In an unprecedented move, the Rural Utilities Service, which traditionally has funded fixed telephone and wireless network deployments in rural America, is preparing a request for proposals related to satellite broadband. The RFP is not expected before Feb. 15, 2010.
RUS executives have indicated the satellite program might allocate $100 million, possibly more, exclusively for extending end user access to satellite broadband services, said Dean Manson, Hughes Network Systems (News - Alert) SVP and general counsel.
Details of the RFP of course are not finalized, but the RUS will have to grapple with some issues. The funds might include both subsidies of some sort for end users at isolated locations who cannot afford the customer premises equipment and installation services.
But the subsidies might also include defraying portions of the monthly recurring fees. A related question is how long such subsidies might be available. The RUS funds to be used for this satellite program are part of the “broadband stimulus” program, which requires that all funds be spent by “three years” from the time of award, implying that service subsidies could last for as much as three years.
Manson expects any service subsidy would have to offer discounts from posted retail rates of “at least a 25 percent from 2009 prices.” But service providers would be free to offer bigger discounts as well.
The RUS also must clarify whether subsidies can be offered for all existing service tiers or only for some, and if so, what discounts are available for which speed tiers.
Also, the RUS will have to employ different definitions than it traditionally has used. In the past, the RUS has targeted census tracts and other geographic areas. For the satellite program, the definition will have to be at the level of specific homes, since there could be eligible households even in broader areas now served either by cable or telco broadband networks.
Then there is the issue of how actual end users would apply for funds. “One approach we have been talking about is to set up a third party administrator to act as a clearinghouse,” said Manson.
A tactical issue satellite providers Wildblue Communications and Hughes Network Systems will have to think about is how to apply. In principle, both companies could apply, as well as others who act as retailers of services provided by those two networks.
But it might be better to submit one joint proposal, setting up some process that allows both firms, and their authorized distributors, to create one granting entity, while still allowing full reign for each firm, and its distributors, to compete for customers.
“We have been talking about one industry proposal, rather than many separate proposals from lots of competitors,” Manson noted.
So far, the RUS seems to have decided to move in a direction originally suggested by Hughes, WildBlue Communications, Inc., EchoStar Satellite Services and ViaSat (News - Alert) in joint comments late in 2009 about how a “broadband connectivity credit” process could be created.
That proposal called for creating an independent entity that could verify that funds were being used for un-served customers, while leaving the individual satellite broadband companies to compete to serve those customers.
Hughes offers an entry-level service operating at 1 Mbps but also offers services operating up to 5 Mbps. Higher speeds than that will be possible once Hughes launches a planned new “Jupiter” satellite, to be launched in 2012.
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by Marisa Torrieri