Are RLECs giving up on broadband stimulus?

Tier-two and tier-three carriers may be giving up on the federal broadband stimulus program, according to one broadband equipment vendor CEO.

Several such carriers, such as CenturyLink (NYSE:CTL) and Windstream (NYSE:WIN), did not apply for stimulus funds due to the requirements attached, such as network neutrality and data disclosure. (Frontier Communications applied, but only in one state.) But some industry observers expected those carriers to try applying in later rounds once changes in the qualification process were made. Windstream, for example, said last month that it was working to convince federal administrators to change those rules.

However, as federal agencies have held their ground on net neutrality and other issues lately, carriers may have lost confidence in their prospects for changing policy.

“Some of those [tier-two and tier-three] carriers have no intent [to apply] at this point in time; they may not qualify for whatever reason,” said Tom Stanton, CEO of Adtran (NASDAQ:ADTN), during the equipment vendor’s earnings call today. “Those carriers that we’re in discussions with are talking about how they’re going to move forward with broadband expansion outside of the stimulus plan.”

Stanton’s comments came in response to a question about whether RLECs that had previously put broadband spending on hold while they evaluated their stimulus prospects might now increase spending. “The answer is yes,” Stanton said. “Some of those players went on a diet going into this year, and definitely in the first half of this year, trying to see how they would position themselves for broadband spend.”

UPDATE: A spokesperson for Windstream today said the company has not ruled out applying in round two: “It depends on how the rules are structured for the second round. We are waiting to participate in the agencies’ upcoming RFI process (request for information).”

UPDATE 10/15: Geoff Burke at Calix responded this way:

About 40% 0f U.S. tier 2 and 3 service providers are already our customers. To date, we’ve seen about a quarter of our U.S. customers apply for Stimulus funds in round one. Those who chose not to apply fall into four categories:
1) Those who did not qualify based on the definitions set forth in the NOFA
2) Those who feared the strings attached to the funds
3) Those who couldn’t wait for competitive reasons
4) Those who are already executing on all cylinders and saw the Stimulus as a distraction

For the first two groups, many are still waiting on the fence to see how dramatically the rules change in the next NOFA this includes some very large ILECs. For the service providers in the third and fourth groups, they continue to charge ahead with broadband expansion and upgrade plans, and in some cases have hastened their expansion and upgrade plans to counteract potential Stimulus-funded incursions into their service territories.

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