Last Friday the FCC voted to establish a $100 million fund to provide one-time grants to fund what they are calling experimental rural broadband projects. The announcement was at a high level of detail and we’ll have to wait a bit to see the specifics. Grant filings will be due within 90 days of the release of the final rules. The FCC hopes to award all of the grants by the end of this year.

Here are a few things that can be gleaned from the high- level release:

• $75 million of the funds will be awarded based upon the ability of projects to deliver at least 25 Mbps download and 5 Mbps upstream. $15 million will be awarded to projects in high cost areas that must deliver at least 10 Mbps download and 1 Mbps upload. And $10 million will be awarded for extremely high cost areas that also can deliver 10 mbps download and 1 Mbps upload.
• The awards will be made based upon a comparison of the amount per passing that is requested compared to the costs calculated for that area by the CAF cost model. Those willing to take the least amount of money compared to costs should win the grants.
• Those willing to serve Indian tribal areas will get a 25% bidding credit.
• There will be some sort of cap set on the amount of any given award.

Here are a few of the things I can glean from these rules so far:

• Nobody should expect these grants to pay for most or all of a broadband project. This is not going to be anything like the Stimulus grants. Some of those grants were for large amounts and paid for a substantial amount of construction. While $100 million may sound like a lot of money, expect the FCC to spread this money to a lot of projects in a lot of states to cover a wide range of technologies.
• You are not going to get a lot per customer. These grants are going to reward those who can pay for most of the cost of a project on their own. So think of these grants as providing a little bit of assistance to construct a broadband project.
• You better already have a project in mind, because 90 days is not a lot of time to understand the filing rules and to complete a grant application.
• Most of this money, except for some very rural places, must be able to deliver at least 25 Mbps download to all of the customers in the proposed service areas. That is going to eliminate a lot of potential projects like point-to-point WiFi networks or even cellular 4G projects that might deliver that much bandwidth to a few customers close to a tower but a lot less bandwidth to those further away. This makes the grant a real technological challenge since there aren’t a lot of technologies other than fiber or a coaxial cable network that can deliver that much bandwidth to everybody. But the awards are not going to be nearly big enough to fund building fiber. The FCC is walking a tightrope between wanting high bandwidth and also expecting filers to pay for most of the project. This combination is going to be hard for a lot of filers to meet.
• Like any federal monies, these grants will come with a lot of paperwork. It’s one thing to have accepted the paperwork burden for taking $10’s of millions of stimulus grant, but you need to consider if that paperwork burden will be worth it for getting a $1 million or smaller grant.
• Because of the quick nature of the process and because the awards will only fund a portion of construction costs, these grants are going to favor incumbent providers who can submit projects that are already in their capital budgets. Since incumbents were already planning on paying the full cost of a project it will be easy for them to just take a little assistance.

The rules should be issued soon and once we see the detailed rules we will understand more about who should and should not bother with this process. There were over 1,000 entities that expressed an interest in these grants at the beginning of the year. I am going to guess that a significant percentage of those projects will find that either they or their projects won’t qualify for the grants.

I hope my caution about the grant process doesn’t come across as too negative, but I have learned from experience that free money is not really free and usually comes with a lot of strings. So before spending money to file these grant requests make sure that you qualify and that you are requesting substantially less than the CAF cost model projects for your study area. There are plenty of folks out there who will be glad to charge you for filing a grant request even if you have little or no chance of winning one.