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<p class=MsoNormal><b><font size=3 face="Times New Roman"><span
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<span class=newsstorytitle>Verizon, AT&T May Tell <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> to Keep $7.2 Billion
Stimulus Money </span><o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>By
Molly Peterson<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>March
31 (Bloomberg) -- <a href="http://www.bloomberg.com/apps/quote?ticker=VZ%3AUS">Verizon
Communications Inc.</a> and AT&T Inc. may have this response to the <st1:place
w:st="on"><st1:country-region w:st="on">U.S.</st1:country-region></st1:place>
government’s offer of $7.2 billion for high-speed Internet projects: Keep it.
<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Unlike the
businesses that welcomed the $787 billion stimulus package approved by
Congress last month, the two biggest <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> phone companies have
reservations. They’re urging the government not to help other companies
compete with them through broadband grants or to set new conditions on how
Internet access should be provided. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“I
don’t think there’s much for them to gain financially from going after this
money,” especially if the government attaches strings to it, said <a
href="http://search.bloomberg.com/search?q=Rebecca+Arbogast&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Rebecca
Arbogast</a>, an analyst at Stifel Nicolaus & Co. in <st1:place w:st="on"><st1:State
w:st="on">Washington</st1:State></st1:place>. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>The
companies have remained noncommittal as they lobby to shape rules for the
grants. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“We do
not have our hand out seeking government funds,” <a
href="http://search.bloomberg.com/search?q=James+Cicconi&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">James
Cicconi</a>, AT&T’s senior executive vice president, told reporters March
11. While the company is “open to considering things that might help the
economy and might help our customers at the same time,” he said AT&T’s
primary focus for broadband is its own investment program. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>The
$7.2 billion is intended to bring fast Internet service to “unserved” areas
that don’t have it and other regions the government deems “underserved,”
according to the stimulus measure. The Commerce Department’s <a
href="http://www.ntia.doc.gov/" target="_blank">National Telecommunications
and Information Administration</a> will disburse $4.7 billion and the
Agriculture Department $2.5 billion. Both agencies must decide what
“underserved” means before awarding any grants. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Verizon
and AT&T say if they seek funds, they are more likely to apply to NTIA
because the law requires the Agriculture Department to give priority to rural
carriers that have already participated in its loan programs for telephone
service. <o:p></o:p></span></font></p>
<p><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt;
font-weight:bold'>‘They’re All Coming’ <o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>NTIA
will receive a “massive” number of applications, mostly from small companies,
said former Federal Communications Commission chairman <a
href="http://search.bloomberg.com/search?q=Michael+Powell&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Michael
Powell</a>. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“If
you’re an entrepreneur or a businessperson, you’re sitting in a room right
now, figuring out every way to Sunday how to get this money -- and they’re
all coming,” Powell, a Republican who headed the FCC from 2001 through 2005,
said in an interview. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Officials
at NTIA say more than 2,000 companies, local governments, community groups
and consumer advocates have contacted them about the agency’s rules for
disbursing its stimulus money. The first public meeting on the funds, held
jointly by NTIA, the Agriculture Department and the <a
href="http://www.fcc.gov/" target="_blank">FCC</a> on March 10, drew an
overflow crowd of more than 500 to the Commerce Department. <o:p></o:p></span></font></p>
<p><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt;
font-weight:bold'>Adding Staff <o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>NTIA’s
portion of the stimulus will be the largest grant program run by the agency.
NTIA, whose original grant budget for this year was $592 million, will add staff
to its 22-person disbursement office and hire contractors to allocate the
stimulus money, said <a
href="http://search.bloomberg.com/search?q=Bernadette+McGuire-Rivera&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Bernadette
McGuire-Rivera</a>, the agency’s associate administrator. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>The law
requires all grants to go out by Sept. 30, 2010, funding at least one project
in each state. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Rural
mid-sized carriers such as <a
href="http://www.bloomberg.com/apps/quote?ticker=CTL%3AUS">CenturyTel Inc.</a>,
<a href="http://www.bloomberg.com/apps/quote?ticker=EQ%3AUS">Embarq Corp.</a>
and <a href="http://www.bloomberg.com/apps/quote?ticker=FTR%3AUS">Frontier
Communications Corp.</a> are likely to push aggressively for grants, said <a
href="http://search.bloomberg.com/search?q=Jessica+Zufolo&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Jessica
Zufolo</a>, an analyst with Medley Global Advisors in Washington. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Frontier,
the Stamford, Connecticut-based company that offers phone, Internet and
television service in 24 states, hopes to use stimulus money for
“shovel-ready” projects to expand broadband access in rural areas, Chief
Executive Officer <a
href="http://search.bloomberg.com/search?q=Maggie+Wilderotter&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Maggie
Wilderotter</a> said in an interview last month. <o:p></o:p></span></font></p>
<p><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt;
font-weight:bold'>Verizon’s Discussions <o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>New
York-based Verizon, like Dallas-based AT&T, may forgo the grants if it
doesn’t like the conditions. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“We
don’t have any plans to apply; we also have not made a decision not to
apply,” Verizon Executive Vice President <a
href="http://search.bloomberg.com/search?q=Thomas%0ATauke&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Thomas
Tauke</a> told reporters last month. “We’re certainly going to participate in
those discussions to the extent that we can.” <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>The
stimulus measure has a provision that makes NTIA a new battleground in the
debate over so-called net neutrality. That’s the idea that broadband
providers shouldn’t be permitted to favor some Web sites by delivering their
content faster than similar content from other sites. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>The law
says recipients of NTIA grants must practice “nondiscrimination” in access to
their networks and “at a minimum” must comply with broadband <a
href="http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-151A1.pdf"
target="_blank">guidelines</a> adopted by the FCC in 2005. Those principles,
which aren’t formal FCC rules, say carriers should let subscribers have
access to any legal Web content or service they choose as long as it doesn’t
harm the network. <o:p></o:p></span></font></p>
<p><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt;
font-weight:bold'>Managing Congestion <o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>AT&T,
Verizon and Comcast Corp., the largest <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> cable provider, say the
rules are unwarranted and would hinder their ability to manage congestion on
networks they have spent billions to build. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Attaching
“onerous” requirements for the grants would discourage companies from
applying for them, said AT&T’s Cicconi. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Verizon,
AT&T and <a href="http://www.bloomberg.com/apps/quote?ticker=Q%3AUS">Qwest
Communications International Inc.,</a> also say most of the grant money
should go to areas that they and other broadband companies don’t already
serve. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“I’m
opposed to the government subsidizing competition,” said <a
href="http://search.bloomberg.com/search?q=Steve+Davis&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Steve
Davis</a>, senior vice president for public policy for Denver-based Quest,
which operates in 14 Western states, in an interview. “While we have unserved
areas it’s inappropriate to spend the limited dollars on underserved areas.” <o:p></o:p></span></font></p>
<p><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt;
font-weight:bold'>Cisco Systems <o:p></o:p></span></font></b></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'><a
href="http://www.bloomberg.com/apps/quote?ticker=CSCO%3AUS">Cisco Systems
Inc.</a>, the largest maker of networking equipment, wants broadband grants
to go to underserved areas as well, said <a
href="http://search.bloomberg.com/search?q=Jeff+Campbell&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Jeff
Campbell</a>, the company’s director of technology and communications policy.
While San Jose, California-based Cisco doesn’t plan to apply for grants, it
will sell broadband equipment to carriers that win funds, he said. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“The
underserved are people who have access to broadband at slow speeds with
little likelihood that that infrastructure will be upgraded to current-level
technology without government assistance,” <st1:place w:st="on"><st1:City
w:st="on">Campbell</st1:City></st1:place> said in an interview. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Broadband
spending by Verizon and AT&T dwarfs what they would get from a portion of
the new federal grants. AT&T plans to invest more than $11 billion this
year to expand its high- speed networks. Verizon is spending $23 billion over
seven years to build out its fiber-optic network. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>So if
the companies ultimately seek grants, their goal may be partly to fend off
potential competition in underserved areas, Arbogast said. <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>“They
would not welcome competitors coming in with a lot of grant money to markets
they’re serving,” she said. “So they might have more of a defensive agenda
than an offensive agenda.” <o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>To
contact the reporter on this story: <a
href="http://search.bloomberg.com/search?q=Molly+Peterson&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1">Molly
Peterson</a> in <st1:place w:st="on"><st1:State w:st="on">Washington</st1:State></st1:place>
at <a href="mailto:mpeterson9@bloomberg.net">mpeterson9@bloomberg.net</a> <o:p></o:p></span></font></p>
<p class=MsoNormal><i><font size=3 face="Times New Roman"><span
style='font-size:12.0pt;font-style:italic'>Last Updated: March 31, 2009 00:00
EDT</span></font></i> <o:p></o:p></p>
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