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McSlarrow: Don't 'Stimulate' New Competitors

By: John Eggerton, Multichannel News

The National Telecommunications & Information Administration and the Agriculture Department's Rural Utilities Service are trying to figure out who gets $7 billion-plus in economic stimulus money. Cable operators and telcos are kicking the tires on a program that offers grant money to deploy broadband service in "underserved" areas. National Cable & Telecommunications Association president Kyle McSlarrow, in an interview with John Eggerton of Multichannel News, said many companies are interested in getting grants, but want to know how the open-access conditions are interpreted and how the grant and loan program is structured. An edited transcript follows:

MCN: A story last week suggested the telcos may sit out the broadband stimulus grant program if they feel the open-access conditions are too Kyle McSlarrowonerous. Is the cable industry concerned as well?

Kyle McSlarrow: Yes, in the sense that it really matters a lot how [the government] interprets whatever that condition is going to be. Congress kind of gave the agencies an out by saying it ranges from sort of adopting the [Federal Communications Commission] policy statement that already exists to something else.

MCN: We assume it is the "something else" that will be troublesome?
KM: Yes, I think that as you move along that continuum, we have communicated that the more you layer on in terms of conditions, the less attractive the investments could potentially be. We're not going to presume anything yet. I think we have a lot of companies who are potentially interested, but until we see the whole package and can actually weigh the relative opportunities versus requirements and conditions, people aren't going to know whether or not this is for them.

MCN: Is the gist of the cable industry's position that you don't want the government to subsidize new competitors to cable?
KM: Yes. I think it is a place where we think our No. 1 legitimate concern coincides with what ought to be the No. 1 legitimate concern of policymakers. Why would you, and you truly would be, wasting money to provide service in areas that already have it, when you've got actual challenges with unserved America or adoption challenges with low-income households, where you can really take this money and move the needle in a significant way?
The best they could do is take $7 billion and put it in a marketplace where we and the telecoms together are going to invest several times that ourselves this year. So all they could accomplish would be unwittingly to screw up the investment decisions that these companies are planning to make already. You want them to continue making those investment decisions. You don't want there to be any doubt that [the companies] should continue making the investment and the money should go to the area where those investment decisions aren't reaching.

MCN: Can you live with partnering with government or nonprofits if that is the price of admission, or is that a nonstarter?
KM: I don't think it is a nonstarter, I just don't think it is a good idea. I think many of our companies are looking to partner with a variety of nonprofits or potentially state agencies. The one good thing about this whole process is that a lot creative thinking and discussion is taking place. I think if people see an opportunity, and a partnership is part of it, I think they will want to be free to do so. But I think just to mandate it across the board, I think they are going to miss a lot of opportunities and a lot of other creative ideas that don't quite fit that mold.

MCN: Where do you stand on states both vetting the grant proposals and potentially aggregating their own proposals?
KM: I don't know. It is one of the things we have been thinking through. It is not obvious to me what is the right answer. States should have a role and probably from NTIA's perspective I would think it would be really important to get their input into it. I think that any time a state or government entity is both ranking the priority list and is also on it, [there] is a little bit of a conflict of interest. The states have an important role, but it is not clear to me exactly what the right answer is.

MCN: One argument made at the NTIA's public forum this week was: Why trust the buildout to incumbents when they are responsible for what was called the woeful state of broadband deployment? 
KM: That's absurd. We can always say: "How can we do better as a country? How do we close the digital divide? How do we increase adoption?" But the idea that cable and the telecoms together have invested hundreds of billions of dollars and rolled our broadband so it is available to over 90% of the country, and every year our speeds are increasing dramatically and the price of the offering is staying in exactly the same place, to say that is other than a success story is absurd.
But it is a different point to say, OK, even if it is a success story, I think it is completely fair to say we have some gaps or we've got some other goals we'd like to layer on. That's fine. Let's have that conversation. But to presume that we have a crisis in broadband, is ridiculous.

MCN: What do you see being the timetable for getting these grants out? Seems like the agencies have a lot to do, in not very much time.
KM: I don't know. I think it is going to be lot harder than people imagine for this to get off the ground quickly ... in terms of the scale of the types of decisions and, just mechanically, how one pumps money out the door and does it in a way that is fair, good policy and avoids fraud, waste and abuse. The government actually takes a lot of time, and we normally call it red tape, to avoid those pitfalls and so I think they are going to have to strike a balance, but I am just dubious that you can make any major decisions that quickly.

MCN: You talked in this week's "Moving the Needle" paper about not deploying funds in a way that would harm existing broadband networks. What, specifically, would be those harmful ways? 
KM: Just to be clear. I am not concerned about competition. There is not enough money here to actually subsidize a meaningful competitor. But my point is that it is a waste of money. And what they actually could harm would be the fabric of investment. Having money sloshing around in markets where you actually have real companies with real capital-expenditure needs, who are going to financial institutions to secure that capital, could be adversely affected if you have money sloshing around. You don't have the same concern, by definition, in unserved marketplaces.
So, I think any time we're talking about the government subsidizing the provision of broadband services in an area where you have extant broadband services you are going to run up against that problem. And in this economy, we need to be very careful that we don't unwittingly mess up what is already a very tough investment climate.

MCN: Are you concerned about the issue of private-company eligibility?
KM: I don't think that is really the issue, at least for private providers. The track record of municipalities or other entities that don't actually have ability or the wherewithal or even have the purpose of running a business is not a good one. It is so obvious that if want to move the needle on the provision of broadband services, you can't do it without existing companies that have the knowhow, the experience, the personnel and the ability to deploy those networks. You're not going to just build green-field networks that spring up from nothing.

MCN: On another subject, what is the status of the cable industry-led DTV call-center effort? Are you ready for June 12?
KM: I think it is unclear, in part because it is still uncertain what the stimulus money will be used for in terms of the call center [the stimulus bill sets aside $90 million for DTV education and outreach]. We have made clear that we are standing by and they are going to use us however they need to use us. But I think the expectation there is that there will be an increase in the efforts and resources of the government call center, so I would expect that our role could be much less proportionally than it was in the first round.
The bottom line is we're not going to leave them hanging.


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