When the announcement came out for the FCC’s experimental grants I wrote that many of the entities who had expressed interest in those grants were going to be disappointed. Now that I have looked at the rules more deeply, let me talk about who is going to get these grants, or better yet, who is not going to get them.
Let’s first look at the largest $75 million portion of the grant. As you go through the rules you can quickly see who is not going to qualify for the money:
- Must propose to deploy a network capable of delivering 100 Mbps downstream/25 Mbps upstream, while offering at least one service plan that provides 25 Mbps down / 5 Mbps up to all locations within the selected census blocks. This eliminates Wisps and cellular carriers.
- Grants are eligible for areas that are not served today with broadband of at least 3 Mbps down / 768 kbps up. This eliminates cable companies that have DOCSIS 1 or higher cable modems today. It also stops these grants from being used by anybody in areas where there are cable modems today.
- Can only be used to serve in price-cap areas. This eliminates anybody that wants to serve an area served by a smaller independent telco.
- Must be able to serve whole census blocks. This eliminates any project not willing to do that. Census blocks very often don’t follow geographic or political boundaries and thus, to meet this criterion it might be necessary to build to an area that is very expensive or not within the planned territory.
- Must submit three years of audited financials within 10 days and an irrevocable letter of credit within 60 days of award. This eliminates any start-up entity that is not already funded and may make it hard for them to qualify even with funding in hand. The feds were very disappointed that so much stimulus money was returned from start-ups who never got their matching funds.
- This is a reverse auction, meaning that funds will go to entities that ask for the least amount of money. This eliminates anybody who isn’t willing to pay for the bulk of a project themselves. And just as a note, this is not a straight dollar comparison, but rather compares the amount of the grant requested to the theoretical cost of serving an area as calculated by federal high cost model.
So who is left? This leaves existing companies with good financial positions who are willing to build fiber or a few types of point-to-point wireless technology to rural areas served by large telcos where there is no existing speeds today of 3 Mbps download. And to win in the reverse auction, a company is going to have to pay for a lot of the project themselves. This probably means telcos, CLECs or existing muni businesses that already have plans to build into rural areas and who would be glad to get part of such a project covered by a grant. That is a pretty small universe of companies and the bulk of this money is likely to go to telcos.
These rules probably eliminates 95% of the entities that filed an interest in these grants this past spring. I hate to use the word sham, but in that process everybody was told that these grants were going to reward good ideas and that filers should be creative. And they were. There were numerous communicates that want to build gigabit networks and to bring their communities to snuff with metro areas. But this auction coldly awards the company willing to take the least amount of subsidy and continues until all of the money is rewarded. There is zero reward in the process for creativity, need or anything other than asking for a low amount of grant dollars per passing.
The other $25 million of the grants are a little easier to qualify for. The big difference is that those networks don’t have to be capable of 100 Mbps or offer speeds of 25 Mbps download. Instead there must be products of at least 10 Mbps down and 1 Mbps up along with a cap of at least 100 GB of usage with a latency better than 100 msec. The 100 GB cap is probably going to eliminate satellite providers.
But these grants still require the areas be rural with no existing service. And companies still need to be able to provide an irrevocable letter of credit within 60 day of award, eliminating start-ups. But this smaller pile of grants will be available to WISPs and cellular companies along with anybody already eligible for the $75 million grants. I would expect most of this money to go to wireless companies willing to pay for a bulk of projects themselves.