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Cable ISPs Battling ‘BTOP II’

Broadband infrastructure push shouldn’t shove aside incumbents, they argue 2/27/2017 8:00 AM Eastern
TakeAway

Cable firms don’t want the government to undercut their investments with overbuild bucks.

WASHINGTON — Cable broadband providers that faced overbuilds during the Obama administration’s BTOP broadband stimulus program are trying to head off a repeat under President Trump.

While the new administration is being pushed by tech companies to make broadband part of its trillion-dollar infrastructure rebuild plan — and Democrats are proposing a new, $20 billion broadband subsidy as part of their own proposal — cable Internet-service providers are looking to avoid a reboot of the broadband stimulus plan.

STIMULATING EXPERIENCE

In 2009, the Obama administration made subsidizing broadband buildouts a multibillion-dollar priority. The federal government handed out grants and loans totaling about $4 billion through the Broadband Technology Opportunities Program (BTOP), overseen by the National Telecommunications and Information Administration, and another $3 billion-plus via the Broadband Initiatives Program (BIP), managed by the Agriculture Department’s Rural Utilities Service.

But ISPs, already in the business of building out broadband, and their Republican allies in Congress argued that the programs allowed for too much overbuilding of existing plant. They said with BTOP’s use of, say, speeds of 100 Megabits per second to define a “served” market, given the needs of schools, it was often targeting “underserved” rather than “unserved” areas and was too susceptible to waste and abuse.

Among the strongest critics was Rep. Greg Walden (R-Ore.), now chairman of the powerful House Energy & Commerce Committee. He accused the programs of hundreds of millions of dollars in wasted spending on a program he said was rushed out the door. The NTIA has said its part of the program “increased economic output by as much as $21 billion annually.”

Democrats are looking this time to almost triple the amount that could go toward deploying high-speed broadband to underserved and unserved areas. That is via the New Deal Rural Broadband Act of 2017.

Modeled on the Roosevelt-era rural electrification program, the bill would “authorize $20 billion for new broadband infrastructure focused on rural communities and those without adequate access.”

It is a Democratic-backed bill, but Trump has also been pushed to include broadband buildout funds in his infrastructure package.

Two weeks ago, Sen. Shelley Capito (R-W.Va.) talked up broadband access — as well as fighting opioid abuse — in a meeting with Trump. According to her office, Capito said she was “very encouraged.”

Capito co-chairs the Senate Broadband Caucus, and wrote the president two weeks ago to urge him to invest in broadband.

Michael Powell, president andCEO of NCTA: The Internet & Television Association, warned about new subsidies at a broadband infrastructure event on Capitol Hill earlier this month. He said mistakes made by previous broadband subsidy programs — he did not cite BTOP or RUS, but his meaning was clear — such as overbuilding existing service should not be repeated as everyone “gets on the bandwagon” for the next tranche of infrastructure investment. The goal should be to encourage private investment rather than try to supplant it with government dollars, Powell said.

Powell said buildouts are “breathtakingly expensive” in up-front costs. He said a lot of projects fall into a trap of finding the money to build a network, but not to sustain it, which was one of the knocks on BTOP. He said the cable industry spends up to $17 billion annually just to maintain the plant it has.

Powell has argued that public funding will never be able to sustain broadband buildout projects, which is why he favors tax credits over grants.

As to the big “unserved” versus “underserved” debate, Powell said “underserved” means the economics are at least sustainable. “I think past efforts have consistently made a mistake allowing money to seep from unserved to underserved.”

Powell’s bottom line: Target funds to people who have “nothing.” And don’t use speed to redefine how markets are being served. “Zero up and zero down is the worst speed anyone can have.”

REPUBLICAN SYMPATHY

Powell has allies in the House Republican leadership on the issue of not overbuilding existing plant, though there might not always be absolute agreement.

FCC chairman Ajit Pai supports including broadband infrastructure in a Hill package. But, as he told CNBC last week, he, like Powell, is looking for ways to spur private sector investment and ease barriers to buildouts.

House Communications Subcommittee Chairman Marsha Blackburn (R-Tenn.) signaled at a press conference that she backed closing what she called the digital opportunity gap, but only with oversight and cost-benefit analyses.

“Is [broadband infrastructure] going to be a focus? Yes,” Blackburn said. “Are we always going to be in agreement with the FCC and the Department of Commerce? Probably not. Will we find common ground? Yes. Are we going to do cost-benefit analysis on all of it? Absolutely. Are we going to be fiscally responsible? You can count on it.”

ISPs are certainly hoping that is the case.

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