Broadband Grant Agencies Should Consider Auction, Say Economists
The NTIA and the RUS should auction the $7.2 billion in broadband stimulus grants instead of using a conventional application process, a group of 70 economists told the agencies in comments filed Monday, the deadline for suggestions on giving out the money. The economists argued that procurement auctions are a more-efficient way of disbursing the funds than the usual grant process, which they said is “long, complicated and involves subjective and arbitrary decisions.”
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In an auction, participants would bid down their federal subsidy while relieving the government of deciding the “best projects,” said the economists, led by Paul Milgrom, Gregory Rosston, and Andrzej Skrzypacz of Stanford University, and Scott Wallsten of the Technology Policy Institute. The agencies could follow the FCC’s example in auctions by limiting the number of projects for each bidder and giving small businesses bidding credits, the economists said. If the agencies adopt a conventional grant system, recipients would have to cover at least 20 percent of the costs of their projects.
Separately, Verizon said it worries that excessive rules could mute the stimulus bill’s effect by discouraging applicants. The NTIA and the RUS should avoid “imposing regulatory ’strings’ or eligibility criteria that will deter participation or otherwise inhibit sustainable broadband investment and job creation,” it said in its comments.
The NCTA said the NTIA and the RUS should consider mainly “the timeliness of construction, the sustainability of the project after the grant is completed and the experience of the applicant” in judging applications. The agencies shouldn’t apply the interconnection and nondiscrimination provisions of the stimulus law in a way that could discourage new investment, the association said. Businesses should be allowed to apply for grants just like public institutions, it said. Proposed rules would allow private companies to apply only if they can demonstrate a project is in the “public interest.”
Commenters remain sharply divided over the definitions and priorities of “underserved” and “unserved” areas. According to CompTel, “unserved” should refer to places where at least 90 percent of the people don’t have access to broadband and “underserved” to places where 90 percent of customers are served by one broadband provider.
“Underserved” and “unserved” regions should be treated equally, the American Cable Association said. “Unserved” should refer to areas where at least “50% of the households do not have access to reliable broadband of 1.5 Mbps downstream and 128 Kbps upstream transmission,” and “underserved” means areas where at least “50% of the households do not have access to reliable broadband of 5.0 Mbps downstream and 500 Kbps upstream transmission,” the association said.
Oakland County, Mich., however, said “unserved” should refer to places with access to dial-up and satellite Internet only, and “underserved” to those without broadband access “due to affordability or lack of multiple providers.”
The NTIA and the RUS should concentrate first on unserved areas and on states’ expertise in its choices, said the National Association of State Utility Consumer Advocates. States are “a vital resource to help determine how to dedicate public funding to do what the private sector has been unable or unwilling to do: Provide all Americans with reasonable access to modern broadband access, even in areas or among populations that are less profitable to serve,” said President David Springe, Kansas’ consumer counsel. Private applicants should get money “only where public or non-profit organizations are equal partners, thus providing a degree of self-monitoring and accountability,” it said. The broadband map that Congress ordered should help consumers shop for broadband and help would-be providers find market opportunities, NASUCA said.
Funding “anchor institutions” with shovel ready projects should be the priority for NTIA and RUS, said AT&T. By funding broadband to such places, which include colleges, hospitals, public safety organizations, and government buildings, the agencies can meet several of the stimulus goals at once, it said. Also, the states should play a large role in the process by listing priorities because each state has different broadband challenges and must be looked at individually, it said.
Increasing adoption in population centers should be the main goal in awarding the federal money, the city of Los Angeles said in comments. The agencies shouldn’t allow the states to set project priorities, it said. Many commenters are concerned that the states, which can apply for money, will favor themselves.
The agencies “must insist that states be very circumspect in their commentary,” because they will be competing against other less-influential applicants, USTelecom said. The highest value should be placed on projects for areas that lack access to broadband services, other than satellite, offering advertised speeds of at least 768 kbps one way, the trade association said.
“High-speed” Internet should be defined as 100 Mbps or higher downstream and federal funding would best be used to connect public libraries and schools that do not have access to those speeds, said the Bill & Melinda Gates Foundation. Connecting such institutions will “spur local demand and facilitate connections to other municipal facilities, households, and local community organizations, often with a resulting economic benefit,” it said.