Now that the financial stimulus package is law, commentators are starting to take a closer look at who likely will be the big winners and losers in the broadband sector once the government actually starts doling out money.
Telephony Online's Joan Engebretson provides a lot of details on the broadband element of the overall plan. The money is being divided up by more than one entity. The Rural Utilities Service (RUS) of the Department of Agriculture gets a little more than one-third; the balance will be administered the Commerce Department's National Telecommunications and Information Administration (NTIA). They have different schedules. Insiders say that the telcos with projects under way may be best positioned for the RUS money, and it will be more difficult to buy gear not made in the United States or another NAFTA country. Deadlines are later for the NTIA dough, and companies will have to contribute 20 percent of the funds on their own.
The former director of communications for the North Carolina Technology Association, writing at LocalTechWire.com provides a bulleted run-through of the highlights of the broadband plan. Noah Garrett's take is that the presence of the NTIA is an advantage for cable and wireless companies. RUS, he says, tends to back traditional rural telcos, though he acknowledges that those firms would argue that this is changing. Garrett feels that most of the money will go to the big telcos, but that cable and wireless companies will be players.
There is another angle to the overall issue of which type of firms will thrive in this challenging economic environment. Paula Bernier points out that the last time there was a slump in the telecommunications sector-around the turn of the century-vendors suddenly developed an infatuation with the rural telcos, which made decisions quickly, tended to have money or access to it, and were loyal. The question is whether history will repeat itself, and what the impact will be of the $7.2 billion the government is throwing into the pot. The views of several analysts are presented in this piece. One doubts that large telcos will focus on rural broadband and another has the same doubts about vendors who are not already involved in RUS-financed projects.
It will be interesting to look back in a few years to see how this all hashes out. Yankee Group analyst Vince Vittore suggests that at the end of the day the broadband stimulus will have limited impact. His reasoning is that the data rates likely to fit the law's definition of unserved and under-served are likely to be pretty pokey, both on the wired and wireless sides. A lot of customers who don't have connections are in rural areas, but are within the footprints of the major telcos. Since the assumption is that money provided by the NTIA and RUS will go to smaller providers who, according to Vittore's logic probably won't be operating in the same areas as the large incumbents, the total overall impact of the investment likely will be muted.
A final chapter in the novel that predicts the likely winners and losers of the stimulus package focuses on WiMax and Long Term Evolution (LTE), two approaches to 4G wireless. The analysis in this piece at Gerson Lehrman Group is that WiMax will benefit and LTE won't. That's a needed shot in the arm for WiMax, which has been performing the neat trick of losing the PR battle despite the fact that it is being deployed and its opponent isn't. The reason that WiMax will win this round is simply that it is ready now. LTE, on the other hand, won't be within the timeframe set out by the government.
The next six months will be vital for broadband as service providers and vendors make decisions about how aggressively to court federal dollars. Alone, of course, the government largesse won't transform today's dynamic, in which the nation's broadband infrastructure is struggling in comparison to many other nations'. It could be a great start towards that reversal, however.