Big Telcos Drag Their Heels on Broadband Stimulus

Telecom giants are concerned that Washington's $8 billion plan to promote broadband access will force them to open their networks to other providers

By Spencer E. Ante and Arik Hesseldahl

As Washington prepares to dole out some $8 billion to promote the spread of broadband access, don't expect Big Telco to rush to the front of the line.

Some of the largest U.S. telecom operators, including AT&T (T), Verizon Communications (VZ), and Qwest Communications International (Q), are dragging their heels on asking for federal money. Some may sit out early funding rounds entirely or ultimately ask for only a sliver of the total.

Telecom giants are concerned that once finalized, the program will include burdensome regulations that will force them to open their equipment to rivals or otherwise hamper their ability to manage broadband networks, according to three people familiar with the thinking of the big service providers.

BusinessWeek Obtains Letter

That sentiment was captured in a Mar. 16 letter sent by industry group USTelecom to the Commerce and Agriculture Depts. and the Federal Communications Commission. In the letter, which was obtained by BusinessWeek, the group urged government officials to not let the broadband stimulus get mired down in contentious policy debates. "The agencies should not try to impose other requirements on grantees as part of this process," wrote USTelecom CEO Walter McCormick.

Executives at AT&T, the largest U.S. phone company, "are now examining the bill and the rules being established… with a view toward any ways it might advance AT&T's already significant investment in broadband deployment," AT&T spokeswoman Claudia Jones said in a prepared statement. Adds Verizon Communications spokesman David Fish: "We don't know for sure which entities will qualify. At this point, we're watching and learning like most everyone else."

Many within the telecom industry have taken a cautious stance toward a new Administration that has demonstrated through policy statements and appointments that it's more likely than its predecessor to use regulation to promote telecommunications competition. "They don't want to go back and revisit the core victories they gained in the last Administration," says Rebecca Arbogast, principal with investment firm Stifel Nicolaus & Co. (SF). "Whether or not they get money, they will work hard to shape the definitions so it is as mild and restrictive as possible."

Lobbying Behind the Scenes

In the past eight years, the communications industry won a handful of important legal and policy battles that lightened regulation of their operations. Now, the industry is continuing to lobby lawmakers behind the scenes and through testifying before various congressional panels.

The reluctance of some Internet service providers to sign on to the broadband stimulus could undermine the effectiveness of a program whose aim is to bring high-speed Internet access to areas of the country that have little or no fast-Web connectedness. A lack of participation by the country's largest, most experienced service providers could slow broadband expansion and interfere with the Administration's aim to create jobs. Plus, a program dominated by dozens or hundreds of smaller telecom players could end up being harder to manage.

Mark Seifert, senior adviser to the Assistant Secretary of Commerce, says the government is ready for a wide range of companies to apply for funding, and expects large players to participate. "Big companies say a lot of things for a lot of reasons," he says. "I don't believe any company interested in maintaining its competitive edge will turn its back on this program."