Broadband stimulus: Grant requests far outweigh requests for loans

Endeavour Partners struck a nerve recently when it called out some of the top broadband stimulus applications and likened them to pork-barrel projects.

Some of the top projects in terms of dollar amounts came from satellite providers, which already have nationwide coverage but don't "count" in the calculation of unserved and underserved markets. Endeavour also pointed out that RADgov (which is asking for $1.3 million in grants) and Edgenics want excessive funding to support e-learning, computer learning centers and government information web portals. And it specifically noted that Kodiak-Kenai and Adak Eagle are each asking for hundreds of millions of dollars in investments for undersea fiber to serve very few potential subscribers in remote areas of Alaska. Endeavour calls this "an underwater bridge to nowhere."

Some folks, especially those from Alaska, took umbrage to Endeavour's analysis. Alaska is one of the most unserved regions of the U.S. Doesn't it deserve money? It does, but Endeavour's point is this: With a finite amount of funds, broadband stimulus money shouldn't be about getting broadband to every single disadvantaged person in the U.S. regardless of the cost. It's about balancing the costs and benefits.

To wit: The Adak Eagle project, which proposes to serve the Aleutian Islands, is seeking $242 million--mostly from grant money and not loans--to serve 9,000 or so people with an undersea fiber network. That means the cost to bring broadband to these people is about $125,000 per household, the firm concluded.

As I've highlighted before, some of the projects proposed have a self-serving feel to them. Interestingly, Endeavour did some more analysis about the ratio of grant requests to loan requests. Endeavour found that two thirds of the 2,180 applications are grant-only and nearly 60 percent of the requested total funds are associated with these grant-only applications. In all, 77 percent of the applied-for dollars are for grants. That means a total of $21.2 billion was requested for grants and just $6.5 billion was requested for loans (See the associated chart for the breakdown).

"These totals stand in contrast to the government's targets for the first round of applications, both in shear dollar amounts as well as the flavor of award (grant vs. loan)," wrote Endeavour's Moe Kelly.

That's why Robert Anderson, CEO of WindTalk, which is proposing to roll out WiMAX in 10 states, got a call from federal officials asking him why the company didn't apply for any grants. Instead it asked for a $297 million loan.

"For the area that we're looking at, because we're not on the bottom of the Grand Canyon, we thought it would be irresponsible to say we want grants to do this," Anderson explained. "It was the responsible thing to do ... If you look at our proposal, you'll see how little impact we have on the taxpayer vs. the value we are bringing."

The folks at WindTalk went to Wall Street first for funding, but no one wanted to jump on board in this scary economic climate, Anderson said. "No one is touching the broadband space now," he said. But he did get assurance that if WindTalk could secure some government loans, Wall Street would be on board too.

WindTalk is proposing, over the next five years, to serve more than 1,200 communities and about 20 million people across 314,000 contiguous square miles of licensed spectrum in 10 states. Anderson said WindTalk's advantage will be in the engineering his team has done to squeeze out the costs associated with rollout and scalability.

"Our design is poised for a very rapid deployment. We've run the numbers on it and outside firms as well have looked at the business case," Anderson said. "Throughout the networks' design phase, careful attention was placed on fast replication and low-cost scalability. From routers to switches to wireless links, device packages were configured and deployed in modular arrangements, embodying just the right amount of devices and hardware for a particular area."

Taking the words from a recent FierceBroadbandWireless commenter: "I certainly hope that the parties reviewing the applications consider the requests submitted with eyes open wide."--Lynnette