How Will the $7.2 Billion Allotted for Broadband Stimulus Be Spent?

— -- In the American Recovery and Reinvestment Act of 2009, recently enacted by Congress, many details regarding the allocation of funds for high-tech projects remain blurry. Nevertheless, the nation's tech community appears to be encouraged by the $7.2 billion provision for broadband in the near $789 billion economic stimulus package signed into law by President Barack Obama earlier this week. Many observers believe that the allocation is a clear first step toward establishing a nationwide broadband strategy.

Officially known as "Title VI--Broadband Technology Opportunities Program," the $7.2 billion in broadband stimulus money accounts for less than 1 percent (and only five pages) of the entire package. Its purpose is to spur broadband growth in underserved areas of the country.

The bureaucracy to allocate the money has not been set up yet, and no one can be absolutely sure exactly how the broadband program will work. Still some definite elements have emerged.

First, two entities will issue grants under Title VI: the National Telecommunications & Information Administration (NTIA), and the United States Department of Agriculture (USDA) Rural Utilities Service. Tech companies, telecommunications service providers, and other ISPs large and small will compete for the grant money through a bidding process managed by the two organizations.

But confusion exists even on this point. "There's no clear way to know which government entity they should apply to," says Derek Turner, research director of Free Press, a Washington media-reform think tank.

The debate has begun in earnest over how much of the money should go to developing and extending rural broadband service and how much to improving quality and choice in existing urban broadband service. The division of the $7.2 billion between the two agencies provides some clue: The NTIA will be responsible for about $4.7 billion of the money, while USDA will dispense about $2.5 billion of it.

Language in the new law explicitly mentions expanding broadband to rural areas: "The purposes of the program are to (1) provide access to broadband service to consumers residing in underserved areas of the United States; (2) provide improved access to broadband service to consumers residing in underserved areas of the United States."

The law does not define any of those terms, however, nor does it identify the mechanism for issuing funds. Rather, it simply states that "the grant program [will be created] as expeditiously as practicable" and that "if approved, provide the greatest broadband speed possible to the greatest population of users in the area."

The USDA has been operating a Rural Utilities Service since 2002 to help small towns obtain broadband access; but the program, operating with a much smaller budget than the one it will administer under the stimulus act, has achieved only limited success.

We also know something about the timing of the allocations. The new bill states that "all awards are [to be] made before the end of fiscal year 2010."

While the Obama Administration would like to dole out this money as quickly as possible, many industry experts say that several months--and perhaps a year or more--will pass before any tangible services are up and running. Furthermore, many of the program's details have yet to be determined.

According to Bart Forbes, spokesperson for the National Telecommunications & Information Administration (NTIA), the White House's technology policy arm, and one of main distributors of the new infusion of broadband money, no bureaucratic process is in place yet to move the funds to their needed destinations. "There's no procedure; there's no staff; there's no program," Forbes says. "The key players have not been put into place."

Forbes adds that the NTIA has no permanent head at the moment--and hasn't had one since November 2007. Moreover, the Department of Commerce, of which the NTIA is a component agency, has no secretary either.

Despite these ambiguities, many industry analysts seem hopeful about the broadband initiative's prospects for success. "There's lots of potential for waste, fraud, and abuse [in the new law], but our country is in trouble right now," Turner says. "I'm cautiously optimistic."

How Will It Work?

Once the NTIA and the USDA create a system for distributing stimulus grants, they will work with the various states to outline the states' needs. The resulting proposals could come in the form of wired or wireless projects--the language of the law doesn't specify any particular speed or technology.

Meanwhile, tech companies, nonprofits, and ISPs will submit grant proposals and the Washington, D.C., entities will broker the final arrangements for funding approved proposals.

Each grant must adhere to principles of openness, including generally recognized provisions of Net neutrality, which require an "open access basis."

To counter potential fraud and waste, the law also mandates a "fully searchable database, accessible on the Internet at no cost to the public, that contains at least a list of each entity that has applied for a grant under this section, a description of each application, the status of each such application, the name of each entity receiving funds made available pursuant to this section, the purpose for which such entity is receiving such funds, each quarterly report submitted by the entity pursuant to this section, and such other information sufficient to allow the public to understand and monitor grants awarded under the program."

Industry watchers say that the new law is crucial if some 20 million Americans are to obtain the broadband Internet access they need.

Craig Settles, president of Successful.com and a longtime telecom industry observer, notes that public discussion of the broadband provision and of the larger stimulus package tends to focus on their similarity to New Deal-era public spending on infrastructure projects; but he says that the parallel is inexact.

"Broadband is as vital as roads and highways, but it isn't as much in the building of the infrastructure as in the job creation that comes out of the more physical, like dams and roads and so forth--those old-school infrastructure projects generate a lot of work," Settles says. "Where you're going to have the greatest impact [with the new projects] is after the network is done. It will draw new businesses to the communities; it will enable the businesses that are there to expand their markets."

In coming weeks, the person appointed as Secretary of Commerce by President Obama will appoint an assistant secretary--and that person will bear primary responsibility for overseeing execution of the provisions of Title VI.

"Over the next 60 days, the Department of Commerce and Department of Agriculture are going to write the [Request for Proposal] that puts the teeth into this bill, and the stipulations that the money gets appropriated to where it's needed and that it's open so it's not just the incumbents that are sucking up the money," Settles says.

Many other industry observers--including Harold Feld, a telecommunications consultant--say that the Obama Administration's attention to broadband indicates its commitment to making technology policy a high priority.

"So far, the Obama people who are going to be running this have shown that they have a drive and an appreciation for what broadband can do to transform people's lives," Feld says. "[Obama] has made a relatively minor part of the stimulus bill something that he talks about in every one of his speeches."