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April 28, 2009 9:28 AM

The Unintended Consequences of the Broadband Stimulus

Was hoping I wouldn't have to say this, but I think so far the broadband stimulus is doing more harm than good.

There are two primary reasons for this.

The first is that from a policy perspective there's a whole lot more discussion going on about how to distribute these limited BTOP dollars than there are conversations about how to craft a national broadband strategy. Given that we have less than a year to create and come to a consensus around that strategy, we can't afford to have the stimulus distract us from pushing this larger dialog forward.

The second, and much bigger concern, is that as things currently stand the stimulus is doing more to slow down deployment than speed it up. I've now heard from multiple people of projects that could already be deploying but instead are waiting to see if they can leverage stimulus dollars to help fund their projects.

On the one hand, I don't blame anyone for doing this. Why put in your own money when the federal government might pick up the tab for you?

But on the other this is an unbelievably bad unintended consequence of making government dollars available. Now we don't just have to deal with whether or not government can distribute its dollars quickly and fairly; we also have to worry about the entire broadband industry slowing its pace of deployment in the hopes of snagging some subsidies.

Of course, it's foolish for any project that could already have been deploying to wait around with their hands out as the legislation specifically states that this money should only go to projects that would not be deploying otherwise. But that hasn't been enough to stop anyone from thinking they might qualify and therefore we're still facing the potential of slower non-subsidized deployment as well as more stimulus applications muddying the picture for NTIA and RUS to decide who gets what.

And the longer it takes for NTIA and RUS to get their rules out, the worse this situation will get as now all new projects will also be looking towards the stimulus for support, which goes against what I want to see, which are projects that are viable without government writing checks.

One other double-edged unintended consequence is that now every community without robust broadband is trying to get their act together around a plan to get stimulus dollars.

On the one side this is great as it's spurring an interest in deployment that many communities just didn't have before.

But on the other it's troubling both because we're again muddying this issue with projects that aren't truly shovel-ready fighting for position over those that are, plus we don't have a support structure in place to help these communities properly prepare themselves.

What this last bit opens up is the possibility of a lot of bad projects getting created. As communities try to figure out what to do they're exposing themselves to a lot of charlatans who claim they can solve their broadband problems but aren't actually qualified to do so. If every community wants to now get broadband, how do they go about figuring out how best to do so?

Previously municipal broadband efforts were driven by an ad hoc network whereby a community interested in broadband went and talked to those who have already done it. But that ad hoc network can't support the demands of every community needing information as they will quickly overwhelm the capacity of successful broadband communities to respond.

That's why our rural fiber group was initially advocating that some of these government dollars be given out as matching grants to cover preplanning costs. In this way we don't just create demand for broadband, we support communities' ability to create plans to spur deployment.

All in all I'm not against the broadband stimulus. I just wish we'd done more to think through the unintended consequences of making a big pot of government money available without any real direction. It would've been great if instead of tossing the hot potato to NTIA and RUS Congress would've been more prescriptive in its legislation.

In lieu of that we need these agencies moving quickly and giving clear directives as to who's going to be eligible to get what. Otherwise if we ignore the reality of how this legislation is influencing the market, the stimulus could end up doing more harm than good.

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Comments (3)

I think the article is correct about BTOP slowing deployment. It may also result in indefinite delays on projects that are not BTOP funded since any investment decision will be weighed against the possibility of a government funded competitor undercutting any privately invested capital. This concern will exist with these rounds of BTOP and in anticipation of a subsequent, son of BTOP giveaway.

Posted by Mel Levine on April 28, 2009 4:16 PM

Really? Doing more harm than good? How many more communities do you think are now considering crafting a broadband plan compared to, say, Nov 2008?

And, do you think the people you've talked to who've slowed projects are really representative of the entire industry?

Finally, if I had told you a year ago that the new Administration had not just committed to, but mandated a comprehensive national broadband plan (also part of the stimulus legislation) wouldn't you had been overjoyed?

BTOP and the RUS program may not be hitting the ground as quickly as you like (but I'm not sure that's realistic), but "doing more harm than good"? Really?

Posted by Kevin Taglang on April 28, 2009 7:43 PM

Mel - I think you're spot on that the issues I raise about BTOP will continue on as the industry speculates on when and where the next chunk of government money will be coming from.

Kevin - I couldn't agree with you more that we're light years ahead of where we were back in November and that BTOP's had a huge impact on getting all communities thinking about their broadband future.

My intent in writing this piece, though, was to point out that BTOP's also had some negative affects on the market as well that could potentially have been avoided if the policy had been more prescriptive in the first place. But because of the uncertainty surrounding who gets what we're slowing down investment and distracting the debate over a national broadband policy.

All this being said, you're right that I probably came off as overly negative in this post when overall I do believe that there's going to be a lot of good to come out of BTOP.

Posted by Geoff Daily on April 28, 2009 11:44 PM

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