Broadband stimulus: Wireless makes sense, but check the ROI

Mike Jude/Frost & Sullivan
22 Sep 2009

But before the champagne is uncorked, a few wrinkles that need to be considered. The stimulus rules also contain a heavy dose of common carriage language in the form of net neutrality. This means that for those successful applications, carriers will need to provide equal access to the broadband connection to competing service providers. If the project is marginal to begin with (to the point where public funding is required), then a requirement for open access might potentially reduce the ROI sufficiently to make the project non-viable in the long run.
As noted in the upcoming Stratecast report, Broadband Stimulus and Net Neutrality: Impact on Access, broadband stimulus only covers up to 80% of the project costs. This means carriers will need to obtain funding in any case and must factor the carrying cost of this debt into their financial calculations. For projects that don't quite meet all of the criteria, less than 80% funding may be provided. Therefore, carriers must plan for a real business model that realistically assesses the number of subscribers. A "build it and they will come" approach won't work here.
Ultimately, many wireless projects will probably be funded. For those providers that have submitted requests or plan to in subsequent rounds of funding, attention to the long-term viability of the deployments is critical.
At some point, the public money will be consumed and the networks that have been deployed under the stimulus will need to stand on their own financially. Attention to the business model and the potential subscriber base are critical in ensuring that the broadband stimulus funding leads to long term benefits rather than short-term experiments. 
More on Broadband stimulus
News: Local telecoms see opportunity in rural broadband stimulus package
News: Jury out on Obama telecom policy, but broadband stimulus gives hope
Commentary: Rural broadband stimulus: It's not about the jobs 

Mike Jude is a program manager at Stratecast/Frost & Sullivan in charge of the consumer communication services practice 
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