UPDATED: Wireless ecosystem to benefit from economic stimulus package: Backhaul, towers included in broadband effort

The $789 billion economic stimulus bill set to shortly become law designates $7.2 billion for broadband grants, but the measure lacks tax credits for wireless carriers and other service providers.
“Despite the fact that broadband tax cuts is a well-known concept on Capitol Hill, the current proposal quickly ran into a wall of industry opposition,” said Jessica Zufolo, an analyst at Medley Global Advisors L.L.C.
The legislation creates a new Broadband Technology Opportunities Program at the National Telecommunications and Information Administration, a unit of the Commerce Department that would oversee the distribution of broadband grants – totaling $4.7 billion – to unserved and underserved areas. Grant recipients would have to underwrite up 20% of the proposed project’s cost, though hardship waivers will be available. It is anticipated that there will be at least one grant in every state.
The remaining $2.5 billion in broadband grants will be administered by the Agriculture Department’s Rural Utilities Service.
Though settling on a final bill and getting it to President Obama’s desk for his signature by Presidents’ Day was a herculean task in itself, there is much heavy lifting ahead.
Crafting rules will be tricky
Crafting rules for broadband grants could be difficult and highly controversial. Indeed, final guidelines that come to govern such key areas as eligibility, data speeds, nondiscrimination and interconnection obligations and unserved and underserved areas may well determine ultimate winners and losers regarding government broadband subsidies.
“The details matter a tremendous amount,” said Carol Mattey, managing director of telecom regulatory consulting at Deloitte Touche and a former official at the Federal Communications Commission.
The main objective of the broadband grant program is to create jobs in the near term. As such, the legislation calls for much of the broadband grant money to be distributed by September 2010. In previous analysis of broadband provisions in House and Senate economic stimulus bills, the Congressional Budget Office projected most of the broadband grant dollars would not be spent in the 18-month window in which President Obama and congressional Democrats want three-quarters of the $789 billion to be put into play.
The Obama administration and congressional Democrats plan to take additional steps later to expand the availability of high-speed Internet access in the United States. The U.S. lags behind more than a dozen other countries in broadband penetration, a ranking for which former President Bush was often scorned by Democrats who control Congress and one that has become hugely symbolic of a broader national challenge to remain technologically competitive on the world stage.
Like his predecessor, President Obama has called for universal broadband. But unlike Bush, who called for achieving that objective by 2007, Obama has not attached a date to universal broadband. The broadband component of the economic stimulus package is essentially the first installment of what is expected to be a multifaceted approach by the Obama administration to bolster this country’s broadband posture. Indeed, $250 million of the $7.2 billion in broadband grant funding is dedicated to developing a national broadband inventory map that would be published in two years. In addition, the legislation directs the FCC to submit a national broadband plan to Congress by this time next year.
The economic stimulus bill’s final language agreed to by conferees, who worked surprising fast to reconcile differences between House and Senate economic recovery packages, does not include a specific earmark of $1 billion for wireless broadband grants. Such an earmark had been included in the House measure. Likewise, stripped out of the final measure was a provision in the Senate bill to make a 20% tax credit available to mobile-phone operators and other commercial wireless providers that invest in networks that support 3 megabits per second downlink and 768 kilobits per second uplink broadband connection speeds for unserved, underserved and rural locales.
A nod to towers and backhaul
Nonetheless, the final bill appears to keep the wireless and tower sectors in the ball game.
“The conferees noted their desire for broad participation by wireless carriers, wireline carriers, backhaul providers, satellite carriers, public-private partnerships and tower companies,” stated analysts at Stifel, Nicolaus & Co. Inc. “They also clarified that broadband needs could be served by any provider able to construct last-mile, middle-mile, or long-haul facilities, and throughout the country’s rural, suburban and urban areas.”
The way in which open-access guidelines are fashioned is apt to be one of the major flashpoints in implementing broadband provisions of the economic stimulus legislation.
“Grant recipients would have to meet a host of reporting and other requirements, including network-neutrality type duties,” Stifel analysts explained. “Combining provisions of both the Senate and House bills, the harmonized legislation requires the NTIA, in coordination with the FCC, to publish ‘nondiscrimination and interconnection obligations’ for grantees, which at a minimum would have to include adherence to the four broadband principles in the FCC’s 2005 Internet policy statement. We believe the details in this area could prove to be quite contentious.”
One major net-neutrality advocate said attaching such conditions to grants was essential.
“The open-network requirements were necessary because the public deserves benefits from the large sums of public money that will be distributed,” said Gigi Sohn, president of consumer group Public Knowledge. “We are pleased that Congress has taken the fundamental step of recognizing that open networks will help to create jobs and to stimulate economic activity in areas that are now unserved with broadband service.”