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.
Continue reading First Round of BTOP Grant Awards Show Some Solid "WINS"