Second Stimulus Round May Prove as Problematic as First, Some Say

NTIA has now completed its initial review of all applications and has begun informing those who won’t receive funding in the first round, an agency spokeswoman said late Thursday. “We expect that by the end of next week, we will have sent out approximately 1,400 letters to all those whose applications are not in due diligence.” NTIA has awarded nearly $200 million thus far, she said. “Our goal is to inform all first-round applicants of their status with sufficient time for them to file in round two, if they choose to do so.”

“The timing is not good for those parties who are in limbo in the first round and particularly difficult for those who are in the due diligence phase,” said John Windhausen, president of Telepoly Consulting, who has advised clients applying for grants. “They have a chance of being approved and are being asked for lots of information by NTIA. They're already working hard and have to decide whether to redouble their efforts to prepare an application for the next round.” On the bright side, Windhausen noted that applicants have eight weeks’ notice to prepare an application, up from six weeks in round one.

But those who “haven’t heard a word from the government won’t know if their application was incomplete or was a good proposal or maybe lacking in some way that the government thought was important,” said Bob Koppel, a veteran telecom lawyer with substantial experience preparing stimulus applications. “I thought they were going to kick out the applications that were incomplete or ineligible. Applications that got kicked out would know they hadn’t won, and it wasn’t because of the substance of their proposal.”

“It’s an extremely unfortunate situation,” said Harold Feld, legal director of Public Knowledge. “It’s not at all clear, given the statutory deadline and the problems that NTIA and RUS have had in terms of staffing themselves up, getting ready for such a massive undertaking that they could have done anything different. This is a classic case of get it done fast, get it done smart, get it done cheap and pick any two.”

The March deadline has applicants scrambling to understand new rules, said analyst Craig Settles of Successful.com. “The problem is, they're not going to give money to areas where projects are funded,” he said. “So if you're waiting to send out a proposal in round two, how do you know if there are still people in limbo? … Somebody needs to do a serious reality check, ASAP, to figure out how to speed up the awards.” Settles said the rules are strict in prohibiting multiple awards to an area. “That cannot be followed if you haven’t told people whether they've won or not,” he said.

“This really is a difficult situation,” said an industry source who has been active in the program. “A year ago the bill passed, but only a fraction of the $7.2 billion has actually been released. There are thousands of applications that are still pending … who don’t even know where they stand with the first round.” The danger with the second round is that the agencies are trying to “micromanage” where the money will go. “Just take the NTIA program,” the person said. “Who’s going to apply for that? It’s going to be primarily municipal governments, county governments. It’s so tailored.”

“NTIA and RUS owe applicants the courtesy of a prompt response,” said attorney Jim Baller of Baller Herbst. “As a practical matter, however, applicants that have not yet heard from NTIA or RUS are unlikely to receive funding in round one. I know of several good projects that are currently in due diligence, and there doesn’t seem to be enough time left in round one for NTIA and RUS to start this process with more than a handful of new projects.” An applicant that hasn’t heard back and still hopes for funding should get started right away on round two, Baller said.

Some said the slow pace in making awards may not pose much of a problem, because the program has changed markedly between the rounds. Among the major changes for the second round, the NTIA will focus on middle-mile broadband projects and the RUS will target last-mile projects. The agencies are requiring two reviewers to screen each application instead of the three in the first round.

“The programs have changed so much that I'm not sure people who applied in round one will just switch over to round two,” said Curt Stamp, president of the Independent Telephone & Telecommunications Alliance. “There are some cases I think where there could be some uncertainty.” He said he expects many applications, judging from the first round. “I haven’t heard a ground swell that people are not going to apply,” he said. “Any time the government gives away money people are going to step up and apply for it.”

Round two has been improved in ways that may attract a larger number of applicants, said Hilda Legg, a consultant at Wiley Rein and former RUS administrator. She said the process has been streamlined. And the RUS has dropped the “remote, non-remote” qualifications that, with varying grant versus loan options, have driven people crazy, Settles said. He also praised RUS’ emphasis on last-mile projects. Although it’s still a pain to address many individual communities on the proposal review side, the RUS -- unlike the NTIA -- has 400 field offices, making oversight of the award recipients more manageable, he said. But the agencies may be overwhelmed again, Settles said.