The U.S. House voted in June to fund $100 million in loan authority in the Broadband Loan Program of USDA's Rural Utilities Service (RUS) for federal fiscal year 2012. Together with the $690 million in loans authorized for the Telecom Loan Program of RUS, this means that rural service providers have a good chance of having an estimated $800 million in loans for the new fiscal year starting October 1, 2011 (FY 2012).

As it was this spring, the Broadband Loan Program remained under fire in the 2012 budget in the 2011 FY. President Obama's initial budget proposal had zeroed out 2012 funding for the Program as Administration officials worked to fund continuing loans under the now emerging Farm Bill. Thanks, however, to a bipartisan coalition of members of Congress from rural distracters across the nation, $6 million in appropriations were added to the RUS budget line even after the House Appropriations Committee had voted not to do so.

The National Telephone Cooperative Association (NTCA) was instrumental in putting together the coalition that restored the $100 million for the program. The passage of an amendment in favor of $6 million in new RUS monies came down to a 221 to 198 vote on June 16. The issue was successfully lobbied for by the NCTA, and by chambers of commerce and economic development agencies representing rural areas.

"With current regulatory uncertainty, private funding sources have become scarce, so having the support through the RUS Broadband Loan Program is imperative for the continued expansion of broadband throughout rural America," said NTCA CEO Shirley Bloomfield in a press statement at the conclusion of the vote. 

The TelPlexus Communications Expo hosted a day and half of presentations by leading vendors, the USDA, and a municipal power authority executive on everything from voice and data to video, transport, funding and more. 

Nick Fusco of Photo Science with Rick Peppers of TelPlexus

Christian Caracciolo of IE-Dynetics and Mark Johnson of Calix

TelPlexus' own Earl Grubbs performs with Hands of Time Traditional Bluegrass

RUS Administrator Jonathan Adelstein announced in late May the end of the use of the agency's List of Materials document for the broadband and telecom loan programs. For years the List has served as the standard reference, showing those materials and products that has been certified by USDA to be in compliance with the Buy American provisions of federal law. It also provided a measure of assurance that the materials and products were appropriate for the application for which they were listed. 

Mr. Adelstein stated that tight fiscal conditions within USDA forced his hand, requiring the permanent suspension of the List. "Maintaining the List of Materials, which includes a product by product review, simply cannot be sustained under our current budget and with our limited staff."

Administrator Adelstein did stress the fact that although the List has gone away, "the agency...is not altering its statutory Buy American obligations." As Buy American is a federal law, its provisions must be met by any entity receiving a RUS loan.

Now What?

The key question now facing RUS borrowers in the Broadband Loan and Telecom Loan Programs is simply put: Now what? 

Adelstein's statement was quickly applauded and agreed to by a significant manufacturer supplying equipment to the independent operating companies. "As the industry has picked up in terms of innovation and rate of change, a simplified process might be a better way to get new products to market faster," said Geoff Burke, senior director of corporate marketing for Calix, Inc. (NYSE: CALX), in an article by Joan Engbretson published in Connected Planet. Mr. Burke's statement is significant. It shows that the equipment and material sector of our industry applauds the move by USDA.

Calix, generally regarded as holding a full 70% of the equipment market for Multi-Service Access Platforms (MSAPs) within the independent telco and telephone cooperative sector, would clearly voice strong concern if Mr. Adelstein's action was seen as detrimental. The evaluation, data submittal, and testing processes that lead to inclusion on the List had at times negatively impacted time-to-market windows for new products. 

Jesse Ward of the NTCA saw benefits and detriments to the change, writing in the Association's NewEdge newsletter, "Now that the list is dead, for rural telcos this will clearly reduce the amount of paperwork required to complete a loan. Unfortunately the industry also relied on the guidance the list provided."

It is critical to understand that documentation must be provided to RUS that a loan borrower's equipment and materials are in compliance with all the intricacies of the Buy American federal statute. We are advising our clients of this requirement as their loan designs are executed and as the program management process rolls out as loan funds are disbursed during a project.

It is this professional responsibility of firms like TelPlexus that Administrator Adelstein clearly had in mind as he concluded his announcement about the discontinuation of the List of Materials, referencing the role of "consulting engineers" in the process. 

With the discontinuation of the List of Materials, TelPlexus has, depending upon the contract and the equipment type, been implementing one or more of the following in their contracts: 

A) Referencing the "last published" List of Materials (which will suffice for a short while) 

B) Adding necessary specifications in applicable portions of the contract; or 

C) Incorporating an "Acceptable Equipment Addendum" which requires conformance to applicable industry standards, conformance to the vendor's own published data sheets and specifications, and conformance to the Buy American provisions of federal law (which the discontinued List of Materials ensured).

We are standing by to answer any questions you have about this important issue.

New alliances and applications continue to drive greater usage of VoIP across the globe and by your customers.

Skype, which offers unlimited nationwide calling from computers for under $5 per month, is being purchased by Microsoft. Facebook will soon have VoIP courtesy of T-Mobile and Skype. Google's own Google Voice application is free to users with a Google account and offers free calls to the U.S. and Canada. Your customer's same Google Voice account can be used on a Smartphone and on a desktop connected to your network.

Ooma and MagicJack offer cheap PC-based phone calls, but each service has a catch. Ooma requires a single substantial upfront payment (a minimum of $250) and MagicJack has notoriously poor customer service.

Any company evaluating the VoIP threat should consider DSL Reports, a consumer advocate website, as a resource. The site tracks user feedback on all services, including VoIP. MagicJack ranks last, and users complain about Google Voice's call quality and customer service. Ooma ranks near the top of the list.

If voice is still a core part of your revenue stream, you need to know what percentage of your customers have a PC at home in order to evaluate the threat. The threat is unlikely to affect a majority of your subscribers in the near term, but every operating company should prepare for the arrival of free or very cheap nationwide phone calls in the future.

From Another Era: Video Calling

While the threat of free phone calls is real, you are likely to read a lot of hype about video calling that can be safely ignored. Every five years or so, pundits announce that video calls will change people's telephone lifestyle, but there are good reasons why the naysayers have always been right so far.  

In 2005, Joe Laszlo, then an analyst with Jupiter Research, spelled out why home users don't want video calls. He noted that there are a few cases where callers may want to see each other, such as grandparents talking to grandchildren (note that most video phone advertisements feature grandparents and grandchildren). 

He then explained that: people now know how to communicate without facial expressions on the phone. Many people also multitask while on the phone and that  "I often make faces while I'm talking on the phone that I wouldn't want the other person to see." Doing those things would be socially awkward during a video phone call. 

He could have added that people enjoy not needing to dress up or groom themselves in order to take a phone call. The technology was there for video calling six years ago, it is there on your network today, but for social reasons, most people will not want video phone calls -- at least for now.

That being said, Mr. Laszlo's analysis is from a different era - an era in which VoIP desktop and mobile applications were not embedded in social networks, and social networks themselves were not fixtures in virtually everyone's life.

VoIP as Broadband Driver

Embedded and application supported VoIP is now the driver of IP based calling that most analysts thought video calling would be. The impact is the same: surging VoIP usage is a threat to your voice-based revenue. The hope and the reality, however, is that VoIP is a driver of broadband adoption and usage. At what point will you want to embrace VoIP? To the point of offering support for your customers' specific terminal and service level requirements?

VoIP will not generate the bandwidth consumption of on-demand or OTT video. It is, however, an important service to understand with your customers, especially now as some of the largest IT players in the world are in better position to bring it to them.