NTIA grant delay: Obstacle or opportunity? Page 2

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There must be plenty of communities such as OpenCape (in Cape Cod, MA) that have done sufficient due diligence to determine there are enough large institutional customers and economic development benefits to underwrite much of the network cost. If the choice is to either: a) delay for nine months the start of a network that will deliver these benefits, or b) secure alternative sources now for stimulus money you may or may not win later, communities could be persuaded to take option B.

In last month's column I mentioned Franklin County, Va., and cities in North Carolina that found ways to move network projects forward without waiting for D.C. dollars. In Franklin, it was possible by forming a public/private partnership and making the county government the anchor tenant. In Wilson and Salisbury, N.C., part of their sustainability strategy is targeting businesses as well as government with high-end (read: premium) services.

Public administrators and private sector executives have become so mesmerized with $7.2 billion in "free" money that rational thought in some places has gone on extended vacation. Here's a little more cold water: These billions divided by 50 states averages $150 million per state. Even allowing for distribution proportional to population, there isn't enough money for everyone that wants it, especially when fiber networks are in the mix.

The real stimulus value we've seen from the broadband bill is the numerous communities and their potential partners that were stimulated to put pen to paper and keyboard to spreadsheet to construct viable business cases for broadband networks. Many have found the benefits most compelling. Now that we're looking at a late payday, these entities should play to the strength of those business cases and view grants as their wild cards.

Free market champions complain that governments as service providers have unfair tax breaks and other advantages. Let me tell you, if I were a small service provider or vendor looking at the delays on Grant Ave., I'd go calling on local governments and lay out a strong, logical case for partnerships that make their tax breaks my breaks. I'd invest in them if they'll invest in me. I'd go door to door with the municipality's CIO to find ideal anchor tenants. Rather than relying creative grant writers as my trump card, I'd look to creativity from my marketing department.

Look at this another way: In order to qualify for the stimulus grant, you have to prove you can fund your entire network operating expense and 20 percent of your capital expense for building the network. Viewed over a five- or six-year period, your OpEx and the 20 percent CapEx together are likely greater than the 80 percent CapEx that you're fighting a hundred other entities to try to win. Since you have to prove your ability to financially sustain the bulk of the network project anyway to win a grant, consider leveraging this financial capability to creatively (and legally) arrange financing or investments for the 80 percent CapEx.

True, it's a radically different approach for those who were placing big bets on the quick stimulus payout. But the winners in this broadband game will be those who adjust to the recent turn of events and make their own luck.

Craig Settles is an industry analyst and consultant who helps organizations develop effective broadband strategy Check out his website at www.successful.com.

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