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Things went horribly wrong with the first round of the U.S. stimulus. Amazingly few proposals came in that would reach the unserved at reasonable cost or create jobs effectively, the primary goals. The normal government response - including the past history of RUS - would be to give out the money anyway, put lipstick on the pig, and hope no one notices. At NTIA, the grants announced are mostly misdirected, and at least one smells like fraud. Congress was already roasting RUS for how long they were taking to spend the stimulus money, putting on pressure to "do something." Jonathan wisely resisted.

Adelstein decided instead to take the heat for the delay and reboot. They just began a 60 day period for new applications. At RUS, they rededicated to the program's original goal, serving "rural areas that currently lack adequate broadband service."  That won't be easy: it turns out reaching the unserved is far harder than any of us realized a year ago, There are fewer than expected - a good thing - and they are scattered in a way that makes it generally impractical for new entrants to serve them. Nearly none are in clusters of 500 or 5,000. That means generally only the local telco or cableco, with facilities in place, have obvious opportunities. Nearly none of the proposed "middle mile" builds make sense for public subsidy. They just duplicate fiber that's in place and has plenty of capacity, rather than extending fiber where tehy don't have any. If some rural areas are being ripped off by local fiber market power, the right answer is to end the ripoff. Overbuilds would cost $50B or so, and the government just doesn't have the money. With rare exceptions - Maine might be one - overbuilds are a mistake.

82% of the unserved are in Verizon, AT&T, and Qwest territory and the three bells boycotted the first round for leverage, as did nearly all the cablecos. It would take political will to overcome that obstacle, and the administration didn't provide that.

Julius at the FCC should immediately take two steps. The first is to eliminate the excessive prices some rural carriers pay for backhaul, which is at least one third of the problem. There's plenty of fiber, but the only local provider(s) look for monopoly-like pricing. Bandwidth that costs $5-15 a megabit in hundreds of cities can cost $100/megabit and even $200/megabit where competition is weak. The overall special access proceeding is huge, with a multi-billion dollar battle over urban office buildings delaying things. Moving forward on a very narrow ruling for rural areas with presumptive market failure is natural, and there's no reason Julius can't do that in weeks. That will double or triple the pool of smaller carriers that can take advantage of RUS funding.

But Julius also needs to do something about the 8 big guys who are more than 80% of the problem. I'd recommend a blunt ultimatum, telling Brian Roberts, Glenn Britt, Randall Stevenson, and their peers "You must offer broadband to almost all your customers. Of course that's expensive in some places, but RUS has $2B to help you. If you don't apply for that funding, I'll expect you to find a way to cover the expense yourself.  You've got 60 days to finish the RUS paperwork, and my colleagues there tell me they intend to fund as many reasonable applications as they can."

At RUS, there are two natural actions that could immediately make a difference. The first is direct outreach to the 2,000 cable companies. most of whom believe RUS will only fund telcos. Adelstein has said the direct opposite to me and to Congress, but the folks at the companies haven't received the message. He only has 30 days to get the message out; I couldn't imagine a better use of the time of the top agency staff. It's far more effective to get good applications in than to negotiate improvements in bad ones.

RUS should target the money directly to what needs subsidy even if the legislation allows them to also subsidize other equipment related to broadband. Towers in unserved rural areas, new fiber down rural roads, an additional satellite in the sky, are all unlikely to be funded without help. Very generous funding of the infrastructure to reach customers is sometimes needed.

 On the other hand, the home gear and installation will almost always be funded by the companies, because they have a paying customer. Subsidy is also almost never needed to upgrade fiber in place. As much as half the subsidy is going to items the companies would pay for. Redirecting that money to where subsidy is needed means it will go twice as far. That needs to be guided by a good understanding of the actual costs, which is why I've been writing so many articles this year on real deployment costs.