A Rocky Start for Obama's Broadband Push

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Households and businesses in remote and rural areas in particular have found their access limited because telecom companies often can't justify the investment associated with expanding their networks into sparsely populated areas where it is hard to turn a profit. Meanwhile, residents of inner cities often tend to choose not to become broadband users either because they can't afford it or don't see it as valuable. Addressing shortcomings like these, President Obama has argued, will not only help create jobs associated with expanding networks, but will also boost the economic fortunes of places where access is lacking.

A Wait-and-See Approach

Broadband Rural's Mattingly says he plans to apply for $7 million in funding to expand his company's service footprint. With about 1,300 customers now, he expects the money will allow him to hire between 25 and 30 people to offer broadband to some 3,000 more people.

Large telecom companies like AT&T and Qwest (Q) are taking a wait-and-see approach as the Administration works out its rules. Having initially advocated tax credits for expanding their networks into areas with little or no traditional broadband service, the telecom giants have grown less enthusiastic as lawmakers shaped instead a program of grants, loans, and loan guarantees. The companies are also suspicious of language in the law that requires "open access," a term that is not specifically defined in the congressional legislation but will be defined by the FCC. The requirement could mean that companies that get broadband funds have to share their networks with competitors. One AT&T spokesman said, "We will evaluate the plans established by the various agencies implementing these broadband initiatives and we stand ready to assist in furthering broadband deployment and adoption."

CenturyTel (CTL), a $2.5 billion telecom company that offers service in mostly rural markets in 25 states, is also watching the process closely. "We're reviewing the legislation and looking for opportunities for ourselves or working with our communities, or a combination of both," spokeswoman Annmarie Sartor said.

More Meetings Scheduled

The next step? Another series of public meetings held in Washington, Las Vegas, and Flagstaff, Ariz., among other places, where agency officials will huddle with state and local leaders as well as telecom executives and other interested parties. "They're really going to get into the weeds over how best to do this over the next one to two months," says Derek Turner, research director for Free Press, a nonprofit telecom policy advocacy organization. "Today's meeting was about showing a unified public face between the NTIA, the USDA, and the FCC, and showing that they're interested in public comment. They're going to be inundated with opinions."

And while $7.2 billion may seem like a lot of money, it works out to a little more than $140 million per state. Given the cost of building broadband networks in rural areas, the money is unlikely to be enough to provide even basic broadband service to all areas of the country. "This is really just a first step," says Turner. "This will make a dent in the problem, but it's not going to solve it."

Hesseldahl is a reporter for BusinessWeek.com.