A Rocky Start for Obama's Broadband Push

At the first public hearing on the issue, government officials offer few answers and almost no guidance

On Mar. 10, Dan Spatz joined hundreds of other people who crammed into a 500-seat auditorium at the Commerce Dept. building in Washington, D.C. The crowd of executives, entrepreneurs, and local officials had gathered for the first public hearing about how the federal government plans to distribute $7.2 billion in grants and loans to improve broadband Internet access in the U.S.

Spatz, a city official from The Dalles, Ore., took the microphone to ask a relatively simple question: How would the government determine which regions in the country are "unserved," a critical definition because those areas without broadband service are supposed to take priority under the legislation passed by Congress.

"The short answer is we've not made a decision," said Mark Seifert, a senior adviser at the National Telecommunications & Information Administration (NTIA), one of two government agencies responsible for doling out the broadband money. "We have reached out and asked you and folks like yourself… to tell us how we should. We're waiting for you to help us get to those definitions."

No Hard Answers

And so it went again and again. At the first public discussion of the Obama Administration's much heralded broadband plan, government officials offered virtually no hard answers to the hundreds of people who gathered in person and the 2,500 more who participated via live Web video. For almost every substantive question about how the billions will be allocated, officials said they're looking for guidance from the public. Bernadette McGuire-Rivera, NTIA associate administrator, said the government is seeking input on "nearly every facet of the program."

The lack of answers proved frustrating for some participants. Charlie Mattingly, chief executive of a small Internet service provider in Texas called Broadband Rural, was taken aback that the meeting wasn't more productive. "I had no idea how full of themselves they are in Washington," he said. "If we had half the money that the government spent to put on this meeting today and half of the money that people spent to attend it, we could have put 1,000 people online," he said.

One reason for the frustration is that time is short. When Congress passed its massive stimulus bill, it mandated that the NTIA cut the first round of checks for broadband buildouts between April and June. With no clear criteria for how the money will be allocated, companies from Broadband Rural to AT&T (T) and Verizon Communications (VZ) are all struggling with whether to apply for the grants and, if so, how best to make their applications. The NTIA will distribute $4.7 billion of the broadband money, in three different rounds, while the U.S. Agriculture Dept.'s Rural Utility Service will hand out another $2.5 billion.

U.S. Ranked 17th in Broadband Access

Officials who led the meeting agree that the need for better technology is urgent. "Too few consumers and small businesses in this country have the high-speed broadband they need if they're going to succeed," said Michael Copps, acting chairman of the Federal Communications Commission. "We pay too much for service that is too slow. It's holding us back as individuals, it has cost our economy billions, and things are only going to get worse if we don't do something about it."

The latest indicator of how the U.S. compares to other countries in terms of broadband availability came Mar. 2 from the U.N.'s International Telecommunication Union. The group ranked the U.S. 17th out of 154 countries surveyed, in part because of low rates of access to broadband.

Households and businesses in remote and rural areas in particular have found their access limited because telecom companies often can't justify the investment associated with expanding their networks into sparsely populated areas where it is hard to turn a profit. Meanwhile, residents of inner cities often tend to choose not to become broadband users either because they can't afford it or don't see it as valuable. Addressing shortcomings like these, President Obama has argued, will not only help create jobs associated with expanding networks, but will also boost the economic fortunes of places where access is lacking.

A Wait-and-See Approach

Broadband Rural's Mattingly says he plans to apply for $7 million in funding to expand his company's service footprint. With about 1,300 customers now, he expects the money will allow him to hire between 25 and 30 people to offer broadband to some 3,000 more people.

Large telecom companies like AT&T and Qwest (Q) are taking a wait-and-see approach as the Administration works out its rules. Having initially advocated tax credits for expanding their networks into areas with little or no traditional broadband service, the telecom giants have grown less enthusiastic as lawmakers shaped instead a program of grants, loans, and loan guarantees. The companies are also suspicious of language in the law that requires "open access," a term that is not specifically defined in the congressional legislation but will be defined by the FCC. The requirement could mean that companies that get broadband funds have to share their networks with competitors. One AT&T spokesman said, "We will evaluate the plans established by the various agencies implementing these broadband initiatives and we stand ready to assist in furthering broadband deployment and adoption."

CenturyTel (CTL), a $2.5 billion telecom company that offers service in mostly rural markets in 25 states, is also watching the process closely. "We're reviewing the legislation and looking for opportunities for ourselves or working with our communities, or a combination of both," spokeswoman Annmarie Sartor said.

More Meetings Scheduled

The next step? Another series of public meetings held in Washington, Las Vegas, and Flagstaff, Ariz., among other places, where agency officials will huddle with state and local leaders as well as telecom executives and other interested parties. "They're really going to get into the weeds over how best to do this over the next one to two months," says Derek Turner, research director for Free Press, a nonprofit telecom policy advocacy organization. "Today's meeting was about showing a unified public face between the NTIA, the USDA, and the FCC, and showing that they're interested in public comment. They're going to be inundated with opinions."

And while $7.2 billion may seem like a lot of money, it works out to a little more than $140 million per state. Given the cost of building broadband networks in rural areas, the money is unlikely to be enough to provide even basic broadband service to all areas of the country. "This is really just a first step," says Turner. "This will make a dent in the problem, but it's not going to solve it."

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