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March 31, 2009 12:01 PM

How Do We Turn The RUS's $2.5 Billion Into $25 Billion?

There's lots of talk about how there's not enough money in the stimulus to lay broadband everywhere, and that's generally true. $7 billion doesn't go all that far when spread across the entire country.

But unlike the $4.2 billion set aside for NTIA grants, the $2.5 billion allocated to RUS can be distributed as grants, loans, or loan guarantees.

This is an important point to note as depending upon how much RUS sets aside for loan and loan guarantees they may have a whole lot more money to work with.

The reason for this is that loans and loan guarantees don't count dollar-for-dollar against the budget. Instead because of the assumption that some portion of the loans will be paid back and/or some of the guarantees will never be cashed in you only have to count a fraction of the loan or guarantee value against the budget.

Now there are a lot of variables that can impact how a loan or guarantee scores against the budget, but as a ballpark you can generally distribute at least ten times as much in the way of loans or guarantees relative to the budget authority you have to work with.

So circling back to the title of this post, if RUS were to focus all of its $2.5 billion on loans and guarantees rather than grants they'd actually have the ability to hand out at least $25 billion in government support, and potentially even more than that depending on how risky the projects they're investing in are.

But there's a fly in this ointment.

I've been hearing rumblings that RUS may follow NTIA's lead and focus most of its attention on giving out grants.

Most troubling is a key reason why: they're worried about getting all of their dollars out the door quickly. So essentially there's a sense that if they focused more on loans and guarantees that they'd end up with too much money to spend in the timeframe they have to spend it.

While I can respect that this may present a conundrum, I can not accept that this is what's going to be best for America.

For example, what happens if RUS gets $30 billion worth of applications? There's certainly that much work to be done and more. The only questions are how many shovel-ready projects are there, and how long will it take for other communities to become shovel-ready.

So if there's plenty of work to be done, why are we artificially limiting the amount of funds available to spur deployment?

Don't get me wrong: I'm not against grants. In some of the most rural areas they may be necessary to bring broadband to every last building.

But now is not the time to worry more about what's easy than what's best for America.

And it seems clear to me that what's best for America is maximizing how we leverage this down payment for our broadband future so that we can spur as much deployment as we possibly can.

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Comments (1)

Has everyone forgotten that this is a stimulus bill?

That the money is supposed to be spent quickly?

That the whole reason behind the stimulus is because credit is NOT available?

Get the money into the hands of rural carriers, benchmark how well it is spent, and when it is done, figure out what went wrong and decide how to do it different.

Posted by Andrew Schmitt on April 3, 2009 10:57 AM

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