As the federal government considers which proposals in Round 2 of the broadband stimulus program will win funding, 360networks claims that its route in eight northern states is being overbuilt, or duplicated, by a rival network that is under consideration for taxpayer dollars.
360, a wholesale service provider certified as a CLEC in 36 states, earlier this month sent an open letter to Congress and ran ads in Capitol Hill publications calling attention to XO Communications’ (XOHO.OB) “Northern Lights” application, which appears to replicate an existing 360networks system in the northwest U.S.
360 even offered to sell XO capacity on that same route, “and they declined,” said Chris Mueller, 360’s CFO.
The issue of overbuilds has heated up as the broadband stimulus program, passed as part of the American Recovery & Reinvestment Act in February 2009, moves into its second phase. The $7.2 billion broadband stimulus was intended to create jobs and jumpstart the tech industry, as well as promote economic growth in rural areas by providing high-speed Internet access, at reasonable prices, for all Americans. The U.S. has consistently placed low in rankings of broadband penetration among affluent nations. As administrator of the fund, the National Telecommunications and Information Administration (NTIA) began releasing money last December; to date the agency has awarded 82 grants totaling $1.2 billion.
The chief complaints stemming from the broadband stimulus have centered on apparent network overbuilds – cases where new federally funded projects duplicate existing networks owned by competitive providers. Some lawmakers have said they think the feds are wasting taxpayer money and unfairly subsidizing competition. But “underserved” is in the eye of the beholder, and NTIA argues that its grants invest in the neediest regions.
“The mere availability of broadband in some form does not necessarily mean that it is fully serving the needs of the community,” said Jessica Schafer, NTIA press secretary. “Some amount of overlap is a physical necessity to the extent that the federally funded projects must interconnect with existing facilities in order to provide service.”
In Round 1, NTIA approved at least three seemingly redundant networks whose full impact will only become clear over the next couple of years. The Three-Ring Binder network, drawn up by Maine Fiber Co., received $25.4 million in December. Incumbent provider FairPoint Communications (FRP) said Three-Ring Binder unfairly overbuilds its existing system. NTIA disagreed, and approved Three-Ring Binder’s grant. Josh Broder, president of the Maine Fiber Co., said the agency made a good decision. “The quality and capacity of the existing fiber isn’t phenomenal,” he said. “I think what FairPoint’s really saying is, ‘This would be duplicative for us.’”
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