Stimulus funds to pay for broadband in rural areas

Proposals are due Friday for the first of three rounds of funding for federal broadband stimulus projects aimed at driving broadband into underserved parts of America.

Already, there's a lot of griping about the $7.2 billion program. At the top of the list: red tape and application rules, which run several hundred pages in length.

The program, ordered by Congress, is part of President Obama's plan for reinvigorating the economy.

The broadband piece is being overseen by the Commerce Department's National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS).

As envisioned by Congress, the $7.2 billion was to be used for broadband projects that could spur innovation and drive up broadband adoption rates.

But because of the way the program is being implemented, that might not happen, says Craig Settles, president of Successful.com and a longtime telecom consultant.

Under the rules, he notes, telephone and cable companies can attempt to veto projects — such as fiber-to-home installations — that might compete with their own DSL or cable modem services.

Another potential trouble spot: speed. Under the rules, "broadband" is defined as 768 kilobits per second, which is about half as fast as a 1.5-megabit connection. That's "very low" by global broadband standards, says James Baller of the Baller Herbst Law Group in Washington. In Japan, 50-megabit connections aren't uncommon, he notes.

The rules also put the onus on applicants to prove that an area is "underserved," he says. The government is favoring those areas for project funding.

The problem: Phone and cable TV companies treat broadband-deployment data as confidential, so figuring out which markets qualify can be tough, says Dean Cubley, CEO of ERF Wireless, which plans to apply for funding.

Applicants "basically have to go out and do surveys," neighborhood by neighborhood, "or hire somebody to do that for them," Baller says.

NTIA and RUS say not to worry. "The promise and opportunity of this program is too important to allow people to game the system," NTIA's Mark Seifert says.

As for the notion that the program will appeal only to existing phone and cable companies — not so, says Jonathan Adelstein, head of RUS. "We are seeing unprecedented interest from new players and old ones," he says.

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