Broadband stimulus: $28 billion dollars in applications chasing $7.2 billion dollars in funding – including Alaska’s new and improved, underwater bridge to nowhere!
$28 billion in applications were received in the first round of an ostensibly three round process to award $7.2 billion in broadband stimulus allocated in the American Recovery and Reinvestment Act of 2009 (ARRA). Recently, the National Telecommunications Information Administration (NTIA) and the Department of Agriculture’s Rural Utility Service (RUS) have released summary data on each of these applications at their Broadband USA site.
We have downloaded and analyzed a complete set of these summaries and have made a few initial observations:
- There were 2,186 applications received
- The average application size (across BIP and BTOP, loans and grants) was $12.7 million, but the median application size was significantly less: $2.7 million
- Alaska had the largest total dollar amount requested, at $1.3 billion
- The largest application was from RADgov, a proposal to build and connect computer learning centers in underserved communities across the US for the staggering cost of $938 million dollars
The following charts fill out the top 10 states in terms of total funds requested as well as funds requested per capita:
Top 10 states by total broadband stimulus funds requested and funds requested per capita
In our last post on broadband policy, I highlighted the six least densely populated states: New Mexico, South Dakota, North Dakota, Montana, Wyoming, and Alaska. These states all have fewer than 20 people per square mile and actual broadband performance that is demonstrably lower than the US average. Of these laggards, only Alaska makes the cut in the top 10 for total funding requests, but four out of the six are represented in the top 10 on a per capita basis – and a fifth, Montana, is ranked 11th.
This one piece of news is encouraging, at least: Some of the money is likely to head to the markets with the greatest need.
Unfortunately, digging deeper provides reason for concern. Three of the top 10 states ranked on funding requests per capita are in the top 10 for actual broadband performance: Rhode Island, the District of Columbia, and Maryland. These are all densely populated areas with meaningful broadband competition.
Looking at specific high value applications gets even more interesting. Among the top 10 applications, four are satellite, three are unlikely to qualify, and the remaining two have a disturbing, “bridge to nowhere” feel. These are all very large projects and most don’t seem to fit the model the architects of the broadband stimulus program had in mind.
Top 10 broadband stimulus applications by total funding request
Echostar, Hughes, and AtConnect are applying for funding to support satellite broadband deployments in spite of the fact that satellite already has nationwide coverage but does not “count” in the calculation of unserved and underserved areas. RADgov and Edgenics are applying for funding to support e-learning, computer learning centers, and government information web portals far in excess of what is likely to be available for these non-broadband-access initiatives. Kodak-Kenai and Adak Eagle are each proposing hundreds of millions of dollars of investments in undersea fiber to serve very few potential subscribers in remote areas of Alaska – an underwater bridge to nowhere!
Beyond the top ten, the value of applications continues to be highly concentrated, with the top 10% of the largest applications corresponding to 66% of total funds applied for and the top 20% representing roughly 80% of the total.
The top 10% of applications represent 66% of total funds applied for
It will be interesting to see how the process plays out – if awards will be made to a few large, pork barrel projects or if dollars will be carefully allocated to the rural states and areas where broadband economics break down and private sector competition is likely to remain weak.
(Update #1 – amended characterization of WindTalk following clarifying conversations with its management; Update #2 – responses and analysis of the cost per household @ Where $28 billion of broadband stimulus goes – the ‘underwater bridge to nowhere’ costs $50,000 per household)
Your post seems to miss the large point and intent of the broadband funds in the Stimulus Act. Those funds were designed to deploy true broadband to locations that are ”unserved” and “underserved”. Why? Because if a location has a large enough population density, or an affluent enough population, the private market has already scrambled to bring service there. Low density, remote and rural markets all over America are struggling with lack of access to service and they fall further behind every day. The rural portions of Alaska are in, in fact, the most remote and unserved in America. They are served only by satellite, which is orders of magnitude more expensive than just about anywhere else in the US, when it is running. At PBIA we support projects that will deploy sustainable solutions for robust, high speed and reliable broadband, especially in remote and rural Alaska. The people who live there, just as the people who live in other rural states, all have a right to high level services and access – that is the federal law. But, without a significant federal investment in rural Alaska, just as in other rural parts of America, real broadband to all Americans will remain a dream. PBIA’s goal of ubiquitous broadband for everyone means that rural Alaska must also be covered if the US as a whole is going to be fully connected. Unlike the Lower 48, with strands of dark fiber running all over the place, the largest part of Alaska, and more than ½ its communities, remain technically unconnected by any reasonable standard today. At PBIA we give well thought out, well designed, and scalable projects in rural Alaska, just as in other remote and rural parts of the country, the benefit of the doubt as it appears they qualify as well as anyone, if not more, for the intended uses of the rural broadband funds in the Stimulus Act. It just so happens that after our review of total reach, total design, total scalability, and total shovel readiness of the proposed Alaska projects, we think the Kodiak Kenai Cable Company’s proposal should move forward and be funded under the Stimulus Act. Also, the fact that the business model of the company, operating as a “carrier’s carrier”, is great because it fits our desired model in driving competition, avoids monopolies, encourages innovation and will result in better service and customer choice for our fellow Americans living in an area the size of nearly the entire Eastern Seaboard. It is important to know the facts. Your post did not demonstrate this understanding. There are larger federal policies at play here and the Kodiak Kenai Cable Company’s project appears to hit all of them.
Scott Slater
Co-Founder & Exec Dir
Personal Broadband Industry Assoc
@Scott – thank you for your comment. Your stated goal is ‘ubiquitous broadband for everyone’. You qualify that as variously: ‘….high speed and reliable broadband…’; ‘…high level services and access…”; ‘…real broadband…’. With any government spending, however, there is a trade-off involved: how much money will be redistributed, for what net benefit.
The key criteria here are the benefits and costs involved, both for the people served, and for the broader population; we’re searching for the greatest good for the common weal.
Given finite funds, the key considerations here *must* be how much the service is improved, for how many people, at what cost. There is a huge opportunity cost to very expensive projects that serve small numbers of people; the much larger number of people who could have benefited had that spending been allocated to its highest and best use.
From that perspective, $344 million dollars to connect a few people in Western Alaska will deny the benefits of the broadband stimulus to much larger numbers of people elsewhere. Here’s a quick calculation: a quick search suggests that the population of Western Alaska is about 30,000 people (http://www.dced.state.ak.us/bsc/CDQ/cdq_handbook/9_cdq_chapt2.pdf), so with an average household size of 2.59 (http://factfinder.census.gov/servlet/SAFFFacts) there are about 11,000 households. Average US broadband penetration is about 60% (although the Broadband Stimulus will increase this), so we could anticipate that there would be about 7,000 or so households subscribing to broadband service.
On that basis, $344 million dollars is about $50,000 per household subscribing to broadband service. That’s a very expensive underwater bridge to nowhere.
Michael
Scott,
Thanks for your post. I appreciate the debate, and I agree with two key points you make:
1) Alaska is the most disadvantaged state in terms of broadband economics (see my post: http://blog.endeavourpartners.net/2009/08/26/population-density-and-broadband-economics/)
2) the purpose of the broadband stimulus act is to bring broadband services to unserved and underserved areas exactly such as these.
But I am struggling with how hundreds of millions of dollars for undersea fiber could possibly be the most cost effective solution to serve only thousands of customers. I am also struggling with how this investment will ever pay itself back or reap any meaningful benefit in terms of job growth, new business formation, or economic recovery.
The question at hand is not: “How do we reach every man, woman, and child in the US with super fast broadband regardless of cost?”
The question is more like: “What is the best way to spend $7.2 billion to provide the greatest improvement in broadband service affordability and availability to unserved and underserved areas while also creating jobs and spurring economic growth?”
We look forward to seeing more details about these proposals, so that we can look at the facts and provide a more fully informed opinion. My first impression is that the Alaska undersea fiber projects do not meet the hurdle implied by the second question above.
Best regards,
Moe.
“Underwater bridge to nowhere!” Does that mean it doesn’t go to Massachusetts? Perhaps bridges should only go to Chappaquiddick and Alaskans shouldn’t be connected. But wouldn’t that would seem contrary to the purpose of the $7.2 billion that was appropriated for “rural?” We are rural here in Alaska and the legislative intent was directed toward rural. Is it surprising that a rural area is less densely populated than Boston? You probably ski in Vermont and figure Americans farther from Manhattan than that don’t really need access. Of course it is more costly per capita to bring broadband to distant and sparsely populated communities! Here — in the obscure and poorly mapped area west of the Alleghenys — we too are Americans and a representative Congress has declared that we shall be part of the national communications network. Along with the sparse polulation, extreme distances and challenging contruction conditions, the significant cost of the multiple proposals from this state reflect the need and desire of our population to be connected.
Let me conclude by saying that the funding of Alaska infrastructure projects absolutely promotes Congress’ goals for ARRA and for any of the Alaska projects for which grants and/or loans are awarded, economies in many of the Lower 48 states will benefit with contracts for materials and services. The Alaska oil pipeline benefited Alaskans and the nation. Broadband access in Alaska would do likewise.
(Jim Rowe is Executive Director of the Alaska Telephone Association. Its goal is advocating “for uniformity and efficiency in accounting, operating, maintenance and construction for supporting the continuance of telecommunications service to the public.” )
Your review of the ARRA responses provided some insight into the status of the program, but you should have ended your blog before electing to assume the role of ‘judge and jury’ of individual submissions. The language of the legislation is very clear that ARRA is specifically intended to facilitate broadband deployment to rural areas, with the primary focus being deployment of broadband infrastructure to unserved and underserved areas in the United States. Also, NOFA guidelines are clear in conveying that an objective of the program is to serve as a source of funding for projects that cannot attract sufficient private capital to cover the entire effort because of size, remoteness, and lack of market size necessary to support investor returns on investment.
And let’s not forget the stated objectives of the Stimulus Act in supporting the creation of jobs during these difficult economic times. So, it strikes me that the more appropriate measure for evaluation of proposals will be applications that generate jobs for our economy AND provide broadband services for fellow Americans living in unserved rural areas.
Other key attributes not discussed in your degradation of the Alaska projects are additional uses of the cable system that spans:
a. Transport of data from future ocean observatories to assess the rate of global warming impacts on our environment,
b. Surveillance systems tracking new vessels transiting the now opened Northeast Passage,
c. Monitoring of marine mammal populations now threatened, and
d. Provisioning of diverse routing path for DOD and Coast Guard’s telecommunications requirements into Alaska.
In preparing your blog, you may not be aware of programs being planned by federal agencies for undersea ocean observatories in the Chukchi and Beaufort Seas and Bering Straits that will use a fiber based, real-time transport system for access of data by research teams located at Universities throughout the US. Do not shortchange the significant impact that such a broadband data collection system will contribute toward our understanding of the challenges of global warming.
Access to scalable low latency, broadband networks is a fundamental cornerstone for communities to complete on both national and international levels. In addition to a focus on the number of households, other essential elements of the Western Alaska region include hospitals, schools, university campuses, companies, research institutions, Indian Tribes, national defense entities and other segments of communities that must have access to broadband transport. The current telecom backbones serviced only by satellite services represents a real and significant constraint on the economic growth of these communities. Your reference to an “undersea bridge to nowhere” may be effective in capturing public attention, but represents a stake through the hearts of the great people and institutions of Western Alaska that are counting on migration to fiber based systems as their “bridge to future economic development”.
(Dr Barratino is the Chief Executive Officer of Global Broadband Solutions, an advanced technology communications services company providing consumers of domestic and international broadband telecommunications services with tailored global network solutions.)
@Jim
Thank you for your comment. We recognize and endorse the legislative intent of the broadband stimulus, and have said so repeatedly. We also recognize that it is more expensive to serve sparse populations dispersed over a very wide area; both Moe and I have spent decades working on novel business models for broadband.
Our concern is the the cost-effectiveness of this proposal, and the opportunity cost.
Optical fiber is a high-fixed cost, very high capacity technology, whose cost of deployment is directly related to distance. As such it is a ruinously expensive technology to serve small numbers of people dispersed over very long distances.
Given finite funding, the money spent providing connectivity to the few people in these communities this way means that many other people in other rural and unserved or underserved areas will remain disenfranchised. The goal is not to connect every American, regardless of location; it is to extend connectivity and as such the key question is what is the best way to spend the money and serve these communities.
@William
Thank you for your thoughtful comment.
While we agree with your characterization of the program, and the potential benefits to the people that would be served by the Kodiak Kenai Northern Fiber Optic Link, we question only the cost effectiveness of this proposal and the opportunity cost. Is this way of doing it really the highest and best use of finite funds, given alternative approaches and competing uses for the funds?
Perhaps this might also be an opportunity for us to learn from examples elsewhere in the world; what approaches have proved effective in bridging connectivity to communities in unserved or underserved areas of Latin America, Africa and Asia for example? Might these suggest some solutions?
[...] Stimulus Update: Over $21 billion in grant requests; 67% of applications are grant only Our post last week on applications for broadband stimulus funds received a lot of attention. While some people disagreed with our conclusions, most found our [...]