December 29, 2009 11:57 PM
First Round of BTOP Grant Awards Show Some Solid "WINS"
Earlier this month, on December 17th, the White House announced the distribution of the first round of Recovery Act broadband grant awards. Notably, of the $183 million in broadband grant awards to be awarded by the Department of Commerce (through the NTIA) and the Department of Agriculture (through the RUS), the NTIA awarded over $120 million toward wholesale, "middle mile" infrastructure. A short summary of the NTIA awards, including the "middle mile" projects is available here.
The reason that I highlight the NTIA's decision to devote the bulk of its funds to wholesale infrastructure supply projects is that--as I explained back in April--I truly believe that this approach is the best way to do a job that is extremely difficult to do well. The Recovery Act requires both the NTIA and the RUS to distribute a very large amount of money in a very short period of time. While the Recovery Act does contain policy guidance to the awarding agencies, and some built-in safeguards, such as limiting the federal government to funding, at most, 80 percent of a project's cost (unless the grantee obtains a waiver from the awarding agency), the responsibilities charged to the NTIA and the RUS are still formidable.
The combination of: 1) direct aid (grants, not loans), 2) the sheer amount of that direct aid (a little less than $6.5 billion in "unrestricted" grant funds, and a total of $7.2 billion in total funds), 3) being distributed by government bureaucracies, 4) in a very short time period (by September 30, 2010) makes the job of efficiently distributing the grant money extremely difficult. Adding to the difficulty of efficiently distributing the broadband grants is the fact that the agencies have little objective tools--such as the "broadband map" (my thoughts here) authorized by the Recovery Act, but not required to be completed until after the grant funds are required to be awarded (the map must be completed 2 years after adoption of the Recovery Act--February 17, 2011--though, as noted, the awards must be completed by the end of fiscal year 2010).
In my April post, I argued that Wholesale INfrastructure Supply projects ("WINS") were the best way for the agencies to allocate discretional grants in the allotted time, because allocating grants to wholesale infrastructure providers allows the agencies to transfer the even-more-difficult job of identifying unserved, existing demand to the most efficient prospective suppliers. The attempt at creating my own acronym was, admittedly, weak (like, "wow-that's-weak" weak), and maybe the idea itself was obvious--but even "obvious" good ideas are not always embraced by the government.
This is why I really think the NTIA got it right by allowing itself a lot of discretion to fund "broadband infrastructure projects" (without any more specificity), and then by pushing more funds into wholesale-oriented projects. Multi-party, combination wholesale/retail ("middle mile"/"last mile") projects benefit from the ongoing incentives of the wholesale provider to: 1) stimulate output by seeking out new wholesale customers, as well as 2) monitor its retail partners success in increasing and promoting retail penetration. These projects offer the promise of being easier to "generically" identify and to police on a forward-looking basis than more "unique" projects.
The reason that I highlight the NTIA's decision to devote the bulk of its funds to wholesale infrastructure supply projects is that--as I explained back in April--I truly believe that this approach is the best way to do a job that is extremely difficult to do well. The Recovery Act requires both the NTIA and the RUS to distribute a very large amount of money in a very short period of time. While the Recovery Act does contain policy guidance to the awarding agencies, and some built-in safeguards, such as limiting the federal government to funding, at most, 80 percent of a project's cost (unless the grantee obtains a waiver from the awarding agency), the responsibilities charged to the NTIA and the RUS are still formidable.
The combination of: 1) direct aid (grants, not loans), 2) the sheer amount of that direct aid (a little less than $6.5 billion in "unrestricted" grant funds, and a total of $7.2 billion in total funds), 3) being distributed by government bureaucracies, 4) in a very short time period (by September 30, 2010) makes the job of efficiently distributing the grant money extremely difficult. Adding to the difficulty of efficiently distributing the broadband grants is the fact that the agencies have little objective tools--such as the "broadband map" (my thoughts here) authorized by the Recovery Act, but not required to be completed until after the grant funds are required to be awarded (the map must be completed 2 years after adoption of the Recovery Act--February 17, 2011--though, as noted, the awards must be completed by the end of fiscal year 2010).
In my April post, I argued that Wholesale INfrastructure Supply projects ("WINS") were the best way for the agencies to allocate discretional grants in the allotted time, because allocating grants to wholesale infrastructure providers allows the agencies to transfer the even-more-difficult job of identifying unserved, existing demand to the most efficient prospective suppliers. The attempt at creating my own acronym was, admittedly, weak (like, "wow-that's-weak" weak), and maybe the idea itself was obvious--but even "obvious" good ideas are not always embraced by the government.
This is why I really think the NTIA got it right by allowing itself a lot of discretion to fund "broadband infrastructure projects" (without any more specificity), and then by pushing more funds into wholesale-oriented projects. Multi-party, combination wholesale/retail ("middle mile"/"last mile") projects benefit from the ongoing incentives of the wholesale provider to: 1) stimulate output by seeking out new wholesale customers, as well as 2) monitor its retail partners success in increasing and promoting retail penetration. These projects offer the promise of being easier to "generically" identify and to police on a forward-looking basis than more "unique" projects.
There is nothing "wrong" with "unique" projects, per se, and,
qualitatively, it may be that there are just as many--or more--worthy
retail projects as wholesale projects. Nonetheless, the "uniqueness"
of a project does make the project more fact-intensive, and
time-intensive, to initially evaluate and then to monitor. Given the
severe time restrictions--it has only been 4 months since the first
funding applications were received, and, according to the White House
press release two weeks ago, the first round will be completed over the
next two and a half months--and the total money involved ($4 billion
this round, with about $3.3 billion dedicated to infrastructure), it
seems like wholesale projects would hold a lot of attraction for
funding agencies.
To the NTIA's credit, they recognized the advantages of the "WINS" theory of triage funding--most likely with no help from me. As a result, the NTIA released the most infrastructure funding in last week's announcement--about 10 percent of the total they have committed to infrastructure projects this round. Last week's announcement was just the "first part" of the "first part" of the "first round" of broadband funding, so I'm not counting the RUS "out" by any means, but they may find it easier over the next two months to take a cue from the NTIA and focus on requests that are presented as combined "middle mile" (wholesale) and "last mile" (usually retail) projects in order to most efficiently meet their own quota for this round (RUS has allocated $1.2 billion to "last mile" broadband infrastructure and $800 million for "middle mile" broadband infrastructure).
To the NTIA's credit, they recognized the advantages of the "WINS" theory of triage funding--most likely with no help from me. As a result, the NTIA released the most infrastructure funding in last week's announcement--about 10 percent of the total they have committed to infrastructure projects this round. Last week's announcement was just the "first part" of the "first part" of the "first round" of broadband funding, so I'm not counting the RUS "out" by any means, but they may find it easier over the next two months to take a cue from the NTIA and focus on requests that are presented as combined "middle mile" (wholesale) and "last mile" (usually retail) projects in order to most efficiently meet their own quota for this round (RUS has allocated $1.2 billion to "last mile" broadband infrastructure and $800 million for "middle mile" broadband infrastructure).
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