News

Not Very Stimulated

9/19/2009 2:00 AM Eastern

Small cable operators held back from applying in the first round of the $7.2 billion broadband stimulus program in droves, apparently fearful that restrictions imposed by the government in the first round of funding were too onerous.

The National Telecommunications and Information Administration — one of the two federal agencies administering the broadband grants — said earlier this month it had received 2,200 applications seeking $28 billion in funding for the grants. Last Thursday, the American Cable Association, which represents about 900 small and midsized cable companies across the country, said about 83 of its members applied for $1.3 billion in grants.

Among those that applied were small operators like Wave Broadband (12 projects worth $10.5 million); Boycom Cablevision (one project, $40.8 million) and NPG Cable (four projects, $3.8 million).

There were a few surprising entries. According to the NTIA database, Zito Media, the small Coudersport, Pa., cable operator run by James Rigas, a former executive at Adelphia Communications and Adelphia Business Solutions and son of John Rigas, the former chairman of Adelphia Communications, applied for funding.

According to the NTIA database, Zito has applied for four separate projects totaling about $29 million, the most ambitious being a $12.6 million fiber ring for Southeastern Ohio and Northern West Virginia. According to the filing, Zito plans to build a 710-mile fiber ring with 10 Gigabits of bandwidth for rural broadband.

Bresnan Communications is proposing a $70 million project in Montana, in partnership with the state and tribal governments of Montana’s seven Native American reservations to develop a statewide middle-mile fiber network.

The broadband stimulus is part of the American Recovery and Reinvestment Act. The bill sets aside $7.2 billion in funding for broadband projects in rural and underserved areas of the country. The plan is being administered by two federal agencies — the National Telecommunications and Information Administration and the U.S. Department of Agriculture’s Rural Utilities Service.

Concerns that the program would shut out small cable operators began to mount in July, when at the Independent Show in Grapevine, Texas, several small operators expressed concerns over restrictions attached to the funding. Of particular concern were the requirements that the government hold a first lien on the project, which some feared would violate their existing bank covenants, and a 10-year ban on the sale of any federally funded project.

ACA CEO Matt Polka said that those restrictions were a barrier for some companies.

“Although many ACA members applied for grants and loans, the turnout would have been greater if the federal government had not attached funding restrictions that made it more difficult for small cable companies to apply,” Polka said in a statement pointing specifically to the first-lien and 10-year ban restrictions.

“We hope these onerous restrictions will be lifted before applications for the second round are due,” he said.

WHO’S SEEKING STIMULUS

Some 83 independent cable operators applied for funding in the first round of federal broadband-stimulus funding. A few examples:

Company Projects Amount Areas
SOURCE: National Telecommunications & Information Administration
Wave Division Holdings 12 $10.5 million Ore., Calif, Wash.
NPG Cable 4 $3.8 million Ariz., Mo.
Boycom Cablevision 1 $40.8 million Mo.
Bresnan Communications 1 $70 million Mont.
Bend Cable 1 $4.1 million Ore.
Zito Media 4 $29 million Pa, Ohio, W.Va.

March