How the Stimulus Package Fails Rural Broadband

The Senate today passed its version of the economic stimulus plan, which allocates $7 billion for broadband grants and offers tax credits for certain types of deployments in rural areas. The next step is for the Senate and House to reconcile their respective versions of the bills with an eye toward passing the stimulus before the end of the month.

However, in interviews with two different types of rural ISPs — each of which serve a constituency that the broadband portion of these bills are trying to address — both expressed uncertainty over how much the stimulus package will do for rural broadband.

Om interviewed Keith Galitz, of Canby Telephone, a 105-year old telephone cooperative in Canby, Ore., who expressed doubts that his cooperative would be able to take advantage of the proposed grants in part because he doesn’t have staff with grant-writing expertise. He also said there’s more about the process he’d need to learn, as for example there’s currently some doubt over which agency would administer the grants.

But Canby Telecom is not waiting for grants. Galitz estimates he will spend $3 million to lay fiber in the core residential neighborhood of Canby to reach some 8,000-10,000 residents. The ISP has about 8,000 customers and just over 10,000 lines. He thinks $1 million of grant money would allow him to provide fiber to the town’s central business district. With annual revenue of about $14 million a year, Galitz emphasizes that fiber is a big investment for his tiny ISP.

Rather than lay fiber, Brett Glass, owner of a wireless ISP in Laramie, Wyo., has more specific issues with the stimulus package. He argues that with populations spread out as far and wide and they are, wireless is the only way to economically provide broadband. However, wireless ISPs, especially ones like his, which operate in unlicensed spectrum, will be harmed by aspects of the legislation.

Glass criticizes the network neutrality language in the bills, claiming that allowing unfettered use of high bandwidth applications on his network causes other customers to have slow or dropped connections. He does sell a service for those wanting to use P2P networks, but needs to plan for such usage in the network because it’s shared among so many people. He also needs to charge those users more for the backhaul to the web, which he buys from other carriers.

His other issue is a little bit more arcane, and has to do with who will administer broadband grants. One of the proposed agencies is the Department of Agriculture Rural Utilities Service, which could seek to administer them under a program that doesn’t offer grants to sole proprietorships. Glass says he can’t afford to pay the fees and take the tax hit that would come with incorporation, leaving him unable to take advantage of those funds.

Rural providers seem concerned that large carriers and cable companies will be able to take advantage of this legislation, while leaving independent rural providers out in the cold. That would be a shame.

With additional reporting from Om Malik.