Thursday, February 10, 2011

Big Money for (Rural) Mobile Broadband? Good Luck Getting $18B!

This has truly been an exciting week in the rural telecom industry, although not all of the excitement has been good. For one, the USF reform NPRM has been released, but this hefty document is almost 300 pages long. And now, I have read that President Obama is calling for $18 billion in federal funds to be used for bringing mobile broadband connections to 98% of the United States. Like the proposed USF reforms, I can see both good and bad in this far-fetched dream of ubiquitous mobile broadband. I am happy to see that the government clearly realizes that the puny $100-300 million from the "Mobility Fund" will be completely insufficient to implement mobile broadband in all unserved rural areas, and some seriously big-time money will need to come from somewhere else besides Sprint and Verizon's surrendered USF support. I am also happy to see that the administration is pushing for broadcasters to release their death grip on some valuable spectrum that could certainly go towards achieving significant rural mobile broadband deployment goals. However... Good luck with that! I predict that the broadcasters will delay surrendering their spectrum for as long as possible, and it will be a struggle until the bitter end. I have long advocated that under-utilized broadcast spectrum be put to more modern and practical use, so I hope this finally comes to fruition.

According to the articles I have read today, the $18 billion proposal is already being met with criticism in the government and telecom industry. Not only is Congress trying very hard to cut spending, but there are questions about how effective the last round of federal spending for broadband service has been. According to the Wall Street Journal, only around $400 million of the approximately $7 billion in federal broadband loans/grants from the 2009 BTOP program has been used so far (although it all spoken for), with some broadband networks not expected to be deployed for several more years. I definitely expect the BTOP loans to come under harsh scrutiny by Congress before one additional penny is allocated to further broadband network advancement--mobile or otherwise.

What alarmed me the most about the President's proposal is: "about $5 billion currently being used for rural phone subsidies would be re-purposed to build cell towers and backhaul networks to towns without mobile broadband services" (Washington Post). Was the President informed by anyone that the FCC is hell-bent on capping USF spending? Does he know that the current annual total USF spending is less than $10 billion? Does he realize that this request is more than the entire High Cost fund? I'm utterly perplexed by this proposal. It seems like they are hoping that this $5 billion will be a one-time investment, which is even more troubling. In addition to the scary thought of the Obama Administration wanting to yank away all rural phone subsidies, this seems like a case of the government intervening with the free market and attempting to pick a winner of broadband technology, to the detriment of other viable and (some may say) superior broadband technologies like FTTH and DSL.

Finally, you all know how I feel about reverse auctions, or "incentive auctions" as the government likes to call them (reminder: I hate them), and I see they are mentioned again as part of this proposal. I strongly urge the government to wait and see how reverse auctions go with the Mobility Fund (I've pretty much surrendered to the fact that they are probably going to happen, as the FCC seems to think they are the best thing since sliced bread). If by chance this plan is approved, it would be devastating to see that much money go to waste in an auction mechanism that is not tried and true. It would also be devastating if none of that massive amount of money was distributed to rural wireless providers, especially if rural telecom providers are going to lose their safety nets in order to fund mobile broadband expansion. I hope that rural telecom providers are disturbed by the idea of forcibly surrendering USF support only for it go to to a wireless competitor, and I encourage all rural providers to make sure that their appropriate government representatives are aware of this situation.

I will be interested to see how this proposal plays out. Fortunately, I doubt it has much hope at least not in the near future, especially with all the pressure on the government to cut spending, the pressure on the FCC to reduce USF growth, and the uncertain success of the previous round of federal loans for broadband expansion. I would love to be able to enjoy 3G or 4G mobile broadband service when I am on the farm in Walnut, Iowa, but ultimately if there is no business case to invest in mobile infrastructure in deeply rural areas it will be very difficult to convince Congress to appropriate such a tremendous amount of money to this goal--especially if there is a viable broadband alternative like DSL or FTTH already in place (and hopefully deployed by a rural provider)!

Hopefully I will be able to motivate myself to read through the USF NPRM over the weekend, I will definitely have more to say about that soon!

You can read about the President's proposal in the Wall Street JournalThe Washington Post, and FierceWireless

Cassandra Heyne

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