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Wednesday, April 27, 2011

AT&T to FCC: Keep Our Acquisition Reviews Separate

StimulatingBroadband.com 04/27/2011 San Francisco - In response to today's filing to the FCC by a coalition of public interest groups, a spokesperson for AT&T (NYSE: T) says the company rejects outright the call for the Commission to merge the firm's two pending acquisition proceedings.   
An alliance of five public interest organizations this morning filed a letter with the Federal Communications Commission asking the agency to combine its review of AT&T's $39 billion takeover of competitor T-Mobile with the ongoing evaluation of AT&T's $1.9 billion spectrum purchase from Qualcomm.


The coalition, comprised of Free Press, Media Access Project, Public Knowledge, Consumers Union and the Open Technology Initiative of the New America Foundation, has previously submitted filings challenging each proposed acquisition by AT&T on its own merits.


AT&T Response
"These are two completely separate proceedings and should remain so," responded AT&T spokesperson Margaret Boles.


"The FCC has been fully briefed by all interested parties on our application to acquire spectrum from Qualcomm.  We are now at day 77 of the 180-day shot clock and we urge the Commission to expeditiously grant our application", concluded Ms. Boles, in answer to our inquiry about a company response to this morning's filing.


"Greater Harm" Seen
As we reported in March, the groups together had filed a formal petition to deny in the Qualcomm proceeding, arguing that AT&T already holds disproportionate market power and prime spectrum licenses.

In today's filing, the groups argue that even greater harm will be generated if AT&T is permitted to acquire T-Mobile, and they ask the FCC either to promptly deny the transfer of Qualcomm licenses or, at minimum, to consolidate the review of the two acquisitions.  


"Combined with the proposed transfer of Qualcomm spectrum licenses, approval of these transactions would further enable AT&T to suppress competition, stifle innovation and harm consumers. At a minimum, the FCC should combine its review of both the merger and license transfer in order to properly assess the joint impact of both transactions on the wireless market," concluded the joint statement. 



"The proposed merger between AT&T and T-Mobile would reshape the entire American wireless industry in a single stroke," the five groups said in a jointly issued statement of this morning.



StimulatingBroadband.com

Thursday, April 21, 2011

Pole Attachment Fees as Barriers to Broadband Projects

StimulatingBroadband.com 04/21/2011 San Francisco - By Alan D. Mandl, Esq.* -


Attorney Alan D. Mandl
On April 15, 2011, three parties filed a complaint with the New York Public Service Commission against Niagara Mohawk, an affiliate of National Grid USA of National Grid plc (NYSE: NGG), in which they alleged that make ready charges and related administrative charges had been increased by Niagara Mohawk by significant, unreasonable amounts.

The complainants were collective recipients of multi-million dollar RUS and BTOP grants relating to about 1,500 miles of overhead fiber facilities to be attached to about 34,000 Niagara Mohawk poles. The complainants estimated, based on charges for small projects, that their make ready expenses would increase by over $3.5 million.

Individual make ready work item charges were alleged to increase by as much as 759% and the cost of make ready application fees were doubled. The charges for make ready were not subject to tariffing and the Commission had not regulated these charges, according to the Complaint.


The complainants further alleged that their federal grant applications predicated construction costs upon the make ready rates that existed at the time of their grant applications. According to the complainants, the increased make ready charges are “devastating,” may call into question full construction of their projects and are “seriously jeopardizing the ability of [the grantees] to implement the BIP and BTOP Grants as intended by RUS and NTIA.”

The complainants have requested that the New York Public Service Commission bar the increased make ready charges from being applied pending their investigation by the Commission.

Need for State Regulatory Oversight
This complaint highlights the need for state regulators with jurisdiction over pole attachment rates, terms and conditions to take proactive steps to assure that any federal broadband expansion grants are not wasted on unreasonable annual attachment rates and make ready-related charges.

While one cannot expect these rates and charges to remain static during the construction and operation of federally (and state) funded broadband expansion projects, the public should expect that regulators, well aware of the impending and now actual expenditure of public monies to help fund broadband expansion, take all necessary actions to establish a framework that best assures the imposition of cost-based, reasonable and non-discriminatory attachment rates.

Annual attachment rates are tied to the sustainability of broadband expansion projects. While they represent one cost component of an overall pro-forma for such projects, they also affect the cost of broadband services delivered to end users, if not the ability of last mile service providers to attract the customers needed to generate revenues that help pay for the infrastructure built to serve them. Make ready charges, of course, affect the capital costs associated with the original construction of a broadband expansion project as well as periodic costs incurred after original construction.

The need for vigorous oversight of make ready charges can be attested to by the legions of companies that have been subject to these charges.

Applicants for attachment space are subject to an application fee, a fee for the cost of surveying aerial plant to determine how much make ready work will be needed to accommodate the proposed attachments and charges for the performance of the necessary make ready work.

In some cases, the pole owner simply gives the applicant a bottom line number for make ready charges without an itemization of the work to be performed and the related costs. On occasion, pole owners have tried to roll into make ready charges the cost of curing pre-existing safety violations on the poles. In other instances, pole owners have developed detailed schedules of make ready rates by the type of work that may be necessary.

Some attaching parties have favored this unit cost of work approach because it provides them with greater certainty about the cost of make ready work for a given project and the ability to submit capital budget requests internally, without having to go back to higher management for additional capital if the final make ready bill exceeds the make ready cost estimate.

The Unit Cost Approach
As the above complaint illustrates, the use of the unit cost approach does not insulate attaching parties from the risk of charges that they may perceive as unsupported and unreasonable. Even existing unit cost charges may be called into question. Several years ago, the Vermont Public Service Board reviewed the unit cost make ready charges that Verizon Communications (NYSE: VZ) had been charging and that were to be included in a pole attachment tariff.

The consumer intervenor (Vermont Department of Public Service) and the regional cable trade association both questioned different unit cost charges; as a result, several charges were reduced when Verizon was unable to justify them to the satisfaction of the Public Service Board.

Elements of proof of cost basis include: the labor time needed to complete a given work task; applicable labor rates and related overheads (e.g., not all make ready worked should be costed out on the basis of  the wage rates for the highest ranking employees); and costs of contract labor (which also may be compared to the cost of using internal employees for the same tasks, where employees are available to do the work and adequately trained).

The fact that an annual attachment fee has been unchanged for a number of years does not mean that the fee is reasonable. In Massachusetts, for example, a cable company that paid a large amount for conduit attachment fees called into question the telephone utility’s annual conduit charges, which had been in effect for over 10 years. The end result, after complaint and hearing, was a ruling by the Massachusetts regulator that the conduit attachment fees were not cost-based, excessive and unreasonable. These fees were rolled back, enabling the cable company to save thousands of dollars annually.

Builders of broadband expansion projects and the parties that help fund these projects have a large stake in assuring that costs of attachment are just and reasonable, as construction is planned and undertaken, and during the life of the broadband project.

This author takes no position on the merits of the recent complaint now pending before the New York Public Service Commission. The Commission is to be commended on its proactive and thorough regulation of the annual attachment rates and terms. Its actions have at times served as models followed by other jurisdictions.

In the present situation, it would have been preferable if, prior to implementing substantial increases in unit cost make ready charges, the pole owner had engaged parties about to incur substantial make ready expenses and existing attachers and provided cost support for its proposed charges. The New York PSC now may have an opportunity to address make ready charge costing methodology and the level of proof required to support make ready input and assumptions.

When pole owners plan to increase annual attachment rates, it is not uncommon for them to raise the issue with cable operators or their trade associations, review supporting cost data and assumptions and attempt to iron out differences before new rates are implemented. Such a process may help avoid time-consuming and costly complaints and allow both stakeholders the ability to focus their resources on construction work and the provision of services. At the very least, issues in dispute can be narrowed.

Regulatory Consistency
Regulators can take steps to reduce the likelihood of complaints by adopting consistent approaches to costing out attachment rates. For example, the Massachusetts Commission, in establishing a conduit rate methodology, created a system under which the telephone company could propose annual increases based upon the established rate methodology, subject to 60 day notice to attaching parties.

During that time frame, this author requested and received from telephone company counsel a workpaper that substantiated the calculation of proposed annual rate increases in accordance with the Commission-approved rate methodology. This same type of approach would work in the case of pole attachments where the pole owner followed a regulator-approved rate methodology and used presumptions established by regulators (for example, the amount of usable space on a pole and the amount of space occupied by an attachment).

Make ready charges may not lend themselves to the same degree of precision as long as pole owners can cost out each job based upon an estimate subject to true-up after the completion of make ready work. To the extent practicable, however, the public interest would be served if state regulators charged with oversight of pole and conduit attachment rates and terms took steps to assure reasonable charges before large sums of taxpayer-supported federal and state grants are expended on broadband expansion projects.

Leaving the matter for dispute results in excessive charges, construction delays and cost increases and complaints. In some cases, projects may be stopped dead in their tracks, given the disparity in resources between pole owners and attachers in most cases and the dependence of attaching parties on access to the pole owner’s facilities.

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Alan D. Mandl is Of Counsel to the Boston and Lincoln, Massachusetts firm, Smith & Duggan LLP. He has worked on cable, wireless and landline telecommunications infrastructure deployments on behalf of private and public clients, including permitting of wireless facilities, construction of intra-municipal fiber facilities, joint and individual conduit build outs, pole attachment agreements and pole and conduit rate issues, and the use of publicly owned conduit infrastructures and rights of way.

Mr. Mandl's other articles for StimulatingBroadband.com are:
Infrastructure Deployment Reform Needed To Achieve Sustainable Broadband Goals and Avoid Waste, and The Broadband Cable Deployment Act of 2009 – A Good Start. Attorney Mandl may be reached at amandl@smithduggan.com 


 StimulatingBroadband.com

Monday, April 18, 2011

USDA Will Issue $400 Million in Broadband Loan Funds This Year

An Exclusive Breaking News Report from StimulatingBroadband.com


(Editor's Note -- The carry over of this program's unspent funds into federal fiscal year 2013 is updated by us in this story of October 4, 2012: USDA: 'We're Still Issuing Farm Bill Broadband Loans'.)


StimulatingBroadband.com 04/18/2011 San Francisco - The U.S. Department of Agriculture will issue $400 million in loans to rural service providers this federal fiscal year under the Farm Bill Broadband Loan Program.


This information has been confirmed for this publication on background by an authoritative source at USDA within the past hour.


The $400 million figure is the nearest estimate of “program level” loans – the total in loan dollars to be issued – by the Rural Utilities Service (RUS) of USDA for the current fiscal year ending September 30, 2011.

The information release on background to this publication gives more granular confirmation and specificity to the previous estimates of loan funding this year in the range of ‘$300 million to $ 400 million,’ we reported previously.


Our sources at USDA, on Capitol Hill, and in trade associations representing rural carriers have all at times had more questions than answers about current year funding for the Program, as it has been at high risk of full cutbacks in Congress.

With Chairman Harold “Hal” Rogers (R-KY-05) of the House Appropriations Committee, and fellow GOP Members taking the lead, the House attempted in several recent budgetary continuing resolutions (CRs) to cut the program level of the Program to zero.

As they advanced the effort to zero out the Program this year, House Republicans and several Blue Dog Democrats in the lower chamber were largely responding to the lobbying pressure of the National Cable & Telecommunications Association (NCTA). 

Opposing the lobbying efforts of “big cable” has been the work to defend the Program conducted by the National Telephone Cooperative Association (NTCA) and the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO). NTCA and OPASTCO are the two leading trade associations representing the interests of rural service providers.

USDA sources are confirming that in the final CR passed by the Senate on April 9th, House Republicans were successful in fully rescinding Broadband Loan Program fund carry forwards from previous years. 

As part of the budget deal cobbled together by negotiators from the Obama Administration, House Republicans, and the Democratic leadership of the Senate however, new appropriations were authorized. It is that new funding which allowed RUS, using its loan leverage capacity, to achieve the $400 million in program level funding which can now issue to provider projects across rural America.

StimulatingBroadband.com is still working with sources in government and industry to confirm what program level of funding remains in the other three tranches of telecom subsidies managed by RUS: The Telecommunications Loan Program, the Community Connect Grant program, and the Distance Learning and Telemedicine Program.



Copyright 2011 PrattNetworks LLC
No part of this content may be reproduced, excerpted, or republished without express written permission. Permission Requests Here.



StimulatingBroadband.com

Friday, April 15, 2011

Luisa Handem of Rural America Radio Interviews Peter Pratt on Rural Broadband Funding

StimulatingBroadband.com 04/15/2011 San Francisco - Luisa Handem of Rural America Radio, and Managing Director of the Rural Mobile & Broadband Alliance (RuMBA), caught up with us for 30 minutes today. 

We talked about what the situation now looks like for the rural broadband and telecom loan programs of the U.S. Department of Agriculture. Given final passage of the last continuing resolution (CR) yesterday, we give our still very rough estimates based on what we are hearing. USDA staff continues to crunch numbers. 

Frankly, any data released prior to information coming out of USDA is speculative, given several factors in play. With Congress having acted, these factors now are being worked at the agency level.

StimulatingBroadband.com will update our reporting when we can confirm and source definitive information. For now, we give our best verbal snapshot on Luisa's program. Underline verbal. Underline snapshot.

Our thanks to Luisa and her organization for taking the time to review what we see at this point.


Thursday, April 14, 2011

FTTH Council: Stimulus Dollars Drive Fiber Project Uptick

Stimulus Spending on All Fiber Access Networks Now in Ramp Up


StimulatingBroadband.com 04/14/2011 San FranciscoIn its semiannual report released today, the Fiber-to-the-Home Council projects that stimulus spending will produce a growth uptick in FTTH new homes passed this year.


The report, prepared by the Council’s retained market analyst firm, RVA LLC, sees federal dollars returning the sector to positive growth following the impacts of recession and the ending of the Verizon Commun-ications (NYSE: VZ) FIOS builds.

We like RVA’s work so much; we’re fully willing to accept a finding formerly considered not only analytical bunk, but pure burn-them-at-the-stake heresy.

A key part of the report that warms the cockles of our heart – or begs for pages of footnotes based on federal project reporting. The Council tells us “Three-quarters of the broadband stimulus-funded projects to create or expand all-fiber networks have now broken ground or are on the verge of doing so.”

“Construction has begun on 38 percent of the fiber to the home projects funded by the American Recovery and Reinvestment Act, while another 36 percent are actively preparing for construction to begin,” summarizes the Council’s release of today.  “Most of the remaining projects are in some stage of engineering or environmental impact evaluation,” the statement concludes.
In this we concur.


Despite the frenzied talk from a boatload of alleged "analysts" who predicted a "broadband stimulus boom" and an upsurge of investment hitting the sector as early as 4Q 2009, neither was ever going to happen.


The federal award cycle, competitive procurements, and compliance issues dictated a different reality. Actual stimulus dollar disbursements are hitting an inflection point now, with increasing spend rates moving out to contractors and vendors.  

21 Million Homes Passed in North America
“Today's report, says the FTTH Council “also revealed that 7.1 million North American homes are now receiving Internet, video and/or voice services and meter reading over end-to-end fiber networks - up from 5.8 million a year ago - as telecom providers continue to upgrade their last-mile connections from copper to fiber.”  “FTTH networks now pass nearly 21 million homes on the continent, up from 18 million a year ago,” according to the report.

U.S. Stimulus & Big Canadian Projects Follow FIOS Drop
RVA President Michael Render said he expected that the recent increase in construction activity by the stimulus-funded projects would mean an overall uptick in FTTH deployments and connections in 2011, with the economic recovery and recent announcements of large FTTH projects in Canada also contributing to the rise.

The increase would come after a moderation in the growth rate of FTTH network deployment over the past two years, with the increase in the annual number of new homes passed dropping to about three million in 2009 and 2010 after reaching more than four million in 2008.  



Render says the combined effects of the recession, and the slowdown in FTTH network construction by Verizon created the decline in FTTH passings.

Who Wins?
The report is good news for the entire fiber access business ecosystem.

In particular, it is great news for those companies that are both FTTH pure plays and smart enough to have positioned themselves to take advantage of stimulus spending.

We agree with the analysts -- real ones, not the "alleged" kind referenced above -- that fiber management component manufacturer Clearfield, Inc. (NASDAQ: CLFD) leads the pack in this category. 

The Census of FTTH Providers
RVA estimates that there are more than 770 entities now providing FTTH services in North America, 61 percent of which are small and mid-sized independent telephone companies.  Another 13 percent are competitive broadband providers, 11 percent are municipalities or public electric utilities, 10 percent are associated with real estate developments and four percent are cable television providers.

RVA also found that 70 percent of FTTH providers said they are "very likely" to continue to build out their FTTH networks to reach more subscribers. 

The RVA report also said that FTTH providers are beginning to more aggressively differentiate their Internet offerings from DSL and cable modem competition with high speed offerings that are often the same upstream and downstream.




Fiber's "Onward March"
The RVA report references "a number of providers that now offer symmetrical 100 megabit service", and the fact that the muni network EPB in Chattanooga, Tennessee, "has become the largest Internet service provider in North America to offer 1 Gigabit symmetrical service." 

RVA also marks the late March selection of Kansas City, Kansas by Google Inc. (NASDAQ: GOOG) for the launch of the company's first "FTTH network providing 1 gigabit connectivity".

"Given the enormous and widespread interest we are seeing in next-generation connectivity, it is not surprising that, as the recession fades, telecommunications providers across North America are resuming their onward march toward all-fiber access," said Daniel O'Connell, the former Verizon FIOS national sales director for the product's MDU business line, and now the FTTH Council's President. 

 "With emerging HD video, 3D video and other applications in areas like tele-health, distance learning and cloud computing, most telecom providers recognize that they will have to upgrade to FTTH in order to keep pace with the ever-increasing consumer demand for more bandwidth."

RVA surveys all types of North American FTTH providers and potential FTTH providers throughout the year, and has conducted more than 360 interviews thus far in 2011, including interviews with more than 50 providers who received an ARRA stimulus grant specifically for FTTH projects. 

A Heresy Forgiven: The Stimulus as “Unintended Consequence”
If truth be told, one of Render’s findings used to make us want to try anyone who spoke of it for heresy.  

They said the broadband stimulus program for a time choked back
CAPEX by service providers.
Early on in the broadband stimulus program voices were heard warning that the program would have myriad unintended consequences. The most feared of these soon to be witnessed horrors would surely be a down draft in capital spending on networks as the industry waited for federal largess.

Most commentators that blathered on about the anticipation of broadband stimulus spending choking back CAPEX in the sector were typically people that never believed in public sector subsidies for telecom or any part of the stimulus to begin with. 


Most were in-house experts at “free market” think tanks. In short, we were predisposed to convict them for their apostasy to begin with, rightfully so.

As knowledgeable and reasonable people who understand our industry increasingly said the same thing; we reconsidered. Render’s research isn’t the stuff of ideological clap trap. He talks to the providers and vendors building some of the most important networks in North America.

"We have found in our surveys over the past two years that quite a number of FTTH builds were put on hold while the stimulus program was sorted out and the network operators got a clearer picture on whether their projects would be funded," said Render.

"But of course that is all behind us now and our latest survey results are indicating that most FTTH projects are now going full speed ahead," concludes Render.

Very regretfully, and only in respect for the extensive interview work of Render and the Council, we are dousing the flames in the village square, freeing the condemned from the stake, and sending the true believers home.

Our Take: The FTTH Council's report of yesterday is more confirmation of what all of us following stimulus spending closely know: The only significant updraft in such disbursements out to vendors has not been seen until now. Q1 and Q2 of 2011 mark the true beginning of the actual stimulus effects of the stimulus on the American telecom sector.


In the report's census of what kinds of service providers are deploying FTTH networks, we see again why a group of them were supporters of the stimulus, and of continued loan funding by USDA's Rural Utilities Service (RUS) of carrier serving low density areas. For those paying attention to recent events, we also see one sub-sector of the industry -- purely coincidentally we're certain -- not attending the FTTH party. 


Rva Ftth Status April 2011 Final Final



StimulatingBroadband.com

Wednesday, April 13, 2011

Obama Administration Fights for Rural Broadband Funding Reprieve

Obama: "I will not sacrifice core investments..."


StimulatingBroadband.com 04/13/2011 San Francisco - Elements of the Obama Administration and the rural service provider lobby are now working with Members of Congress from rural districts to restore at least some of the U.S. Department of Agriculture's Broadband Access Loan Program this year.
Agriculture Secretary Tom Vilsack
Government and industry sources are now quietly expressing the hope that over half of the proposed broadband loan authority of $700 million in USDA's Rural Utilities  Service (RUS) will be made available.


Republican members of the House Committee on Appropriations, had proposed fully defunding the Program this year.  They had done so using two recent continuing resolutions cobbled together over the past 40 days.


The CRs removed the underlying  appropriations and credit authority necessary to leverage the $700 million figure.


A Deal is Seen
Late Monday evening House Appropriations and the House Committee on Rules separately issued documents that revealed the details of negotiations  between the House and Senate. Those details, now being reviewed by USDA budget analysts and trade groups, signal a deal to fund $300 million to $400 million in federal loans in the broadband program.


Detail level analysis is needed to establish the loan amounts which RUS can finally issue. The final loan dollars to be delivered is based on variables of actual appropriations, allowed carry overs from prior authorizations, and the credit subsidy level set. 


Preliminary estimates suggest possible scale backs to the Community Connect Grant Program and to the Distance Learning and Telemedicine Grant Program. A funding goal of the former had been set at $25 m million at the former, and $30 million at the latter. Similarly, initial analysis suggests that this year's Telecommunication Loan Program will retain a "program level" funding of $690 million.


On March 30th StimulatingBroadband.com broke the story that all four funding programs, 96% of the dollar value of which are comprised of loans to be repaid to the U.S. Treasury, were under threat of severe cuts.    


To deliver these grant and loan levels, a legislative deal needs to hold through to tomorrow's scheduled votes on Capitol Hill on the final fiscal year 2011 federal budget. If achieved, it will signal a partial victory for President Obama's Secretary of Agriculture Tom Vilsack over House appropriators. 


The President Weighs In
It is not at all a coincidence that President Obama mentioned his strong commitment to  broadband infrastructure support in his speech on federal deficit reduction earlier today.  



"I will not sacrifice the core investments that we need to grow and create jobs.  We will invest in medical research," said the President.


"We will invest in clean energy technology.  We will invest in new roads and airports and broadband access.  We will invest in education.  We will invest in job training.  We will do what we need to do to compete, and we will win the future." 


House Republicans & Tea Party Play into Industry Competition
Starting in late February as GOP appropriators in the House began to be focused on cuts to the Program, an increasing number of right wing media outlets, conservative pundits, and Tea Party associated critics of the Administration began their attacks on the same initiative.


The fact the effort worked on even Republican members from rural districts is but one of the ironies of this fascinating insight into the ways competition is playing out in the American telecom sector.

_________________________________________________

A Call To Action: Call your two U.S. Senators, and your Member of Congress. Tell them why you want them to vote in favor of restoring this important funding. 


Watch us for specific updates of the Sections and program levels to be mentioned. Don't wait for that final information. Call now.


U.S. Senate Contact  & Senator Lookup


U.S. House Contact & Member Lookup 

_________________________________________________


StimulatingBroadband.com

Monday, April 11, 2011

GOP Kills Full $700 Million in Rural Broadband Loans Slated by USDA

Rescission of $68 Million Cancels $700 Million in Loans for Rural America


StimulatingBroadband.com 04/11/2011 San Francisco - The full amount of $700 million in rural broadband loan authority slated to be used this year by the U.S. Department of Agriculture has been cancelled as part of the budget compromise reached Friday evening.


House Appropriations Chair Harold Rogers
The loan authority cancellation was sponsored by the Republican majority members of the House Appropriations Committee, chaired by Rep. Harold "Hal" Rogers (R-KY-05).

In the run up to this weekend’s threatened shutdown of federal operations, an increasingly shrill chorus of right wing pundits had targeted the Broadband Access Loan Program of USDA’s Rural Utilities Service (RUS) for cuts. The effort, based in disinformation and outright incorrect facts about the program, achieved success among GOP appropriators.

No source in government or industry we interviewed expressed hope that any portion of the broadband fund will be restored in the current 2011 federal fiscal year.  Statements by President Obama and congressional leaders about the overall budget deal passed early Saturday morning clearly signal there will be no room for back filling of cut accounts this year.   

The $700 million was never a hard dollar appropriation sitting in the RUS accounts. The $700 million was instead the upper limit of the “program level” loan authority which USDA was attempting to issue to service providers in rural areas.

The intended $700 million program level – the dollar value of federally backed loans targeted to actually flow to rural telecom carriers applying for the funds -- was to be secured by $68 million in appropriations previously authorized by the 2008 Farm Bill. Of that latter amount, $39 million was cut by the continuing resolution (CR) passed two days ago, on top of $29 million taken out in the previous CR introduced February 25 by House Appropriations.

No amounts anywhere approaching $700 million will thus ever “be "pulled...out of USDA's coffers" as a result of this action, as one right wing apparatchik wrote erroneously last week.  


Said accurately, the denial of the $68 million in federal funds means that a figure over ten times that amount will not flow to credit worthy wired and wireless service providers for eventual repayment to the government.  The RUS broadband loan portfolio has a default rate of less than one percent.


The $700 million will also not flow to U.S. telecommunications equipment and materials manufacturers certified by RUS for inclusion on the agency’s List of Materials. Federal certification and inclusion on the List, which is required for all components used in USDA-funded rural networks, signifies the majority of each product’s manufactured value is of domestic origin.

In the broadband stimulus program, the Obama Administration had issued waivers from the Buy American provisions of the Recovery Act for telecom network equipment. The Administration did so despite the strong objections of organized labor and a handful of U.S. manufactures, with the vocal Zhone Technologies leading the small pack.

Demand for the full $700 million in a new tranche of rural broadband loans is clearly seen in the tremendous over subscription for RUS loan/grant packages in Round 1 and Round 2 of the stimulus effort. 



Resources:
Rural Telecom Funding provides a link to our Mailing List for updates on the dynamic realm of changing budgets, program rules, and funding flows for telecom in rural America. 

Copyright 2011 PrattNetworks LLC
No part of this content may be reproduced, excerpted, or republished without express written permission. Permission Requests Here.

StimulatingBroadband.com

Thursday, April 7, 2011

Breaking: Budgetary Continuing Resolution Will Wipe Out USDA Broadband Loan Program

StimulatingBroadband.com 04/07/2011 San Francisco - Multiple sources are confirming for this publication that enactment into law of the current federal budgetary Continuing Resolution (CR) will wipe out the Broadband Loan Program of the U.S. Department of Agriculture for the present federal fiscal year.
USDA officials recently issued a funding notice and proposed program rule changes with the intent to place up to $700 million in "program level" loans this year. The  Program began in 2002, and was suspended as USDA's Rural Utilities Service (RUS) issued $3.5 billion in loans and grants in its part of the broadband stimulus program. 


This year's effort to restart the Broadband Loan Program, with Agriculture Secretary Tom Vilsack and Rural Development Administrator Jonathan S. Adelstein in the lead, was slated to use unexpended funds authorized by the 2008 Farm Bill.


In the words of an industry alert (below) to Members of Congress issued earlier today by the National Telecommunications Cooperative Association (NTCA), passage of the current CR as now drafted will "remove all available funding for the RUS Rural Broadband Loan Program." 


NTCA Message to Capitol Hill
This morning the NTCA, the trade association representing the rural cooperative independent telephone operating entities across rural America, sent out this message to Capitol Hill staffers in both the House and Senate.


The message urges Members to oppose the presently proposed cut of $39 million in the current CR by giving the substantive reasons to preserve the Program: 


Please oppose further cuts to the Rural Utilities Service (RUS) Broadband Loan Program, which has been critical in helping provide broadband to rural America.  The short-term continuing resolution (H.R. 1363) would rescind $39 million from the RUS Broadband Loan Program in addition to the $29 million removed from the program by the previous continuing resolution a few weeks ago.  This would remove all available funding for the RUS Rural Broadband Loan program.


There can be no question regarding the ongoing essential nature of this program as noted below.

- Broadband is critical to providing access to economic growth, job creation, distance learning, health care, and national security in rural America. 

- RUS Broadband Loan Program projects are funded with loans that must be paid back with interest – creating a win/win situation for rural broadband consumers and taxpayers.

- RUS borrowers have a default rate of less than one percent.

- According to the FCC’s National Broadband Plan, 14 million people in 7 million housing units do not have access to terrestrial broadband capable of download speeds of 4 Mbps, and that such housing units are more common in rural areas.

- Using the National Broadband Map’s Broadband Statistics Report, critics of the RUS Broadband Loan Program point out that 92.8% of rural Americans (99.8% urban) have access to “broadband” download speeds greater than 786 kbps, therefore the loan program is no longer needed.  However, the same report shows that only 86.1% of rural Americans (98.7% urban) have access to speeds greater than 3 mbps and only 55.7% (93.5% urban) have access to speeds greater than 10 mbps, which are minimum download speeds more commonly considered necessary for rural areas to compete in the modern broadband world.

- According to the National Broadband Map’s Broadband Statistics Report, in 55 congressional districts 10% or more of constituents still do not have access to broadband download speeds of greater than 3 mbps.

- Critics of the program point out that the President’s FY 2012 Budget did not include funding for the Broadband Loan Program.  However, this is because adequate carry-over funding from previous years was expected to be available, which will not be the case if further cuts are implemented.  The carry-over balance is the result of USDA’s focus on implementation, over the past two years, of new Farm Bill rules to further improve the program and implement congressional and industry recommendations.  With new interim rules now in effect, RUS announced on March 10, 2011 that the application process for new projects has restarted.

- This program is essential to achieving our nation’s rural broadband goals. 

If this funding rescission for the Rural Broadband Loan Program is approved, investment in rural broadband deployment will be jeopardized. 

Resources:
Rural Telecom Funding provides a link to our Mailing List for updates on the dynamic realm of changing budgets, program rules, and funding flows for telecom in rural America. StimulatingBroadband.com

Waiting on the GOP's Rural Broadband Funding Cut

StimulatingBroadband.com 03/07/2011 San Francisco - Should the current federal budgetary Continuing Resolution (CR) pass on Capitol Hill and be signed into law by the President, a cut will be made to the Broadband Loan Program of USDA's Rural Utilities Service (RUS).


Update 12:15 PM: Sources on Capitol Hill and inside USDA are now telling us the situation is critical, and potentially catastrophic for funding of the Broadband Loan Program in the current federal fiscal year.  


We see the numbers, but the actual impacts are still being calculated by the best sources in government and industry we rely on. 


2008 General Election Results, by County
Map: Mark Newman, University of Michigan


A determination of the actual cut to the "program level" of the loan funds which will flow out to projects in the field is being made. That calculation to be made by RUS, as agreed to Congress, turns on the  loan leverage rate to be used. 


In this, as in the threat to shut down the government of the United States, the Republican Party reminds us it is forever capable of shooting itself in its own lifeboats. The last we checked the rural areas of America tend to make people like us who live in places like Boston and San Francisco have bad election nights. 

In fact, we've been saying for well on two years that the Democrats are often fighting only among themselves as their rural representatives on Capitol Hill argue with their urban colleagues over broadband funding priorities.

Why then is it that the GOP is so intent on cutting back programs supporting broadband capital investments, and the larger community developments of USDA, in GOP controlled red states comprised of red and (the all important) purple congressional districts?

As we await the final numbers for the Republican-inspired and executed cut to the first post-stimulus federal broadband capital support program, we will be pondering that question. 

Stay tuned. 

Resources:
Rural Telecom Funding provides a link to our Mailing List for updates on the dynamic realm of changing budgets, program rules, and funding flows for telecom in rural America. 

StimulatingBroadband.com

Saturday, April 2, 2011

Alert: New York Times Reports on BayWEB Stimulus Grant Allegations

Report Will Force Climb Down by Obama Administration on Controversial Project


StimulatingBroadband.com 04/02/2011 San Francisco - The New York Times this evening published a story that breaks new and highly damaging information about the controversial BayWEB $50.593 broadband stimulus grant. 


The story provides new details of how BayWEB is part of upwards of $100 million in federal funds issued to San Francisco area governments which purchased equipment from Motorola, Inc. (now Motorola Solutions, Inc., NYSE: MSI) in procurement contracts which were noncompetitive.
Commerce Secretary Gary Locke (center), with President Obama,
and Vice President Joe Biden 


Written by staff reporter Jennifer Gollan of the The Times' Northern California bureau, The BayCitizen, the story is the best single piece of investigative journalism on BayWEB to date. The piece covers the history of the public safety project's  affiliated network and allegations about its regional sponsoring organizations.


The story traces the role of Ms. Laura Phillips, Executive Director of the federally funded Bay Area Urban Area Security Initiative (UASI), and other employees of the City of San Francisco as they worked on the "selection process" which resulted in the $50 million grant award to Motorola, Inc.


As seen in Phillips' appearance in a Motorola-produced video (below) about BayWEB, she has for years functioned as a governmental official enunciating the public policy, technology, and marketing positions of Motorola from her perch inside a public sector agency.   


Ms. Gollan of The BayCitizen also highlights the role of Mr. William J. McCammon, the head of the East Bay Regional Communications Systems Authority (EBRCSA), in moving ahead with tens of millions in non-competitive purchase efforts to the benefit of Motorola.


As regional officials have increasingly questioned Ms. Phillips' role in BayWEB and other activities of UASI, McCammon has more and more attempted to salvage the project. In this he has been joined by Alameda County Sheriff Gregory Ahern, the listed Executive Sponsor of the BayWEB grant. McCammon's EBRCSA was established to serve as the regional public safety support facility for Alameda and Contra Costa Counties.


StimulatingBroadband.com last September was the first publication to report the role of Phillips, a former government affairs executive of Motorola, and that of her three managers involved in the choice of the company to serve as the applicant "partner" in the grant process. The staffers were also immediate former employees of Motorola, the Schaumberg, Illinois based equipment manufacturer holding a full 80% of the U.S. public safety communication equipment market.


Commerce Department's Continued Support
The key question now emerging for BayWEB: How and when will the Obama Administration do the inevitable climb down form its continued support of the BayWEB project? 


One of the most perplexing aspects of BayWEB is the length of time that senior officials of the Administration have continued to take a see no evil approach to the $50 million project award. Tonight's report in the Times, and the follow-on scrutiny it creates will now significantly erode that stance.


As we reported on March 3, Assistant Commerce Secretary Lawrence E. Strickling met in Alameda County with the very regional officials, including Ahern, McCammon, and Phillips, most heavily criticized for the BayWEB mess.


Strickling is Administrator of the National Telecommunications and Information Administration (NTIA) which issued the $50 million BayWEB grant. He had previously voiced his continued full support of the project in both October and February, as he answered the project's leading critics, Mayor Chuck Reed of San Jose, and Santa Clara County Executive Jeff Smith. 


Reed and Smith were successful late last year in triggering an investigation of BayWEB by Commerce Department's Office of Inspector General (OIG) in November. As OIG chief Todd Zinser testified to Congress in February, the investigation is ongoing.


Over a seven  month period, the Mayor and the County Executive have also communicated directly with Strickling's boss, Commerce Secretary Gary Locke. Despite these communications, despite the ongoing investigation by the OIG, the Strickling on-the-ground meeting went ahead.


Sources present at the meeting tell us that the Administrator urged participants to expedite the project by continuing to frame a new local governance agreement -- one which did not exist when the grant was applied for a year ago-- and to complete a no-bid materials and system maintenance purchasing document with Motorola. 


StimulatingBroadband.com has been provided with both documents, which we will publish the week of Monday, April 4. We are doing so despite the efforts of UASI and the California Technology Agency (CTA) to withhold the documents from public inspection, in violation of the California Public Records Act. CTA, in yet another of the many mysteries of BayWEB, has been drawn into the current effort to keep the project moving at all costs. 


Timing is Everything
Today's national reporting on the allegations of public ethics and procurement improprieties in the BayWEB federal grant comes within days of two other events relating to investigations of the broadband stimulus program.


On Thursday the House Subcommittee on Communications and Technology marked up legislation intended to trigger give backs to the U.S. Treasury of broadband stimulus grants in instances in which fraud or nonperformance are found.. The mark up, voted to be sent to the full Committee on Energy and Commerce, was proposed by Subcommittee Chairman Greg Walden (R-OR-02)  in February. 


As we reported yesterday, credible multiple published reports out of Florida state that the Federal Bureau of Investigation has opened its first probe of a broadband stimulus grant.


Also issued by Strickling's NTIA, the $1.2 million grant to the City of Tallahassee was sponsored by the City Mayor, who is a compensated board member of one the partners in the project. As in the case of BayWEB, questions have been raised about the pre-application selection process of the grant partner. 


Our Take: No More Chicago Rules
 It is time for Secretary Locke to step in and make this right. He needs to stop listening to Larry Strickling on this one. 


Chicago rules don't apply when it gets this messy, even for a large hometown employer.  


The Secretary needs instead to take the wise counsel of, well, his General Counsel. He's a guy from Boston who has never steered us wrong in any number of tough fights. He'll do the same now. 



Resources:
The BayWEB Examination is our compendium of information on the project. We believe it is the most comprehensive such collection available. We have assembled links to all media coverage of the issue, to online documents secured by us from confidential and open sources, to documents secured by others and by this publication under federal and state public records filings, and to our own published reporting.


Note on awardee identification: The project grant was applied for by, and subsequently awarded to, the entity Motorola, Inc., formally traded as (NYSE: MOT). Motorola, Inc. was split into 2 new and separate companies, which both began trading on January 5, 2011.  The network infrastructure side of the business, all public safety equipment lines, and the network integration / management services divisions became Motorola Solutions, Inc. (NYSE: MSI). We have retroactively re-tagged our BayWEB stories with the MSI ticker symbol.
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