In its second-quarter earnings report today, broadband equipment vendor Adtran (NASDAQ: ADTN) said small rural telcos were continuing to free up spending that had been frozen in the first quarter as they puzzled over which plans could coincide with stimulus bids. (The company made similar comments in April, though a rival, Occam Networks, cited the stimulus chill as it cut 10% of its staff in May.)
One group of broadband stimulus hopefuls that has been in large part swept out of the running by the specifics of the plan is individual municipalities of any size. Though the stimulus plan stoked broad interest from municipalities earlier this year, many of them have been frustrated by the program’s preference for “underserved areas,” which the government has defined as areas where at least half of all households lack broadband, where fewer than 40% of households subscribe to broadband, or where no service provider advertises broadband transmission speeds of at least 3 Mb/s.
Those rules sent the city of Northfield, Minnesota, for example, which had hoped to secure stimulus funds, back to the drawing board in its efforts to finance its plans. Melissa Reeder, Northfield’s information technology director, told the local press, “Honestly, I don’t think there’s a single Minnesota city that would qualify.”
She wasn’t alone in expressing those views. Steve Ferguson, chief information officer of the city of San Jose, Calif., told the press, “I have a fire station that I could use fiber to, but it’s in the middle of downtown San Jose…[The ‘underserved’ imperative] makes any attempt for stimulus money in an urban city a virtual impossibility.”
Smaller towns are likely to continue to apply for stimulus funds, but many of them are likely to pool their efforts into state-based bids, as states play a unique role in the stimulus process.
Earlier this week, consultants at Telecom Pragmatics argued that the biggest beneficiaries of broadband stimulus funds will be large construction firms, which will help build the networks, along with fiber and equipment suppliers — particularly Corning, the largest fiber supplier (which also makes a business out of installing its own product) and Calix, whose private ownership will allow it the margin flexibility to take market share (in fact, Calix recently bulked up its sales staff specificially to take advantage of the stimulus opportunity).
During its earnings call today, Adtran’s Chief Executive Officer Tom Stanton pointed out that most of the company’s telco customers expecting stimulus funds are, in accordance with the plan’s goals, planning to apply them to “incremental builds” — projects the carriers wouldn’t have done on their own. And as as this year will see just one of three waves of stimulus funding, Stanton said, “We don’t expect a strong stimulus uptick in ‘09.”