Gov't broadband project to compete with existing service

By Features IDG.net

A US$33.5 million broadband project in northern Georgia, funded by the U.S. government and touted by U.S. Vice President Joe Biden as bringing huge new benefits to the region, will instead compete with existing service in large parts of the area.

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Biden appeared Thursday at Impulse Manufacturing in Dawsonville, Georgia, to announce the North Georgia Network Cooperative broadband project as part of a first round of broadband stimulus funding being released by two government agencies. Biden suggested Impulse is being hurt by being on the "wrong side of the digital divide," but the company has broadband service with 12M bps (bits per second) of download speeds, according to broadband provider Windstream Communications.

Windstream can also provide business-class broadband service of up to 100M bps in Dawsonville, said Frank Schueneman, vice president of regulatory policy. Windstream covers about 70 percent of the area that North Georgia Network Cooperative proposes to cover using government money, he said.

"It doesn't sound reasonable that a competitor would get tax dollars to compete," Schueneman said. "It's not an issue of getting broadband to people who don't have it -- that's probably a good goal for our country. But this is essentially an overbuilding of an existing, capable network ... that we made millions and millions of dollars of investment in."

Earlier this year, Windstream challenged the broadband application of the North Georgia Network Cooperative, saying it already provides broadband in most of the area. A second company, TDS Telecom, challenged the cooperative application in two of the eight counties, saying it provides 3M bps service there.

Broadband availability in the Dawsonville area has been "spotty," countered Ron Baysden, president and owner of Impulse Manufacturing. Until recent months, when the cooperative filed its broadband grant application, Impulse had only 1M bps broadband service, he said, and parts of the Dawsonville area still have no service.

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"In any one spot, it is just hit or miss to whether you're on or off," Baysden said. "It's been a war to get it to this point."

The area has needed broadband competition, he added. "There's been a push up here for these guys to get off top-dead center and do something about it," Baysden said. "One organization sells out to the next organization ... and they talk a good story, but don't really do anything."

While Windstream increased consumer-based broadband speeds in mid-2009, the business-class ethernet service has been available for several months, Schueneman said.

The North Georgia Network Cooperative project, funded by the U.S. National Telecommunications and Information Administration (NTIA), would create a 260-mile fiber-optic ring connecting eight counties. The middle-mile project would connect 245 community institutions, including public schools, colleges and hospitals, and allow ISPs to build out last-mile connections to other end users.

Biden, speaking at the Thursday event at Impulse, suggested the company was being held back by a lack of broadband. Impulse's current Internet service can't handle large e-mail files, he said.

"Without broadband, companies like Impulse ... are not going to be able to compete globally," he added.

The broadband grants and loans from NTIA and the U.S. Rural Utilities Service, funded by the $787 billion American Recovery and Reinvestment Act passed early this year, are designed to cover both areas unserved by broadband and "underserved" by broadband. Several U.S. lawmakers have urged the two agencies to focus on unserved areas.

To qualify as underserved, one or more of three criteria must be met, according to NTIA rules: No more than 50 percent of households have access to broadband service, no broadband provider provides service of at least 3M bps, or less than 40 percent of households subscribe to broadband.

The goal of the NTIA program is to deliver funding to areas with "demonstrated need," and strengthen communities by providing new economic opportunities, said Jessica Schafer, an NTIA spokeswoman.

"These grants were carefully designed to invest money where it's truly needed," Schafer said. "To be clear, the fact that an existing provider offers some level of broadband service somewhere within the project's proposed service area does not disqualify the project from funding."

Windstream covers well over 50 percent of the area, offers speeds above the 3M bps threshold, and about 50 percent of households in the cooperative's proposed coverage area subscribe to Windstream broadband, said Windstream's Schueneman. "To characterize this area as underserved ... is really not a true picture," he said.

Asked if the project covers areas already served by broadband, Lee Ann Roy, a representative with the cooperative, referred questions to Windstream. The cooperative is "introducing services that we feel, based on our research, are needed in the region," she said.

Roy was asked if the comments from Biden and other officials at Thursday's event made sense, given that Impulse already has broadband service. "It is our understanding from interviews with Impulse during our feasibility research that the company is in need of greater bandwidth and reliability than is currently available," he said. "I would direct you to Windstream or Impulse Manufacturing for any additional detail."

Windstream declined to provide the cooperative with information about its existing service areas, Roy said. The cooperative's application was based on a feasibility study and "numerous" in-depth interviews with schools, hospitals and businesses on their broadband needs, she added.

The broadband competition in the Dawsonville area shows the difficulty of defining "underserved" areas, said Daniel Hays, director of the telecom practice at PRTM, a management consultant firm.

"The challenge filed by Windstream should certainly have given the NTIA pause in accepting the new application," Hays said. "After all, are we risking destroying jobs in one service provider in order to create them in a new, subsidized one?"

Biden's speech at Impulse was used to announce $182 million in broadband grants from the economic stimulus package passed by Congress. In the next year, NTIA and the U.S. Rural Utilities Service are scheduled to distribute $7.2 billion in broadband grants.

Kicking the program off at Impulse seemed to be an odd choice, when another broadband provider already serves the company, Hays said. "Given the situation, it seems curious that this would be the flagship example that the government would choose to showcase the first awards," he added.

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