OSP's Broadband Stimulus Update - May 29, 2009

by: Dr. Bernhard Deutsch
OSP Magazine
In mid-May, both the NTIA and RUS published their much-awaited Program Plans for the broadband technologies opportunities program (BTOP) and broadband recovery plan, respectively. The intent of these Program Plans was to clarify the objectives and define the measures that will be reported to Congress on a regular basis, as well as establish a schedule for the next 16 months until the end of the program in September 2010.

However, the agencies did not provide more detailed guidelines for the application form and process, as well as definitions of key terms like "unserved" and "underserved" or "broadband." The highly debated topic "Buy American" was not addressed at all. It can be assumed that the details of these definitions and the application process will be revealed with the first Notice of Funds Available, expected in June from both agencies.

It seems it will take the agencies longer than initially planned to award the first grants. The new timeline anticipates these grants to be decided towards the end of the year now. This means that projects that require funding from the stimulus plan may not start deployment until next year. So, as a service provider, you should start deploying whatever you planned to build out this year and not wait for released funds from the plan.

While the information did not describe the application review criteria, the listed measures that the agencies will report on and what they require from grant receivers give a strong hint on what the application should focus. Below is more detailed information on what the two agencies published, but first, here is a brief summary from my point of view:

Primary focus is job creation.
This is the primary objective of the American Recovery and Reinvestment Act. There is good news if you are thinking about building a fiber-to-the-home (FTTH) network because studies have shown that with almost 20 jobs per $1 million spent, FTTH generates the most jobs compared to other broadband technologies:

Broadband Technology Jobs per Million $ Invested
FTTH Weighted Average Multiplier 19.7437
Cable Weighted Average Multiplier 14.7412
DSL Weighted Average Multiplier 14.7412
Wireless Weighted Average Multiplier 14.6618

[Source: Economic Effect of Tax Incentives for Broadband Infrastructure Deployment, Empiris LLC, prepared on behalf of the FTTH Council, January 2009]

If you don't have the ability to accurately forecast the jobs directly created or retained for your project, it might be worthwhile to attach a copy of this study to your application. In addition, a survey among businesses in the area where deployment is planned might be beneficial to demonstrate that indirect jobs are created or maintained because of the broadband availability.

Focus on network capability.
I recently learned (painfully I might add) that in golf, speed and reach/distance are the same, and I think this is a great analogy for broadband networks. The better the speed is (or bandwidth of the technology used), the better the reach is. While the agencies have not defined "broadband," they clearly indicate that the number of homes reached with the network is very important. If a new technology is deployed in central offices, the best way to leverage this investment might be to choose the technology with the furthest reach. This is particularly of importance in rural areas.

Focus on customer take rate.
One of the criteria listed is the number of subscribers taking the new services. It is probably best to give an estimate from your business plan when applying. However, it might be more powerful to support your assumptions with market studies. An example for FTTH broadband networks is the recent market study by Render Vanderslice & Associates [Source: Render Vanderslice & Associates, Current FTTH Status, April 2009]: With approximately 4.4 million subscribers and approximately 13.8 million homes marketed, the overall subscriber take rate is an impressive 31.8 percent after only a few years, specifically if you take into account that the homes marketed grew 3.8 million between March 2008 and March 2009. But homes connected grew 1.5 million – a clear indication that take rates are still increasing. The data becomes even more compelling if you look at the take rate outside of Regional Bell Operating Companies: a 52.6 percent subscriber take rate should be a very good argument to tell application reviewers.

Focus on timeliness.
One aspect the application review process may evaluate is the ability to execute the project within the required timeframe of two years. It may be helpful to demonstrate that you utilize modern installation methods that accelerate and simplify the installation such as directional boring and preterminated cable solutions. Here studies have shown a time savings of 30 to 50 percent.

NTIA information update.
NTIA highlighted their BTOP's intent to "enable consumers in unserved and underserved areas…to access broadband services" with the goal that these deployments "serve as an important engine for economic development, enabling communities and regions to develop and expand job-creating businesses and institutions."

The NTIA defined the following measures – and what the grantee needs to provide:

• Job creation – Report on the number and type of jobs created directly by the program.
• Expanded broadband access – Number of areas where service will be made available or improved, and how many homes and businesses will be passed by the network.
• Stimulate private-sector investments – Amount and types of investments generated from ARRA funded projects.
• High-speed access to "strategic institutions" – New equipment and capacity and estimated number of end-users who are currently using or forecasted to use the new infrastructure.
• Encourage broadband demand – New subscribers generated from demand-side projects.

BTOP's Program Office, led by its Compliance Officer, will work closely with the Grants Office to develop formal guidance for conducting quarterly desk reviews and onsite monitoring visits. NTIA is currently developing internal procedures and controls for assigning risk to grantees for the purpose of reporting and monitoring.

NTIA understands they need support in this program and plans to close on its procurement for grant program assistance services with award of this contract in June 2009. They are preparing for the "initial solicitation for proposals" and expect to publish the first Notice of Funds Availability (NOFA) also in June 2009. They stated that they plan to review these proposals between September and December 2009 with the initial grants being awarded in December 2009. The second and third "solicitation for proposals" are planned for October to December 2009 and April to June 2010, respectively. As a reminder, all grants have to be awarded by September 2010.

RUS information update.
RUS has issued an RFQ to procure a contractor for implementation, administration and oversight assistance. It plans to publish a first NOFA in June with awards for this first funding round by the end of 2009 – additional NOFAs are expected to follow with awards between the second and fourth quarter of 2010.

The USDA's RUS defined the following measures – and I think it is fair to assume that the grantee is required to provide this information on a regular basis:

• New or retained businesses in areas funded.
• Jobs created or saved (direct via network planning, engineering, construction and maintenance, and indirect from existing and new companies that utilize the new broadband access).
• Number of households and businesses receiving first-time access.
• Number of households and businesses with improved broadband access.
• Number of educational, health care and public safety providers receiving access.

Grantees will be required to report no less than quarterly after funds project benchmarks. The project performance will be tracked at least quarterly, with some measures being reported monthly and annual CPA audits will be required from all applicants. In addition, RUS field accountants will conduct audits upon project completion, and they mentioned the option to hire outside contractors to provide additional monitoring and evaluation.

The RUS also defined its expectations from the implementation of the plan to "improve the rural quality of life" by new and improved services for businesses and residences, as well as critical facilities (e.g., educational institutions, health care providers, public service/safety, and local, state and federal government).

For any questions, please contact me at econstimulusinfo@corning.com

Sources:
• RUS http://www.recovery.gov/?q=content/program-plan&program_id=5408
• NTIA http://www.recovery.gov/?q=content/program-plan&program_id=5517#measures

Legal Disclaimer: This material is intended to provide general information about that portion of the American Recovery and Reinvestment Act of 2009 (the "Act") related to broadband deployments in the United States. These materials are based on information from multiple sources (e.g., USDA and USDC presentations, webinars by industry associations, the Act). Many factors, including the final provisions of the Act, any accompanying regulations and other government programs may change, delay or terminate public funds for broadband deployment. Corning Cable Systems makes no promises about, and does not assume any liability for, the accuracy or completeness of the information provided in this presentation. Corning Cable Systems does not assume any obligation to update this presentation or you about changes to the Act.