Stimulus plan is great, but does it go far enough?

The federal government’s stimulus plan might come up short in the area of investments in telecommunications technologies, according to industry analysts. Decisions driven by the American Recovery and Reinvestment Act might even push companies in the wrong direction.

The act directs $7.2 billion to telecom-related programs. Of that, approximately $6.39 billion is in the form of grants and loans to promote broadband access in rural, unserved, and underserved areas. The remaining allocation funds the development of a National Broadband Inventory Map and provides grants for community programs that encourage broadband adoption and expand public computer centers.

A recent report from inCode, an Atlanta-based telecom consulting firm, says there’s a lot to cheer about the stimulus plan. According to the report – “Stimulus Spending and American Telecom: Change to Believe In” – “The final Act succeeds in many ways versus earlier House and Senate bills, especially in allowing the market to decide the technologies and speed requirements to close the digital divide, under the scrutiny of [the National Telecommunications and Information Administration] and [the Rural Utilization Service] policy officials that have experience in running such programs.”

In particular, the report singles out the welcome creation of a “broadband map,” and the push for vendor- and technology-agnostic policies.

At the same time, inCode believes the plan has significant weaknesses. First, of course, is the small number of dollars it involves. “A lot of the economic studies show that if you really want to offer broadband to everybody, $15 billion to $30 billion would be a better number than $6 billion,” said Jorge Fuenzalida, general manager at inCode.

Fuenzalida is also concerned about the timing dictated by the legislation. The inCode report points out that funds have to be allocated and used in the very near term. “While this spirit serves to stimulate the economy and create telecom jobs, it may lead service providers to make short-term technology decisions that will be superseded by better technologies only a few years later,” the report warns.

“Right now if you’re looking at wireless broadband and you wanted to build a network today, the most available and probably the best technology today would be WiMax,” Fuenzalida said. “And when WiMax works it works just fine. But recently in Barcelona, Verizon has announced bold plans around [Long Term Evolution]. Which is better? If you went today with WiMax you might be on something that is less than standard a few years from now and you might have higher device cost and fewer device choices.”

Long Term Evolution, ior LTE, is a developing communications technology.

Finally, Fuenzalida notes that the structure of the aid may push companies to be inefficient. “It’s more around grants and loans as opposed to tax credits,” he said. “I think that’s going to push people to do more of the Greenfield type deployments. If it were more oriented toward tax cuts it would benefit the incumbents who are throwing out cash [to improve broadband in the cities and suburbs].”

At the end of the day, said Fuenzalida, the legislation reflects the American tendency to let the market make the decisions, a policy that has benefits and risks. “A lot of the innovations have occurred here,” he said. “At the same time, we’ve had many more telecom companies go bust here because of stranded technologies or non-standard technologies. We tend to be this grand experiment here that the rest of the world can watch, while most of the rest of the world tells operators what technologies they have to employ.”

About the Author

Patrick Marshall is a freelance technology writer for GCN.

Reader Comments

Thu, Feb 26, 2009 DOD

How can the stimulus bill be "great" if it will "push companies to be inefficient"? The writer appears to be doing too much cheerleading and no real analysis.

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