An Analysis of the House Broadband Stimulus Package

Now that we have draft legislation from the House we can start diving into the details of the broadband stimulus portion of it.

The breakdown is this:

$2.825 billion to RUS for loans, loan guarantees, and grants to projects where at least 75% of the area to be served "shall be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development."

$350 million to NTIA for establishing and funding the State Broadband Data and Development Grant Program, which will track the availability and adoption of broadband.

$2.825 billion to NTIA for Wireless ($1 billion) and Broadband ($1.85 billion) Deployment Grants where wireless grants must prioritize unserved areas without wireless voice and underserved areas without wireless broadband, and broadband grants must prioritize projects that bring basic broadband service to unserved and advanced broadband to underserved areas.

Here are some questions I have about these parameters and some of the details found therein:

Why split the baby between two agencies?
If the goal is to bring government dollars to un/underserved regions, then why are we splitting that money up between two agencies with overlapping agendas? The only differences I can see is that NTIA's money is grants only but can be used for projects anywhere, and RUS's money can be loans, loan guarantees, or grants but only be used in rural areas. The question becomes, if a project qualifies for both programs, which should they apply to? Also, how will these two agencies coordinate their efforts to make sure they're not missing opportunities for projects to leverage each others' assets in order to create a greater whole?

My take: I'd focus each agency more narrowly on a specific task. This could be as simple as saying RUS handle rural and NTIA everything else, or have both focus on rural but have RUS deal with residential and NTIA institutional. But however else this could be split up, it's vitally important that there are mechanisms in place to coordinate funding between the two agencies, at a minimum so they're aware of what the other is doing.

Why subsidize "high speed" broadband and wireless voice but not fiber?
Of course some connectivity is better than no connectivity, which is why this bill supports deploying "high speed" broadband and voice-only wireless networks. But in the context of an economic stimulus package full fiber deployment creates the most jobs in the short-term and provides the greatest long-term benefits. In fact, only fiber delivers the connectivity needed to spur rural economic development if the goal is that businesses in these areas need to be able to compete in the global economy.

My take: If we're going to specifically subsidize yesterday's broadband then we should put at least the same amount of support behind tomorrow's broadband, especially since fiber deployment will have the greatest impact on stimulating the economy.

Why separate wireline and wireless support?
First off, you can't have wireless without a robust wireline network to plug into. And once you have that robust wireline network, wireless becomes easy. So the most efficient/effective broadband networks are those that include both components. By splitting support we risk encouraging the deployment of disjointed networks.

My take: I'd get rid of the distinctions entirely. Instead create a simple chart/equation that weighs the number of unserved homes that will be connected and underserved homes that will be delivered advanced broadband and reward grants based on that. If we're going to be technology neutral we shouldn't be distinguishing between wireline and wireless. And we can't afford to limit the deployment of integrated networks as the future will be one where both wireline and wireless connectivity is universally available.

Why force artificial timelines on an overburdened NTIA?
So the bill says that half of the NTIA grants must be distributed by Sept 30th of this year despite the fact that even if everything goes right they won't be ready to start giving any money out until the second half of '09. And to have any hope of the NTIA being ready to make sound decisions about which projects to fund by then means both that the FCC is able to define contentious terms like "underserved" and "open access" in a timely manner and that the DTV transition doesn't drag on as a continuing distraction.

My take: I can understand why the Sept 30th deadline was put in--as a way to make sure this money gets flowing and stimulating the economy quickly--but when you look at the timing and complexities of everything doing this seems likely to set NTIA up for failure. If the idea is to give one grant to all 50 states, then let's say their goal is to have 25 grants lined up by Sept 30th. Assuming each state has at least 3-4 applicants and that applications won't be able to start being accepted and reviewed until April 1st when the definitions are set, that leaves roughly 120 working days to vet 75-100 applications and distribute $1.4 billion equitably and effectively. An alternative to this would be to set a rule that prioritizes and fast tracks shovel-ready projects. Each state could submit one project that's already ready to go that could be approved quickly so they can start deploying immediately. This fast lane would only be available to projects that have already been in the works and that have most if not all of the details worked out. Then instead of saying every state gets its fair share, I'd weight things towards a first-come-first-served model in an effort to reward progressive states and incentivize the laggards to get moving more quickly lest they miss out on the grants.

Why limit projects to 20% of a state's area/population?
The primary reason would seem to be to insure each state gets their fair share and a secondary reason could be to insure incumbents don't face competition that's too widespread. Yet I'd be willing to bet that in a state like Montana well over 20% of its area must be underserved since so much of it is rural. And even though NTIA grants can be used for non-rural areas, by restricting population percentage we're basically saying that bigger cities in smaller states can't qualify even if they are underserved.

My take: I'd remove this provision. If the point is to make sure there's enough money to go around, then I'd either increase the budget or use this as an opportunity to spur competition between states as mentioned above. If a project's going to reach 25% of a rural state instead of 20%, I can't see how that's a bad thing, especially as the bigger the project the better the economies of scale, so we want to be encouraging large-scale deployment not discouraging it.

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After having a chance to more thoroughly review the House's proposal and discuss it with others I find my opinion of it becoming increasingly favorable. While I may not agree with all the details and still think it could be improved, there's no denying that this policy shows that our policymakers are more worried about the public good than private interests, and that they're willing to take bold steps to push America into its digital future.

It leaves me optimistic that 2009 will be a truly transformative year for national broadband policy and more excited than ever at having the opportunity to be here in DC in the heart of the action.