requirements. Robust scenario modeling is in order.

The Bottom Line:

The excitement and energy surrounding possible application of stimulus money is great to see and hear in our industry.   Direct telecom opportunities as well as smart grid and healthcare networks all bring forth possibilities in network construction, management and service provisioning. These already have inspired creativity, "a lost summer of proposal writing," and strong new ideas for business models to serve the country.  It's not quite on par with the 1990s in terms of potential investment, but it has driven many fine minds to invest their energies in partnership building, mapping exercises and deep analysis of new ways to build the nation's electronic infrastructure, and their businesses along with it.