U.S. Broadband Stimulus Sets Aside $100 Million To Subsidize Satellite Services

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SAN FRANCISCO — One year after U.S. President Barack Obama signed into law the American Recovery and Reinvestment Act, which earmarked $7.2 billion to extend broadband communications across the country, satellite firms have seen little benefit from the initiative.

The vast majority of contracts awarded to date have offered money for terrestrial wireless and fiber-optic projects. Nevertheless, industry officials say a federal program set to begin this spring that will set aside at least $100 million to bring satellite-based services to remote communities is an encouraging sign.

“This is especially meaningful because the government is acknowledging that satellites are a key part of the solution to bringing broadband to everyone,” said Dean Manson, senior vice president and general counsel for Hughes Network Systems of Germantown, Md.

When the federal broadband initiatives were announced, industry executives were confident that any effort to offer broadband communications services to communities that lacked service would include satellites. As a result, companies applied for grants to defray the high cost of launching the next-generation of communication satellites, proposed targeted projects that use satellites in combination with terrestrial technologies to bring high-speed Internet to remote communities, and sought funding for mobile, satellite-based communications hubs for public safety groups and emergency response teams.

So far, few projects that involve satellites have been selected. The terrestrial projects that have won contracts are designed not only to expand high-speed Internet service but also to create jobs in rural areas — an important goal of the American Recovery and Reinvestment Act, industry observers said. In addition, satellite projects are being passed over by government officials due to concerns that the services they offer consumers are slower and more prone to delay than other communications options.

“If you look at what is available now, satellites may not be able to perform at the same level” as other broadband services, said Maury Mechanick, an international telecommunications attorney with White & Case LLP of Washington. “The next generation of satellites will be substantially better and will certainly be able to deliver a high-quality broadband product on a cost-effective basis.”

For example, Hughes Network’s Jupiter 1 satellite, due to launch in 2012, will enable the company to offer download speeds up to 20 million bits per second. But the company’s current fastest available service is 5 million bits per second — a tenth of what U.S. cable providers offer.

Still, satellite companies think they will garner a share of the broadband funding that has yet to be awarded. As of Feb. 18, the U.S. Commerce Department’s National Telecommunications and Information Administration (NTIA), which has $4.7 billion to spend, had awarded money for 19 projects worth $228 million in addition to $97 million in mapping and planning grants. The U.S. Agriculture Department’s Rural Utilities Service (RUS), which has $2.5 billion to spend, had awarded $587 million for 25 projects. By law, the two agencies are required to commit the entire $7.2 billion by Sept. 30.

As part of the second phase of the broadband initiative, RUS announced plans Jan. 22 in the Federal Register for a program specifically targeted to satellites, a $100 million initiative to bring broadband to customers who lack access to any terrestrial broadband services. Applicants for that funding will be able to offer customers discounts of $750 on the satellite dishes and electronic components needed to receive satellite-based broadband in homes or small businesses. That $100 million budget also could be augmented with funding left over from other RUS broadband programs, the announcement said. RUS plans to issue a request for proposals with additional details on satellite broadband projects in April, May or June, said RUS spokesman Bart Kendrick.

The RUS plan is similar to a proposal crafted by the leading consumer satellite service and equipment companies and delivered in November to NTIA and RUS. At the time, Hughes Network Systems, WildBlue Communications Inc. of Denver, EchoStar Satellite Services LLC of Englewood, Colo., and ViaSat Inc. of Carlsbad, Calif., asked the federal agencies to set aside $500 million in broadband funding to reach customers who lack access to terrestrial broadband service. The group proposed subsidies of $1,000 for each customer to cover the cost of equipment or service.

While the RUS initiative falls short of the $500 million sought, it is “a step in the right direction,” Manson said. It is not clear yet how the satellite firms will respond to the RUS program. They may compete individually for funding or, more likely, submit a joint proposal. Under one possible plan, the satellite companies would work together to establish an organization focused on offering broadband service to customers with no other high-speed Internet options. The firms still would compete for individual customers. “The approach seems to have a lot of merit,” Manson said.

As these issues are being discussed, satellite firms will continue to compete individually and with partners for other elements of the larger broadband initiative. RUS and NTIA are accepting applications for grants and loans until March 15, according to the Federal Register.

One satellite-related venture that has confirmed plans to compete in the second round of the RUS broadband initiative is Rivada Sea Lion LLC. In December, RUS announced plans to award $31 million to Rivada Sea Lion, a joint venture of Rivada Networks of Colorado Springs, Colo., and Sea Lion International of Anchorage, Alaska, to deliver broadband communications to 53 communities in Southwestern Alaska. That effort will rely on terrestrial wireless communications and satellite backhaul to bring high-speed Internet service to villages in a 230,000-square-kilometer region, said Desiree Pfeffer, Rivada Sea Lion president.

Although Rivada Sea Lion has not yet received money as part of the award announced in December, the firm is preparing a proposal for additional funding to offer communications services to more communities under the next round of the RUS program, Pfeffer said.