GRAPEVINE, Texas -- The Independent Show -- The U.S. government's $7.2 billion broadband stimulus plan may end up stimulating more than a few law firms along the way.

That's because the rules surrounding the application process are full of potential pitfalls and loopholes, likely causing many an interested operator to lawyer up a bit to ensure that they don't make any mistakes.

That much was evident here during a panel offering a primer on the broadband stimulus program. The audience included many of the nation's Tier 2 and Tier 3 cable operators that may try to get a piece of the pie to hook up some of the nation's "unserved" and "underserved" areas.

The American Cable Association (ACA) , a group that represents more than 1,000 smaller operators, is encouraging members to take advantage of those funds, as well as explain how they can protect themselves against telco competitors seeking to grab the funds. The ACA is providing details on the rules and the applications in the "Member's Lounge" portion of its Website (password is required).

Time is of the essence. Applications for the first round are accepted electronically between July 14 and Aug. 14. A second round will commence later this year, with a third round expected to get underway by next spring. The entire $7.2 billion sum, to be delved out by the Rural Utilities Service (RUS) and the National Telecommunications and Information Administration (NTIA) for last-mile access and middle-mile (facilities and transport) projects, will be awarded by Sept. 30, 2010.

Because the rules around the process (including how unserved and underserved areas are defined, and which projects are eligible) could change after the first round, the ACA and its counselors are suggesting that member MSOs jump in right away if they intend to apply at all.

"They [the government] are going to be real strict," said Jeremy Kissel, associate attorney with Cinnamon Mueller, a firm that works closely with the ACA.

Generally speaking, unserved areas are those with one or more census blocks where at least 90 percent of homes lack access to facilities-based broadband. (So, wireless counts, but satellite doesn't.) The "unserved" label also applies to areas where users aren't being served with minimum speeds of 768 Kbit/s downstream and 200 Kbit/s upstream.

Underserved areas generally include regions where no more than 50 percent of households have access to facilities-based, terrestrial broadband service at the 768 Kbit/s by 200 Kbit/s benchmark. But the "underserved" label is thrown out if any service provider in the area advertises broadband speeds of at least 3 Mbit/s.

"Underserved" also covers areas where broadband adoption is less than 40 percent.

"The inclusion of this factor confounds me," said ACA VP of government affairs Ross Lieberman, noting that those figures are dictated by area demographics and poverty levels. "A household without a computer won't be purchasing broadband."

Beyond the unserved/underserved rules, operators still have some research to do. A proposed plan has to show that it can be substantially completed in two years and fully completed in three years, noted Bruce Beard, senior counsel for Cinnamon Mueller.

Also, MSOs shouldn't be thinking about trying to build something with those funds and then flipping it for a profit later. That's generally discouraged, though some special circumstances will allow for a future sale.

The government wants to be sure applicants are in it for the long haul and that those who are building out these projects are actually operators, Beard said.

MSOs have some recourse if they discover that a competitor is trying to obtain stimulus funds to overbuild an area already served by cable broadband. Once applications are submitted, providers will have a 30-day period to comment. Depending on the outcome, the government may choose to reclassify an unserved area as underserved, or perhaps reject the application outright.

On the fence
So, will all these rules deter operators from applying for funds? Not really, if an unscientific poll conducted during the session offers any indication.

Among MSOs in the crowd today (to keep results clean, only one person from each operator in attendance was allowed to vote), 22 percent said they anticipated filing for funds in the first round, with 23 percent saying they are "most likely" to do so. Twenty-three percent said they're not likely to file in the first round, and 33 percent punched in a firm "no."

About 20 percent said they would likely file for one of the two remaining rounds.

Of those that do anticipate filing, 31 percent said their proposed projects would cost more than $2 million -- the priciest of the four choices offered for that polling question.

"Reaching for the stars... that's good," joked ACA president and CEO Matt Polka.

— Jeff Baumgartner, Site Editor, Cable Digital News