WildBlue Takes 2nd Look at USDA Broadband Loan Program
After being rejected last year when it applied for a loan from the Dept. of Agriculture to offer rural broadband service, WildBlue is trying again, it told us Wed. WildBlue is “working with” the USDA’s rural development program to offer its satellite broadband service, said CFO Mark Adolph. The broadband loan program, part of the 2002 Farm bill, is administered by the USDA’s rural development program, formerly known as the Rural Utilities Service (RUS).
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The riskiness of WildBlue’s 2006 application was “unacceptable,” said Kenneth Kuchno, dir. of the Telecom Program at USDA’s Broadband Div., in an Aug. 16, 2006 letter. WildBlue CEO David Leonard told us last month that the rejection was due to “philosophical difference.”
Two of the 3 U.S. satellite broadband carriers have tried to navigate the USDA program’s bureaucratic maze: Hughes Network Services gave up in Dec. 2005, when it realized it wouldn’t be successful. (Only StarBand hasn’t made any effort.) “It was trying to put a square peg in a round hole,” Doug Medina, senior dir.-enterprise mktg., told us. Hughes tried hard, he said, but “we just couldn’t make it fit.”
The experience of 2/3 of the satellite broadband carriers mirrors that of wireless carriers in the early days of the program when they complained the rules were too rigid and tilted toward the original recipients of USDA telecom loans -- rural ILECs. For example, both wireless and satellite providers bumped up against a rule prohibiting loans to serve markets already being served by another loan recipient. Since both wireless and satellite service areas differ from wireline markets, RUS finally changed this prohibition. Now wireless constitutes nearly 1/4 of its broadband loan portfolio, Ponti said.
The broadband loan process is “extremely complex,” said WildBlue’s Adolph: “Everyone is proceeding cautiously to make sure that the right choices are made every step of the way. Sometimes that can result in disappointments or delays, but at the end of the day we're all seeking the same goal.”
During the 2004 presidential campaign, President Bush said he wanted broadband available nationwide by the end of 2007. WildBlue’s Leonard believes USDA needs to realize satellites offer a unique solution. “We welcome satellite participation in the program,” said Jackie Ponti, asst. admin. of USDA rural development telecom programs. “Satellites do play an important role, especially in those most remote areas,” she told us. Ponti stressed several times that satellites qualify for the broadband loan program. However, she said: “In talking to the satellite folks, the financing arrangements give them pause. We are a lender. We have a standard mortgage.”
Leonard said a problem for satellites is that since they are inherently national, developing a business plan for a specific market is more complicated. Identifying specific markets requires loan applicants to “do their homework,” Ponti agreed: “We do require that all applicants say where they are going to serve, do a market plan and a business plan. Satellite [carriers] can identify where they are going to market.”
USDA needs to be more flexible, said Brad Greenwald, WildBlue’s vp-mktg.: “Either the rules have to be more flexible or the money will not get out there.” The programs “don’t exclude satellites,” acknowledged David Cavosa, exec. dir.-Satellite Industry Assn., but the way the program is structured “it makes it difficult.”
There is a similar problem with the Dept. of Homeland Security’s interoperability grant program, Cavosa said. SIA has been working with DHS and USDA to educate them about how their broadband programs could be more friendly to satellites, he said. The education effort is part of a larger lobbying effort SIA has been waging to have its technology subsidized to serve rural America. SIA has met with FCC officials on changes it would like to see from the universal service program, and the Office of Science & Technology Policy.
SIA will soon know whether its USDA efforts have been successful. New rules for the broadband loan program will be out shortly, Jim Andrew, admin. of USDA rural development telecom programs, told the House Agriculture Committee during a Tues. hearing. Rep. McIntyre (D-N.C.) gave him 10 days. “New programs and guidance should be out in the coming weeks, which should make it easier for satellite broadband to compete for the loans,” Cavosa told us before the hearing.