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ACA Board Member Testifies about Broadband Stimulus Program

In recent congressional testimony, ACA board member and NewWave Communications President & CEO James Gleason praised the House and Senate for providing billions of dollars for new broadband infrastructure but urged lawmakers to ensure that the money is being allocated in a fair and cost-efficient manner so small cable operators can continue in their role as leading broadband access providers to consumers located in the most rural areas of the country.

"ACA members view the $7.2 billion broadband stimulus program as an important opportunity to continue their great work in constructing broadband facilities in remote and rural areas so these communities can enjoy technological parity with densely populated urban areas so accustomed to being the first in line," Gleason said in Oct. 28 testimony before the House Committee on Small Business.

Under the American Recovery and Reinvestment Act of 2009, Congress authorized the funding to build up broadband in unserved and underserved areas under the direction of the National Telecommunications and Information Administration (NTIA) in the Commerce Department and the Rural Utilities Service (RUS) in the Department of Agriculture.

NewWave serves more than 115,000 customers in Kentucky, Illinois, southeast Missouri, northeast Arkansas and western Tennessee and is headquartered in Sikeston, Missouri. The versatile company provides cable television, high-speed broadband and data services and telephone service, specializing in smaller and mid-sized communities.

NewWave has applied for $10.1 million in funds to upgrade fiber and cable facilities in 11 communities in Illinois, Indiana, Missouri and South Carolina. The network upgrades will be state-of-the-art, fiber-to-the-curb designs and will offer these rural communities DOCSIS 3.0 technology that will offer data speeds up to 100 Mbps.

Gleason was the only industry witness to testify on various issues and concerns related to the broadband stimulus plan. Testifying on behalf of the Obama Administration were RUS Administrator Jonathan Adelstein and Assistant Commerce Secretary for Communications and Information Lawrence E. Strickling, who is also NTIA Administrator.

In December, NTIA and RUS are expected to announce the names of first round recipients of federal grants, loans, and grant/loan combinations under NTIA's Broadband Technology Opportunities Program (BTOP) and RUS's Broadband Initiatives Program (BIP). Both BTOP and BIP are designed to help the country achieve the goal of affordable and universal broadband access within a reasonable period of time.

While generally positive about the design of the broadband stimulus program, especially the decision strongly supported by ACA to spend $800 million on middle-mile projects, Gleason did recommend several changes that would remove barriers and disincentives and encourage more small cable companies to apply for funding.

Gleason said NTIA and RUS should eliminate the first-lien rule. Some ACA members did not apply for funding, he said, because RUS insisted on holding the first lien on loans. That requirement would have violated terms and conditions in many existing bank loans held by ACA members, making it impossible for them to seek RUS loans.

Gleason noted that many ACA members didn't participate because rules barred funding recipients from selling a funded project within 10 years. Because the decade-long holding period was too long, the stimulus program discouraged some ACA members from utilizing the BTOP and the BIP, Gleason said.

"We believe the funding agencies should be sensitive to the important business concerns of our members and change the rules to allow for waivers of the 10-year rule where it can be demonstrated that lifting the rule will benefit consumers in those markets," Gleason said.

Gleason also noted that projects classified as rural could not automatically apply for grants with NTIA but first had to seek loans from RUS. Grants are far preferable to loans, Gleason explained, because they make it easier for applicants to expand the scope of their projects, helping both NTIA and RUS in their effort to make broadband a universal product at affordable prices.

"Companies, including ACA members, wanting to serve rural areas should not be placed at a disadvantage by being forced into loan/grant combinations when companies serving non-rural areas do not have similar obligations," Gleason said. "We heard from various members that the building of some projects simply could not be economically justified by a loan or loan-grant application. By contrast, if the area was non-rural, the applicant could apply for a grant at BTOP and not worry about a loan. The rule has the effect of discouraging applications in the rural areas where they are drastically needed."

Gleason argued that small cable operators deserved parity under the point system used to grade funding applications. RUS, he said, automatically awards five points to previous borrowers.

"The scoring of an application should be made on the merits of their project, not the applicant's history with the agency," Gleason said.

BTOP and BIP imposed costs on small cable operators by requiring them to defend their current service areas from hastily prepared applications that sought to provide broadband service where it already exists, Gleason said.

"We fail to understand why NewWave and other ACA members had to invest their limited resources to respond to applications that weren't even vetted for completeness," Gleason said. "NewWave alone - a small company - will spend in excess of $30,000 simply telling the government where we already serve."

In addition to cost burdens, NTIA's mapping tool that ACA members are to use to show that funding applicants were indeed ineligible overbuilders malfunctioned on many occasions, limiting the ability of existing service providers to respond.

That's an issue for ACA members, Gleason noted, because NTIA and RUS suggested that they will assume that an areas is unserved if they do not hear from existing providers.

"The agencies and applicants should engage in their own due diligence to determine if an area is already served, and therefore not eligible for funding. Doing so will help avoid using scarce taxpayer resources in areas that already have broadband service," Gleason said.

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