Many strings attached to broadband funds

The Obama administration has attached stringent and enforceable conditions to $4 billion in incentives for companies, nonprofit groups and other institutions to promote increased deployment of high-speed Internet service, particularly in rural areas.

The funding, announced Wednesday, is the first wave of money to be doled out through the $7.2 billion broadband stimulus program, also designed to spur job creation.

Guidelines issued by the Agriculture and Commerce departments reveal that recipients who violate the restrictions could face penalties, including termination of funding and repayment.

Major carriers, who signaled for months they would pass up the money if ample strings were attached, were noticeably silent. AT&T and Verizon, the nation's largest telecom carriers, did not issue statements, while the U.S. Telecom Association said it was reviewing the details.

The National Cable and Telecommunications Association, in a carefully worded response, applauded "the release" of the regulations governing the broadband grants and loans. In contrast, public advocacy groups such as the Open Internet Coalition, whose members include Google, welcomed the conditions as necessary to protect consumers.

"Unfortunately, we as a nation have been lagging when it comes to broadband, falling behind too many countries. This is unacceptable. We must do better," said FCC Chairman Julius Genachowski during an appearance in Pennsylvania with Vice President Biden and other officials Wednesday.

This morning, Genachowski presided over his first commission meeting, which featured a status report on the agency's national broadband plan (see related coverage).

The $4 billion represents the first funding phase, with Commerce's National Telecommunications and Information Administration distributing $1.6 billion in grants and Agriculture's Rural Utilities Service issuing $2.4 billion in grants and loans. Awards are to be announced Nov. 7, with the remaining funds doled out in two more batches, and all distributions to be made by Sept. 30, 2010.

The rules are open-ended on a contentious issue that has drawn the attention of powerful lawmakers: whether the bulk of the money should assist unserved households or underserved ones lacking competitors or the latest technology.

"They left themselves room to decide later based on what comes in the door," observed Paul Gallant, a telecom analyst with the Washington Research Group.

Participating broadband providers must engage in "good faith" interconnection negotiations with other carriers, and cannot discriminate against competing content or services on their networks. Aggrieved parties may appeal to all three agencies.

To comply with the non-discrimination requirement, parties must adhere to the FCC's four "network neutrality" principles designed to preserve the Internet's openness and prominently post their network management policies.

Senior administration officials were vague about whether fund recipients must comply with the FCC's anticipated expansion of those principles. Genachowski is expected to champion the addition of a fifth plank barring anti-competitive behavior by broadband providers. The other four principles govern the rights of consumers to access online content.

The ambiguity, some experts said, is purposeful. Stating that awardees must adhere to expanded Internet principles might dissuade some companies from seeking funds, while grandfathering recipients could shelter them from future enforcement actions. "They may just want to leave themselves as much flexibility as possible," a telecom insider said.