In much the same way the banks pushed back on Washington over restrictions tied to stimulus money, telecom and cable companies aren’t taking grants for rural expansion.
Here's the background: The Obama administration’s broadband initiative is providing $4.7 billion in grant money to service providers for infrastructure build-out. The loans and grants are part of a $7.2 billion overall program to provide broadband access throughout the contiguous U.S.A.
These highly capitalized companies do not need the government’s stimulus money nor the sword of Damocles hanging over their heads. They aren't willing to build out into rural areas, because it’s not cost effective, and taking the government’s money would open the doors to more demands that many carriers view as stifling profits.
Walter B. McCormick Jr., president of the telecom trade group, United States Telecom Association (USTelecom) , told the Post: “We are concerned that some new mandates seem to go well beyond current laws and [FCC] rules, and may lead to the kind of continuing uncertainty and delay that is antithetical to the president’s primary goals of economic stimulus and job creation.”
Denver-based Qwest Communications International Inc. (NYSE: Q), the third-largest U.S. phone company, is sitting out the first round also, hoping the rules will change. “Upon evaluation of the funding opportunity and the various requirements for participation, we were unable to make the business case for filing an application for more rural opportunities,” wrote Steve Davis, Qwest’s senior VP of public relations, in a statement to the Denver Business Journal.
Although no one’s admitting it openly, the extension is in large part a consequence of a lack of participation in the program.
With cable and telephone carriers owning 85 percent of the lines in this country uninterested in participation in the build-out under the current format, the program comes in jeopardy of not getting off the ground on time or on budget.
Some see the stimulus money going to smaller carriers.
Mark Seifert, senior advisor to the assistant secretary of the NTIA, concedes that no rules were etched in stone about how large or small the carrier needs to be to participate in the broadband effort.
The lack of participation from large providers spells big trouble for the broadband initiative, however. Despite the $7.2 billion only being a “down payment” for the FCC’s larger plan, if money goes to smaller, less-equipped companies, deadlines could be extended and budgets blown out.
This is yet another glaringly evident example of how the government is no match when it comes to the battle of wits with top-tier corporate America. The government's efforts to wrangle the broadband giants will prove a formidable challenge.
— Chris Poley has been a professional trader for more than 20 years.
I am one of a group of people that set that up, I shun the credit. If anyone wants some tips or info feel free to contact me, I'll help in anyway I can.
For the instance of the unconnected 6 houses in the middle of a saturated area, I'd ask the cable company if they weren't willing to do it, what contractor would they accept to do the work and then pitch in and privately contract the work.
Homesteadtrader, Maybe the cable company thinks you are Amish and are trying to break ranks ;->
Seriously, I think cost effectiveness and "just not wanting to be bothered" in this case, are the same thing.
My suggestion to you, is try your hardwire phone company, you have copper to your house. I suppose you can get an ISDN line which is slower than DSL but twice as fast as typical 56K.
Or, go to your municipality and see if you can get other residents within your surrounding communities, much like dlavie did, to try and start some dialogue on local governmental level. This may get the attention of someone willing to help.
Yes, I do have the Verizon mobile broadband. But it is just a little bit faster than dial up, and as I said, really not worth the price they gouge you for. But it is either that ir 2 phone lines plus internet cost.
The biggest thing with the cable, is that there is the same number of houses on the piece of road they refuse to do, as there is on both ends of the road they will service. And we all (6 families) wanted cable. This is what we don't understand.
All they need to do is litterally connect the 2 ends of the wires! Probably less than a 1/4 mile of line needed to finish the road. Plus it is a small rural road (barely 2 lanes), that was once an old Dutch farm settlement where the farm houses line the road. They're not set way back or spread far apart. These old houses are litterally almost on the road, to where if they wanted to ever widen the road, even a little, they'ed have to buy almost all the houses and demolish them. So, we're probably talking less wire use than they would normally use on an average job.
When I called them and they said to me about "cost effectiveness", I asked them why then, did they bring their lines up either end of the road, which actually had only 3 families on each end, and stop where the settlement was more populated (having 6 families)? They couldn't answer me. Then, I asked them why they sent a brochure about signing on with cable/internet, when it was obvious that they had no intention to even bring the service to us. They claimed it was an oversite.
Sometimes, I think it is more than just cost effectiveness. When I was fighting with the company, I almost got more of a feeling that it was more like they just didn't want to be bothered.
Maybe someday we'll get internet from someone that is actually useful and fast!
Thanks for interesting commentary cbrown. Without going into their financial statements I don't know precisely what their cash flows are, but they run operating margins 17-20% and net profit margins all above 10% quarter to quarter, that’s tremendous in this environment. These are service providers not network manufacturers and are not subject to the same market conditions.
My only point is the Gov't can't run any business profitably, look at the Post Office, Fannie Mae, Freddie, Mac, Medicare, social security, all f'n disasters. Sure maybe provide some loans and grants to get the ball rolling, but first round of $7.2 is quite the ball, no?
Yes, Of course net-neutrality is good for all but the ISPs, if they take the money, that I claim they do not need, what's the sense. I'm not supporting big telecom or cable, as a business they are doing what serves their shareholders best, that's all.
The gov't is obviously getting involved because no one else wants to run 10 miles of fiber and accommodate 4 homes. I just assume with all the choices to select, let the market or municipalities do the initiating and let big brother sit this one out, his dance card is plenty full.
I've been away a few days and came back to see arguments about socialism/capitalism - i'll stay out of that! Just a few comments:
1).These companies like Verizon, Comcast and AT&T are flush with cash.
Hmm...well yes and no. Their wireless divisions have done reasonably well but wireline margins have been on a downward spiral for nearly a decade now. There have probably been as many if not more layoffs in the telecom sector - from both carriers and equipment manufacturers - than in the auto industry. Flush with cash? Ask Nortel, Cisco, Siemens, et al if it's being spent on their equipment. It's not. Even if they had the money, we're well past the go-go days of the late 90s when you could build as much as you could and grab as much revenue as you could before the money dried up. Network expansions today require a sound business case.
2).The money can bring unwanted scrutiny of business practices and compensation as seen with the auto makers and banks.
Very true! Before the AIG scandal there was a Worldcom/Ebbers scandal, a Nortel scandal, an Adelphia scandal, etc... Sure there are different players now, but what politician would be willing to trust them with taxpayer dollars?
3) The further push for net-neutrality will be attached to these funds
Yes, but of course for everyone else that's not a bad thing :-)
4).The cash they have is more than enough to go it alone without government intervention
Like I said, whether they have the cash or not (more likely the latter), these companies are ultimately in the business of making money. As J DAmbrosio pointed out in an earlier post, it's extremely difficult to make the business case for broadband work in rural areas, even for LTE/Wimax services. If the business case doesn't work then the carriers aren't going to make the investment.
Indeed, were it not for government mandates (in exchange for monopoly) these areas would never have been provisioned for telephone service decades ago. It's very reasonable to assume that unless the government offers some kind of tax break, cash incentive or legislative mandate that rural broadband simply isn't going to happen any time soon.
It seems you have your hands full between your terrain and lack of participation from regional carriers.
On the other hand, your ECVCFN initiative seems to have taken the time and effort to review all options available as of now as reported in your press release.
I wish you and your surrounding communities a rapid solution and all the fiscal success. Thanks for not biting your tongue and sharing with us your program.
I started working at the Dominican Republic's telecom regulator (read DR FCC), specifically with development projects.
One of them is called Rural Broadband. What we did was create a pilot program to prove that its profitable and from there, have more interest from the telecom companies.
Our goal is to provide broadband* to all communities that have at least 300 people or 80 houses.
Also, it's not smart to pick one technology but to be flexible enough to use whatever fits best. Wireless in some regions, fiber in others, etc.
The concensus was fiber was best. Our topography is bad for wireless, however most of the covered area has above ground (poles) service for power and existing copper for telephone. Its a lot of linear miles but once pulled it can be up for a long time, barring traffic and weather issues. The laws in Vermont allow us access to the poles (we have to pay the owner of the pole)
With the wireless, you're still having to pull fiber to the remotes for backhaul.
The drawback to fiber is of course it doesn't address the mobile crowd, we expect the next big thing for us will be small wireless "strap ons" in a local church steeple for a local wireless.
Cel phone coverage is not too good in the state. Verizon and the big players haven't got a complete solution yet and they have way more capital than us.
Hey dlavie, Is it possible to piggy back electrical towers and place cellular signals on the towers themselves. Does the electrical current interfere with the signal?
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