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ACA: New Broadband Stimulus Loan/Grant Rules From NTIA And RUS Further Disadvantage Small Cable Providers

Trade Group Disappointed Updated Regulations Have Become Bad for Taxpayers, Less Industry Neutral

PITTSBURGH, February 2, 2010 - According to the American Cable Association, new rules adopted by the National Telecommunications and Information Administration and the Rural Utilities Service would further advantage certain segments of the telecommunications industry over small cable operators interested in obtaining broadband infrastructure loans and grants available under the American Recovery and Reinvestment Act of 2009 for last-mile broadband deployment.

"ACA is disappointed that NTIA and RUS structurally modified the programs in a way that makes it harder for small cable providers to receive last-mile funding," ACA President and CEO Matthew M. Polka said. "The rules seem to favor every entity except small cable operators, who are well-positioned to deliver state-of-the-art broadband facilities in rural and remote communities at low costs. Not surprisingly, we will be closely monitoring the implementation of the programs to ensure that small cable operators are not unfairly treated."

Small cable operators should not be disadvantaged because regulations have been written that side with competitors to many ACA members, Polka explained in a letter (attached) sent Feb. 2 to Assistant Commerce Secretary and NTIA Administrator Lawrence E. Strickling and RUS Administrator Jonathan S. Adelstein.

"The American taxpayer will be disappointed to learn that the program was changed to give greater priority to awarding particular segments of the telecommunications industry with broadband funding over equally or better qualified applicants, including ACA members, that could provide the same broadband service at a lower cost," Polka said.

Under last year's economic stimulus law, Congress provided NTIA and RUS with $7.2 billion in funding for broadband infrastructure loans and grants issued to eligible entities. All funds need to be allocated by Sept. 30, 2010.

According to ACA, NTIA and RUS made various adjustments to its second-round funding rules that dismayingly tilt in favor of rural telephone and satellite companies to a degree that more than likely gives them a decided advantage over smaller cable operators that decide to apply for last-mile grants and loans. 

Polka noted that in the rules, RUS opted to increase from 5 to 8 the number of points out of 100 automatically awarded to applicants that have borrowed funds under Title II of the Rural Electric Act of 1936, which are overwhelmingly traditional phone companies.  Moreover, RUS plans to set aside $100 million in grants specifically for satellite broadband targeted at rural unserved areas.

This decision to bolster incumbent RUS borrowers has taken on greater urgency because NTIA says that most of its $2.6 billion in broadband grants will go to middle-mile projects, while the RUS's $2.2 billion in grants and loans will mostly go toward building last-mile infrastructure projects.

"If preference had to be given to past borrowers, we thought 5 points was too much last round. Now, we are perplexed that RUS would make matters worse by increasing that amount to 8 points.  In our new era of open government, we would have hoped for a clear explanation of changes that so apparently disadvantage small cable," Polka said. "Favoritism and disparate regulatory treatment are not a formula for success."

To their credit, NTIA and RUS did respond to some of ACA's concerns.  For example, NTIA eliminated the strict prohibition on the sale of funded facilities within 10 years; RUS eliminated the definition of "remote," thereby broadening access to grants in lieu of loans; and the NTIA eliminated the requirement that certain applicants had to apply with RUS first before being eligible to obtain NTIA grants.

"But for the agencies' decision that RUS will be the primary source of last-mile funding and the RUS's increased preference for awarding certain segments of the industry, these rule changes would have encouraged more small cable providers to participate. As it stands now, I'm afraid that we'll see fewer small cable operators seeking to apply for money to help the Obama Administration achieve the goal of making broadband service both universal and affordable to every American in the near future," Polka said.

ACA is encouraged to learn that NTIA and RUS will soon send out approximately 1,400 letters to applicants whose proposed projects will not be receiving loans and grants under the first round of funding applied for last year. These letters will inform ACA members whether they need to consider applying in the second round.

Last year, more than 80 ACA member companies applied for broadband stimulus funding for an array of last-mile and middle-mile projects totaling more than $1.3 billion. Of the 80, only one was granted. The turnout by ACA members would have been greater if certain funding restrictions had not made it so difficult for small cable companies to apply.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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