Now that the rules have changed for the second round of broadband stimulus funding awards, will incumbent telco carriers get more involved?
(See below for a list of the rule changes.)
None of the three former Bell carriers applied for the first round of funding. And of the biggest rural telcos – CenturyLink, Windstream and Frontier Communications, which might have the broadest reach into unserved areas – only Frontier applied for stimulus in the first round, and only in one state (West Virginia). Strings attached to the application process – such as open-access requirements for networks and customer information disclosure – weren’t worth the money, carriers like Windstream said as they urged federal administrators to change the rules.
Carl Russo, chief executive officer of Calix — a broadband equipment vendor that counts at least one first-round stimulus winner among its rural telco customer base – predicted last summer that carriers that had sat out the first round would join in the second.
“Everybody’s going to watch what happens in [the first] round, and then you’re going to see a whole lot of gaming in the second round,” Russo said in August. “People are going to watch who won awards, why they won, why they didn’t, and you’re going to see reinterpretations of the rules. I don’t know that the rules will change, but you’ll see a lot of lobbying. There’s a lot of people that may not choose to be in round one and are public about, ‘Well, this is not for us;’ if you think for a moment that they’re not going to be back in right after round one, you’re dreaming.”
Upsetting that prediction to some degree was the fact that there wasn’t much opportunity to apply lessons from the first round to second-round rules changes. Not many first-round winners have been named yet (the batch announced last month represents only about 9% of first-round funds, though, in total, applicants asked for more than four times the amount available). And second-round applications are already due March 15.
The changes made to the rules will take some time to digest, too (the two new set of rules released last Friday approach some 200 pages). In an email yesterday, a Windstream spokesman said the company was still reviewing those documents and didn’t know yet whether Windstream will participate. (Iowa Telecom, which Windstream is acquiring, applied for nearly $7 million in the first round.)
Calix executives echoed that sentiment today but offered some thoughts on how the changes might impact carrier involvement in round two.
“Most of our customers are still in the education and opinion-forming stage,” Geoff Burke, Calix’s senior director of corporate marketing, said in an email. “That said, I do believe that a number of the sticky points that kept many rural carriers, including many of the larger ones, on the sidelines have been adequately addressed. For example: (1) the expansion of potential grants available for BIP projects, (2) the removal of the ‘remote’ distinction from the BIP [Broadband Incentives Program, the Rural Utilities Service program], making many more service areas not only eligible, but eligible for grants, (3) the softening of the rules in the BTOP [Broadband Technology Opportunities Program run by the National Telecommunications and Information Administration] around the sale or transfer of project assets and (4) the expansion of BIP-eligible project areas by effectively raising the eligibility standard for projects from 768 Kbps to 5 Mbps. This last rule change may be the most pivotal, as it both potentially opens up new opportunities for large carrier project proposals but also potentially exposes them to being overbuilt in areas where they are not meeting the minimum ‘high-speed access’ definition.”
On the other hand, the network interconnection and nondiscrimination requirements that turned big carriers away from the first round are still included in both sets of new rules, Stifel Nicolaus analysts said in a note today.
“Our sense is the changes will generally not be enough to convince the big guys to participate in the second round, though we can’t rule out exceptions (e.g., Qwest?),” the analysts said.
What do you think? Will the new rules convince bigger telcos to apply? Leave a comment below.
UPDATE: The folks at Adtran have kindly supplied a brief summary of key changes to the stimulus rules for the 2nd round…
NTIA and RUS made the following rule changes for the 2nd round:
• Definition of “Remote” has been eliminated – enabling service providers to receive 75% Grants (vs. 50%)
• Remaining RUS funding will be focused on Last Mile projects ($1.7B for Last Mile)
• Remaining NTIA funding will be focused on Comprehensive Community Infrastructure ($2.35B for Middle Mile with <20% Last Mile projects)
• Eliminated joint RUS/NTIA applications (previously an applicant had to be rejected by RUS before NTIA considered the application)
• Eliminated 10-year limit on Sale or Lease of broadband facilities
• Relaxed Program Income Restrictions
• RUS modified Net Neutrality obligations to align with forthcoming FCC rules. [NTIA acknowledged (footnoted) ADTRAN’s comments but has chosen to maintain consistency across both rounds of funding.]
• RUS has adopted a High Speed Access definition of 5Mbps (downstream + upstream combined), eliminating the “Underserved” definition.
• Any serving area which is 75% rural and has less than 50% of premises with 5Mbps is eligible.
• RUS is eliminating the 2-step process and simplifying to a single step to get awards out faster
• Eliminated Census block reporting
• Added a “second chance” to provide supplementary information if a service provider’s application is denied