Is there really a free lunch?

The ink had not even dried on the American Recovery and Reinvestment Act of 2009 (what you and I would call the Stimulus Package) before troubled industries began feverishly scanning the hundreds of pages of legislation to see if there were any goodies in there for them. Telecommunications had not seemed like a particularly troubled sector, at least compared to the manufacturing, financial, retail and other sectors which have been swimming in ever-deepening red ink for the last few months. There was nevertheless a perception that America is falling behind other countries in broadband penetration, and something needed to be done about it – pronto.  Congress therefore graciously set aside $6.8 billion for distribution to the teeming masses yearning to provide, or get access to, broadband.

And teeming masses is right. It seems there is no one remotely connected to the broadband industry who does not feel deserving of his or her fair share of the billions to be distributed. As NTIA and RUS – the two federal agencies primarily charged with administering the program – frantically gear up to distribute vast sums of money in the bureaucratic equivalent of a nanosecond, one naturally asks: how can I get my hands on some of that money? When the cannon sounds and all the buckboards race off to lay claim to great swathes of free money, how can I get there first?

The National Telecommunications and Information Administration (NTIA) and the Department of Agriculture’s Rural Utilities Service (RUS) are still figuring out how and on what basis they are going to distribute the funds, but the basic outline provided by the Stimulus Package gives us a partial map to the Promised Land. While the two agencies have been given somewhat different emphases and approaches to the money distribution, the overarching priorities for both are (1) to create jobs fast and (2) to facilitate the provision of broadband service to “unserved” and “underserved” parts of the country.   The difficulty here is that Congress did not define what it meant by those terms, leaving it to the agencies in consultation with the FCC to come up with a definition. The result of that definitional process will be critical to separating the gets from the get-nots. 

The other difficulty is that Congress provided an additional $350 million in funding for a detailed broadband mapping project whose object is to determine where and by whom broadband is now being provided. You would think this would have been the first step in the process – how are you supposed to facilitate service to unserved or underserved areas if you don’t know where they are? – not the last.   But in fact the mapping does not have to be done for two years – long after all the money must be distributed. In a similar vein, the FCC is supposed to come up with a national strategy for achieving universal, affordable broadband deployment within one year of February 17, 2009. Again, most of the money is likely to be committed or spent before the strategic plan is announced. The buckboard seems to be way ahead of the horses here, but that’s the system we’ve got.

From here the criteria for distribution of funds by the two agencies deviate, sometimes in contradictory ways. NTIA has been given $4.3 billion to distribute, all in the form of grants.   Its objective, in addition to the ones noted above, is to ensure the availability of broadband to worthy community institutions such as schools, libraries, medical care providers, public safety agencies and organizations that support underprivileged populations.  

  • The entities eligible for funding include not only state and local governments but Indian tribes and private business firms. The roster of potential participants here is therefore virtually unlimited since you could be a service provider such as a common carrier, or you could be a service recipient such as a university, a municipal government or a neighborhood association that wants free wireless for a suburban cul-de-sac. The sheer openness of the eligibility criteria – coupled with the understandable attraction of free money – may ensure thousands of applicants. 
  • The money must be doled out in a “technologically neutral” way, which we understand to be code for not biasing the system in favor of either wireline or wireless technologies.   Service providers must pledge to abide by the broad “net neutrality” principles enunciated by the FCC but never formally adopted: unfettered and non-discriminatory access to the internet.
  • Applicants who are “socially and economically disadvantaged” get a preference.   A cynic might construe that as backhanded affirmative action program of the type outlawed by the Supreme Court a decade ago, so we will have to see how the administrators dance the tightrope of favoring racial minorities without actually doing so on the basis of race.
  • On the other hand, there is no means test to receive the award. Even industry giants could qualify for awards if they, like anyone else, can show that the project would not have been done without the aid money.
  • Unlike the RUS money, which is expressly reserved for rural areas, NTIA can distribute to both rural and urban areas, subject to the preferences noted above. However, at least one grant must be made per state
  • Affordability of the service to a large segment of the population to be served is a plus.
  • The speed of the broadband service is also a factor – the higher the better. Still to be resolved is what actually constitutes broadband speed. Congress itself could not reach a satisfactory definition, particularly since the speeds achievable on wireless and wireline systems are likely to vary greatly.
  • Finally, all of the money must be awarded by September 30, 2010.  

An applicant who can credibly propose to achieve these objectives stands a reasonable chance of getting some money. But don’t forget that the program requires grant recipients to put up at least 20% of the funds through non-grant sources. Of course, the government expects you to deliver on your promises. The funded projects must be “substantially complete” within two years of the date of the award. Performance will be monitored through detailed reports, accounting prescriptions and audits. The money is subject to recapture if you are not performing as promised.

RUS, a service created to administer the New Deal’s rural electrification program, is still going strong 75 years later. RUS has $2.5 billion to dole out in the form of grants, loans and loan guarantees. It is unclear how they will decide which category your request falls into. Unlike NTIA, RUS is charged with funneling money to mostly rural areas which lack adequate access to high speed broadband. RUS’s priorities in awarding funding include, strangely, current or former borrowers under existing RUS programs. (You might have thought current or former borrowers would have been the last in line, but not so.) Projects that can begin promptly and can be completed with the requested funds are also favored. Note well: there is no double-dipping. Projects which receive RUS funding may not receive NTIA funds as well. However, different projects by the same entity could qualify for money from both agencies.

The funding is supposed to begin by mid-June, so hitch up the wagons and get ready to giddy-up. There’s gold in them thar hills!