The Broadband Fiasco - More Insanity

Congress in HR1 is proposing billions for Broadband as we have already detailed (See Telmarc Reports below). This is a $2.8 billion NTIA grant which is in addition to a $2.8 billion new authorization for Agriculture and an additional $2.8 billion expansion of an existing Agriculture appropriation. This is a total of $8.4 billion.

Telmarc was through one of its investments, Merton, one of the first companies to obtain RUS financing four years ago. Merton had to abandon the project because of the problems obtaining a Franchise from Hanover, NH one of the anchor towns. The problem was local government as well as State problems. The new HR1 bill states the following:

"(1) PRIORITIES REPORT SUBMISSION.—Not later than 75 days after the date of enactment of this section, each State intending to participate in the program under this section shall submit to the NTIA a report indicating the geographic areas of the State which— (A) for the purposes of determining the need for Wireless Deployment Grants under subsection (c), the State considers to have the greatest priority for— (i) wireless voice service in unserved areas; and (ii) advanced wireless broadband service in underserved areas; and (B) for the purposes of determining the need for Broadband Deployment Grants under subsection (d), the State considers to have the greatest priority for— (i) basic broadband service in unserved areas; and (ii) advanced broadband service in underserved areas."

This part mandates the States to perform the market plan! You must be out of your mind. There is no one in any State Government who could do this. Or perhaps this is an Illinois plan of finding the largest bidder to pay off some Government official. This makes no sense. Then the Bill goes on:

"(ii) give substantial weight to whether an application is from an eligible entity to deploy infrastructure in an area that is an area—

(I) identified by a State in a report submitted under subsection (b); or (II) in which the NTIA determines there will be a significant amount of public safety or emergency response use of the infrastructure; and (iii) consider whether an application from an eligible entity to deploy infrastructure in an area— (I) will, if approved, increase the affordability of, or subscribership to, service to the greatest population of underserved users in the area;

(II) will, if approved, enhance service for health care delivery, education, or children to the greatest population of underserved users in the area; (III) contains concrete plans for enhancing computer ownership or computer literacy in the area; (IV) is from a recipient of more than 20 percent matching grants from State, local, or private entities for service in the area and the extent of such commitment; and (V) will, if approved, result in unjust enrichment because the eligible entity has applied for, or intends to apply for, support for the non-recur ring costs through another Federal program for service in the area."

This means that the providers must do so in a manner which satisfies all of these other requirements and not just being economically viable. This is a business, not a funding plan for local governments. We walked away from that. The costs are prohibitive and the delays are unwieldy. This Bill now nationalizes this process. We believe that such a Bill will drive out true competition and creativity. We saw that with Hanover, NH. They wanted Universal Service. My reply was if they could deliver me one "poor" person in Hanover I would personally pay their monthly bills. We never saw one. In today's Wall Street Journal an writer, one Gordon Grovitz writes upon this package bemoaning that he thought that there would be $100 billion and not well under $10 billion. Specifically he states:

"But broadband, once thought to be in line for $100 billion as part of the stimulus legislation, ended up a low priority, set to get well under $10 billion in the package of over $800 billion. This is a reminder that even with a new president whose platform focused on technology, and even with the fully open spigot of a stimulus bill, technology gets built by private capital and initiative and not by government."

Well Mr. Grovitz, as one who has the distinct disadvantage of experience, I always hate to bring up facts and experience especially to those in the Press, the $100 billion is our money, the shareholders, and as I have already written, Verizon and others have the capital to do this and are doing it, and could you imagine the Government managing the whole $100 billion. You must be out of your mind!

He then goes on to quote a Pew Study and says:

"In contrast, most other advanced countries have numerous providers, using many technologies, competing for consumers. A recent report by the Pew Research Center entitled "Stimulating Broadband: If Obama Builds It, Will They Log On?" concluded that for many people, the answer is no, often due to high monthly prices. By one estimate, the lowest monthly price per standard unit of millions of bits per second is nearly $3 in the U.S., versus about 13 cents in Japan and 33 cents in France."

The very same Pew Study group said that there was de minimis incremental demand for broadband! I remember sitting in a meeting in Keene telling the city folk how we would deliver 1 Gbps. Then a hand went up and a gentleman a bit younger than me, in his fifties, asked the chilling question: "I just use it for a few emails, what am I going to do with all of this." The chill was not having an obvious answer that made sense. Not everyone is downloading You Tube videos all day. Some people work. As for USDA, we found them superb to work with but over worked, short on staff, and needing endless documents, but that was the deal. Then we also found that the Cable companies were slowing it all down by trying to disgorge all of our filings, before any decision was made, under FOIA requests.

Then we had to deal with that. The overhead here is monumental. USDA is fine, it works, it is slow, it is diligent, and it has been doing this for ages. NTIA is clueless at this point because it lacks the staff to do this effort. Thus it must staff up. That is costly, creates more Government and then just takes time. Imagine if all one did was to give tax benefits to say Verizon. Any new buildout would get a great tax break. That is being talked about but it should be in place of the above not in addition.