U.S. broadband stimulus funding rules for "underserved" areas could produce controversy, delay

While designed to stimulate employment and do so quickly, the federal economic stimulus package enacted in February and specifically the $7.2 billion it allocated as a down payment on a badly needed upgrade of America's aged telecommunications infrastructure may not work as rapidly as intended. With unemployment persisting and exceeding that forecast by the Obama administration as it took office just before the enactment of the stimulus package, this could prove problematic.

The $7.2 billion allocation is targeted for build out of telecom infrastructure in those areas of the nation that are "unserved" and "underserved" when it comes to broadband access. Under the rules governing the award of grants and loans issued last week by the two federal agencies overseeing them, generally only deep rural America where dialup and satellite are the sole options for Internet connectivity will likely meet the definition of unserved. Proposed broadband projects to serve these areas are unlikely to generate much controversy.

However much of the U.S. is chock a block with broadband black holes located in metro areas outside of rural areas due to incomplete buildout of the existing telco and cable company wireline infrastructure and the well known technological shortcomings of DSL over copper. Most of these census blocks will fall into the underserved category. The definition of what constitutes underserved is complex and likely to lead to controversy, delay and potential litigation that could frustrate the key goal of the stimulus funding: to rapidly preserve and generate jobs.

Since the rules require maps of the contiguous census blocks of proposed broadband projects to be posted at a Web site run by the two agenices administering the stimulus funds and stipulate that only one project can be approved for a given area, it's possible -- if not probable -- that existing providers will challenge some of the proposed projects as not in compliance with the definition of underserved. They could contend that they serve at least half of a given census block with wireline broadband, thereby eliminating a key element of the definition of an underserved census block. Under the guidelines, such a challenge would quickly put a proposed project on hold or ultimately result in its rejection by the agencies.

The incumbent wireline providers -- typically deep pocketed telcos and cable providers -- could tie up these proposed projects both in challenges before the agencies and in court if necessary. Incumbent wireline providers tend to view their service areas as franchises and even sovereign territory regardless of whether (or not as is often the case) they are actually providing services throughout them.

Wireless providers could also stymie proposed projects in underserved areas, but for them it could be harder. Under the rules, a census block is considered underserved if no wireless broadband provider advertises service providing at least 3 Mbs download. That eliminates 3G cellular based wireless as well as many fixed terrestrial Wireless Internet Service Providers (WISPs) since in underserved areas they typically offer download speeds below 3 Mbs. That's because both prefer relatively lower cost T-1 lines for backhaul that can't provide 3 Mbs download speeds in order to enhance their profit margins.

Even if an area doesn't qualify as underserved under these parameters, a third prong of the definition deems it such if only 40 percent or fewer households within the census block subscribe to broadband service. That's likely to be the case in many underserved areas due to the poor value wireless providers currently offer in terms of high monthly rates for slow speeds barely adequate to support video, high latency and in the case of 3G services, bandwidth useage caps similar to those employed by satellite Internet providers.

Regarding the third underserved qualification -- broadband take up of 40 percent of households or less -- how is that figure to be determined both for the purpose of documenting proposed projects as required under the agencies' guidelines or in the case of disputes? Must those proposing to serve these census blocks engage a polling company to go door to door asking residents if they subscribe to broadband services? That's certain to introduce cost and delay for projects proposing to serve "underserved" areas. And in the case of disputes, will the parties be forced to hire an independent pollster, adding even more cost and delay?