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Applying for funding is half the challenge

The broadband stimulus package, created to upgrade America’s broadband infrastructure, is working its intended magic in scattered markets, with early signs that community entities such as libraries, schools and hospitals are benefiting from the $7.2 billion available via the American Recovery and Reinvestment Act of 2009.

Yet for small and independent cable operators serving rural America, the once-promising funds targeted for broadband expansion and network upgrades are proving to be frustratingly elusive – and for many, nearly impossible to access.

A complicated, tedious application process, coupled with strict rules against the sale of funded facilities, have dampened the enthusiasm of first-round funding for smaller service providers, most notably smaller cable operators.

Yet despite those barriers, a growing number of small and independent cable and telecom service providers are applying lessons learned from round one to round two and are now detailing their equipment, technology and network requirements.

Tyrone Garrett, president of Semo Communications, a Missouri-based cable company, said: “We didn’t apply for first-round funding. Too many onerous restrictions. But looking at round two, there are pockets of homes that would benefit from the fiber network we already have in 20 communities. We want to upgrade to DOCSIS 3.0 and stay on technology’s cutting edge, and we have the backbone for middle mile and fiber.”

As the bell rang for round-two funding, some of the restrictions considered among the most onerous were eliminated, most notably the 10-year wait time to sell funded facilities, a move that most agree will create a more favorable environment for smaller operators.

In addition, the National Telecommunications and Information Administration eliminated the requirement that certain applicants had to apply with the Rural Utilities Service before being eligible to obtain NTIA grants. And the term “remote” was eliminated to expand access to grants in lieu of loans.

“The greatest funding opportunity is on the infrastructure side, and for smaller operators to become contractors or vendors. They have experience in middle mile, and much of the infrastructure is already oriented there,” said J.G. Harrington, a member of the Washington-based law firm Dow Lohnes. With many smaller operators looking to upgrade their systems, the stimulus package is well-timed. Added Harrington: “It’s a big capital hit to upgrade to, say, 800 MHz. So the funding could solve that. If they need a backbone connection to link several smaller systems, that is just what the funding is for.”

It could also advance emerging technologies such as RFoG, a technology suited to reach low-density areas, said Ian Olgeirson, a senior analyst with SNL Kagan.

“For certain operators, it’s a chance to upgrade their equipment and technologies like RFoG and stretch their plant to reach new housing while turning their plants into two-way. There’s also an opportunity to add or upgrade headend and network equipment, cable modems, labor and construction. But it’s a super challenging environment for smaller operators with capital requirements. The broadband grants could offer some relief.”

Mid-Atlantic Broadband Cooperative got some relief with a $16 million stimulus fund grant and $4 million of matching funds from the Virginia Tobacco Commission.

Tad Deriso, president and CEO of Mid-Atlantic Broadband, a company with 55 private sector telecom members, said: “It really helped. We connected 460 miles of 144-strand fiber build to 121 schools with a backbone that would have taken years to build. We’re also providing transport for smaller cable operators from their main headends to mini-headends. When you get to HD and VOD, it’s hard to replicate in several locations, so we transport to those locations. Smaller operators have an opportunity to be last-mile providers and connect to our equipment and take it the rest of the way.”

DTN DWDM SystemIts grant provides additional access points to the unserved and underserved regions with telco services and extended last-mile services.

A crucial component to the funding process, insisted Harrington, was partnering with local communities. “Small operators would be well-served to partner with community organizations and local institutions, even among multiple communities. That is priority number one.”

Lakeview Cable in Oklahoma got the partnering message. Its application for first-round funding was replete with school districts, vocational schools, a nursing home, low-income areas, fire and ambulance departments, telemedicine, and even rights-of-way and a Cisco Systems partnership.

“We felt a partner like Cisco would help. That was our main equipment tie-in so all schools could interact together via VOD,” said Mike Rowell, general manager of Lakeview Cable.

That could be welcome news to another equipment sector such as VOD and the companies playing in that space, which includes SeaChange International.

“We’re working with content aggregators that serve smaller markets and are looking to provide VOD, advertising, content. Potentially, the infrastructure would only need half the equipment, less software and could run on a single server,” said Sanjiv More, senior director of advanced advertising and VOD sales for SeaChange.

Infinera, an optical network provider that is partnering with Mid-Atlantic Broadband, is feeling the impact of the stimulus package, as well.

“We’ve developed large-scale photonic integrated circuits, chips that offer networking that is easier to operate and manage cost-efficiently because of fewer parts and the circuitry. It’s a great opportunity for smaller cable operators and rural telcos,” explained Jeff Ferry, director of broadband marketing for Infinera.

The stimulus funding process hasn’t exactly moved at light speed, however, prompting a chorus of grumbles from equipment manufacturers and service providers alike. Added Ferry: “We’re disappointed it hasn’t moved faster. But there are good parameters and lots of work to do.”

John DahlquistSome of that work entails opening up the networks, which, according to Aurora Networks’ John Dahlquist, is a key sticking point for smaller operators in their quest for stimulus money.

“Many smaller operators have chosen not to participate in the funding process because of the onerous strings attached if they open up their networks. The ones moving forward are using RFoG, and transmitters for headends and CPEs are extremely important. That’s where we see the money being spent,” said Dahlquist, Aurora’s vice president of marketing.

One other spend was on a SONET backbone, and though admittedly “old school,” Deriso chuckled, it works.

“When the stimulus package came up, the major technical direction in our region was the SONET backbone. When properly engineered, it’s the best way to offer Ethernet service. It offers network visibility and QoS, and we wanted a carrier-class network. Maybe it’s old school, but we’re not capacity-constrained and haven’t had to increase the SONET rings,” Mid-Atlantic Broadband’s Deriso concluded.

Just how the small and independent cable community responds to the second-round funding process will likely depend on who they partner with and how they architect their networks for broadband service.

Out of the 80 American Cable Association members that applied, just one received first-round funding, and this has prompted questions about the unbalanced distribution of grants in favor of smaller telcos.

Some key revisions to the application process will help with second-round funding, experts maintain, and the nurturing of community partnerships is expected to go a long way in accessing grants.

Now smaller operators and telcos, along with equipment manufacturers and technology and software companies, should be better prepared to enter round two with newfound vigor.

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