A High-Speed Race for Broadband Billions

It's crunch time at International Broadband Electric Communications (IBEC). The Huntsville (Ala.) telecom provider is racing to meet an Aug. 14 deadline to complete an application for some of the billions of dollars Uncle Sam will dole out to make high-speed Internet service more widely available in the U.S. For weeks, IBEC Chief Executive Scott E. Lee has had 6 of his 54-person staff working overtime and weekends. "It's a lot of work," says Lee. "[But it's] worth the effort."

No kidding. If successful, IBEC could reap $80 million to $100 million to help build broadband networks in rural areas. It's one of hundreds of companies scrambling for a slice of the $7.2 billion allocated in the federal stimulus plan for the expansion of broadband networks into hard-to-reach hinterlands and poor inner-city neighborhoods.

The Obama Administration has high hopes for the effort. The government sees high-speed Net connections as a way to help improve education through distance learning, make health care more efficient, and create thousands of jobs. Broadband networks "will promote innovation and be an enduring engine for economic growth," said Julius Genachowski, chairman of the Federal Communications Commission, earlier this month. A Brookings Institution study estimated that each percentage point increase in broadband penetration could add 293,000 jobs—by linking businesses in one region to customers in another, for example.

But the program has its critics. Some say it doesn't go far enough in bringing Web access to remote areas. Others fret the government will waste billions because it's trying to disburse so much money in such a short period of time.

One big problem: The government wants detailed proof that a particular area lacks the cable and other infrastructure to provide broadband service before it doles out money. But the companies with the best data on broadband availability are the giant cable and telecom companies, such as AT&T (T) and Comcast (CMCSA), and they're not inclined to share with would-be competitors. The government is planning to map out the broadband gaps, but those maps won't be completed until February 2011—five months after all the broadband stimulus money is supposed to be spent. "Without a map, it's like building a road without plans," says Timothy Dowd, president and CEO of consultant Input, which helps companies win government contracts.

THE NEED FOR SPEEDGovernment officials acknowledge the risks. David J. Villano, an administrator with the Agriculture Dept., which will team with the Commerce Dept. to disburse the money, says the aim is to stimulate the economy quickly, so there isn't time to wait for complete maps. He says some states do have broadband maps of certain regions. In addition, the FCC is putting together a national plan for broadband, to be completed in February, so the $7.2 billion may be just the first phase of the Administration's effort.

Over the next few months, Villano and his colleagues will have to sort through not only where broadband is needed but also which technologies are the best fit for different regions. There are at least half a dozen viable choices for delivering high-speed Internet service—from fiber-optic cables and souped-up telephone lines to new wireless technologies. Federal officials have remained neutral on the alternatives and will likely make different choices depending on the region. But they say broadband technologies need to be cost-effective and capable of increasing speeds over time.

RidgeviewTel, a broadband service provider based in Longmont, Colo., is opting for wireless technologies, including Wi-Fi and WiMAX. The company, which operates in rural markets in Colorado and Illinois, is applying for $25 million in loans and grants to start offering broadband service in 35 communities in upstate New York. RidgeviewTel CEO Vincent T. Jordan says that because wireless systems are much cheaper to install than alternatives such as fiber-optic lines, he can offer service at a more affordable price. He plans to offer basic service, with connections of 512 kilobits per second, for $29.95 per month, well below the $39 per month average cost of broadband nationwide.

Technology experts believe the government will end up backing many companies that use wireless because of its affordability and reach. "My gut feeling is that there will be more wireless than anticipated," says Vince Vittore, principal broadband analyst at researcher Yankee Group.

IBEC is taking an unusual approach. The company is concentrating on a technology called broadband over power lines, which uses the existing electrical wiring in homes to deliver Internet access. Known as BPL, the technology has been around for years but has gained little traction because it is relatively expensive. IBEC's Lee says the technology is likely to gain in popularity, because electrical lines already run to virtually all homes and IBM (IBM) is lending its support. Big Blue is helping companies such as IBEC with everything from consulting to installation of the technology.

Vittore of the Yankee Group believes that expanding the availability of broadband is an important national project. But he is worried about the risks of executing such a complex plan so quickly. "My main concern is when you give any government agency a ton of money to hand out in a short time, there's huge potential for waste and fraud," he says.

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkBroadband = Jobs?A Brookings Institution study argues that the expansion of speedy Internet connections throughout the country will help create jobs. The authors estimate that for every one-point increase in the percent of U.S. households with broadband, nearly 300,000 jobs will be added to the economy. The study is controversial, but the Obama Administration has used its general principles to justify plans for nationwide broadband service.To read the study, go to bx.businessweek.com/u-s-broadband-policy

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