July 29, 2009

Stimulus Just the Beginning

For business it's important to keep the eye on the money. That's why the broadband stimulus plan is a big topic for small cable operators at the Independent Show in Dallas this week.

But aside from the loans and grants cable may get from the American Recovery and Reinvestment Act, changes in Washington could result in federal assistance for years to come.

"The broadband stimulus is $7 billion," said Rhod Shaw, president of Alpine Group, a Washington consultant firm. "The Universal Service Fund...is $7 billion every year."

The Universal Service Fund, in its earliest iteration, was designed decades ago to provide taxpayer funds to deploy telephone in rural areas, said Matt Polka, president of the American Cable Association (ACA). "Now in a converged world, a lot of lawmakers think it (the Universal Service Fund) should be extended to broadband," Polka said.

Two congressmen, Rick Boucher (D-VA) and Lee Terry (R-NE), are expected to introduce a bill this year to modify the Universal Service Fund. How it might affect cable is unclear.

"Our concern is: will such a bill require our members to charge customers a fee for rural broadband?" said Polka.

The fund has traditionally been financed by taxes on long distance telephone charges. But if cable becomes an eligible recipient, it is assumed it will have to contribute to the fund, most likely by charging a fee or tax to its subscribers.

"The bottom line is: our members are rural providers. If they have to pay in, we want to make sure they get funds out," said Polka.

Whether the Universal Service Fund becomes a source of capital for cable is yet to be seen, but the FCC is busy crafting the national broadband plan that must be delivered to congress by next February. Washington insiders at the Independent Show anticipate the federal government set its sights on broadband for years to come.

"We know in the near term the FCC will be broadband-focused, not traditional cable-issue-focused," said Chris Cinnamon, with Cinnamon Mueller, the ACA's outside counsel. "The Commission has canceled August vacations. In the longer term, we think the Commission will stay broadband focused."

-Linda Hardesty