Telcos and cablecos oppose Federal financing of competitors

Cable TV companies and big phone companies don't want $7.2 billion in Federal stimulus money set aside for new high-speed Internet lines to subsidize upstarts planning to compete with existing broadband services.

Stimulus money should be used for "extending broadband [service] to unserved areas," the cable industry's lobbying group emphasized in a letter to members of Congress last week. The group repeated those remarks in a paper released Monday. Lobbyists for AT&T and Verizon are spreading the same message, urging regulators to spend the money only on wiring homes in rural areas that still rely on dial-up Internet service.

The definition of unserved, and how that is different from underserved, could be critical in deciding who gets stimulus money to extend broadband services, and where the money goes.

That isn't the only issue overshadowing the Obama administration's efforts to extend fast Internet services to more Americans. Advocates of an open Internet, or net neutrality, are wrangling with big telecommunications companies over what conditions, if any, are attached to grants. Meanwhile, industry groups want the money to be given to companies directly, instead of requirements that they work with local governments on grants. Local officials frown on that idea.

The biggest issue, however, is the debate over unserved areas versus underserved areas. Established broadband providers are concerned that the government not give federal grants to competitors looking to build new -- and potentially faster -- Internet services in markets that already have some form of broadband.

"We believe that the rules that will result here should not overly fund competitors in a market where there are already multiple broadband providers," said Matthew Polka, president of the American Cable Association, which represents smaller cable operators.

Midsize phone companies and consumer advocates argue that some stimulus money should be spent on new Internet lines in areas that already have service. New "middle mile" Internet lines could be used by multiple phone and wireless companies to offer faster service over longer distances, they say, and potentially increase competition.

Last year, a study by the Pew Internet & American Life Project found that only about 10% of Americans still use dial-up service. Upwards of 10 million households don't have any access to broadband service, according to a July 2008 Brookings Institution study, which found most unserved areas were in rural communities that are expensive to wire.

Cable and large phone companies would also like some of the $7.2 billion in stimulus funds to go toward spurring demand by consumers who have access to broadband now but don't subscribe. Incentives for such consumers might include things like subsidized purchases of PCs or discounted broadband access for low-income households, for instance, through an existing federal telephone-subsidy program.

Decisions on rules for the broadband stimulus grants are expected to be made in a few weeks, much faster than the usual government rule-making process. On Monday, hundreds of lobbyists packed in to the Commerce Department for the first workshop, which focused on eligibility requirements for private companies. Later this week, scheduled meetings will focus on issues including how to define unserved areas and how much of a role state officials should play in the grant-making process. (info from The Wall Street Journal)