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Recovery Act: Tier 2 Says 'No Thanks'

It's well known that Tier 1 carriers weren't interested in money from the American Recovery and Reinvestment Act (ARRA), but some of the Tier 2 camp turned down the offer as well.

Of course, there were still plenty of names -- some recognizable -- that put in for their share of the $4 billion being handed out in the first round of grants and loans. (See Recovery Act: The Stimulus Index.) But they may be in the minority.

"Most Tier 1 and Tier 2 broadband service providers have decided against applying for broadband stimulus funding," writes analyst Michael Genovese of Elevate Research Inc.

CenturyLink Inc. (NYSE: CTL), which had been on the fence about applying for funds, ended up in the "No" category, Genovese writes. (See Recovery Act: The Undecided Remain.)

Others on Genovese's list of nos include Consolidated Communications Inc. , Frontier Communications Corp. (NYSE: FTR), and Windstream Communications Inc. (Nasdaq: WIN).

In some cases, the reluctance comes from the same concerns big carriers have: network neutrality verbiage in the ARRA and the whole idea of the government keeping watch over a project.

For those reasons, many small carriers probably didn't even consider applying, says Russ Sharer, vice president of marketing for equipment vendor Occam Networks Inc. (Nasdaq: OCNW). "They see the evolution of the government's involvement in, say, the financial industry," he tells Light Reading. "Independent operating companies didn't get their name by accident. They like being independent."

Sources have also been citing the cost, as carriers would have to pony up 20 percent of the project financial outlay.

Sharer offers one more reason: Not every carrier wants to delve into unserved territory. It's not always profitable, once you compare the costs of managing the network against the slow takeup of customers (given that a lot of U.S. households don't care about broadband).

"Some people say it's not worth the business risk," he says.

— Craig Matsumoto, West Coast Editor, Light Reading

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