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Details emerge on Obama's $40B broadband stimulus

By: Ed Gubbins, Telephony Online

President-Elect Barack Obama is likely to direct up to $40 billion in grants and loans toward improving broadband availability and speeds as part of broader economic stimulus efforts, according to UBS analysts.

In a research note this morning, UBS analysts said they expect Obama’s economic stimulus plan to include two main provisions for broadband: $5 billion to $10 billion in grants to expand broadband to unserved areas (at a minimum speed of 768 kilobits per second) and $30 billion in interest-free loans for boosting broadband speeds – to 50 megabits per second downstream and 20 Mb/s upstream for wireline networks and 10 Mb/s downstream, 2 Mb/s upstream for wireless networks.

draft of the proposed $825-billion economic stimulus bill circulating on Capitol Hill today lists $6 billion for expanding broadband "so businesses in rural and other underserved areas can link up to the global economy," adding, "For every dollar invested in broadband the economy sees a ten-fold return on that investment."

The grant money will likely be used by telcos and municipalities to bring broadband to the 10% to 15% of American homes (about 13 million homes) that can’t get it today, UBS said, adding that this provision could well aid the job-creation goals of the larger economic stimulus effort.

The loans will likely be used to speed rollouts of 4G wireless, fiber-to-the-premises (FTTP) and DOCSIS 3.0, rollouts major cable companies slowed last fall amid a broad slowdown in carrier purchasing.

“While we would not expect AT&T to change its strategy, we believe Verizon could be more aggressive with its current FTTP rollout,” UBS analysts said.

In a presentation at an investor conference last week, Verizon Chief Executive Officer Ivan Seidenberg said the company would wait until next year, when it expects to reach its goal of passing 18 million homes with FTTP, to determine what to do next. At least one analyst expects Verizon to overbuild FTTP in adjacent areas outside its local service footprint.

At an industry event this week, Blair Levin, a key member of the Obama transition team, cautioned listeners not to confuse the broadband component of Obama’s economic stimulus plan – which is focused largely on rapid job creation – with Obama’s longer-term plans to address broadband availability, which will continue independently of the economic stimulus efforts he is expected to introduce as soon as possible once his term begins next week.

According to UBS, the equipment vendors best positioned to benefit from these broadband stimulus plans are Adtran and Arris, as they have the highest exposure to US capital spending. Other beneficiaries could include Ciena, Commscope, Juniper Networks and Tellabs to a lesser extent, UBS said.


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