Stimulus 1st step in Obama's broadband goals: aide

WASHINGTON Mon Feb 16, 2009 1:07pm EST

Smoke rises in the background as utility workers repair damaged fiber optic lines in Orange County. October 27, 2007. REUTERS/Phil McCarten

Smoke rises in the background as utility workers repair damaged fiber optic lines in Orange County. October 27, 2007.

Credit: Reuters/Phil McCarten

WASHINGTON (Reuters) - The $7.2 billion in funding to promote high-speed Internet in the stimulus package is just the first step in the Obama administration's effort to fuel expansion of telecommunications services, an adviser to the president said on Monday.

"Despite new federal money, the amount is but a fraction of what is needed" to establish the United States in terms of broadband versus other developed countries, said Blair Levin, an adviser to U.S. President Barack Obama on telecom matters during the transition and now an informal adviser.

"You've got to take a long view," he said.

Blair, who recently returned to his position as an adviser at investment banking firm Stifel Nicolaus, spoke at a conference of state utility regulators in Washington.

Obama's campaign promise to vault the U.S. out of its slump in terms of connectivity, speeds and access to broadband among its industrial peers has raised the hopes of the technology community.

The hopes were somewhat dashed by the size of the stimulus package devoted to broadband. One public interest group had called for $44 billion to build networks to connect rural and other unserved parts of the U.S. to the Internet to help bridge the digital divide.

Obama is expected to sign the nearly $800 billion economic measure, which passed largely down partisan lines, later this week.

WHO WILL BENEFIT?

Wall Street analysts also worry that strings that may be attached to the funding -- such as requirements for open networks -- that may deter investment.

But the chief executive of rural telecom provider Frontier Communications Corp said it will look for a way to benefit. Frontier reaches 90 percent of the markets it is in, she said.

"I do believe for that last 10 percent, it can be a gift for us," Maggie Wilderotter, CEO of Frontier told the conference.

"We're going to take a very hard look at it," she said, noting the money could be useful to upgrade speeds in areas that already have access.

Eyes are now on the U.S. Federal Communications Commission as it has a year under the bill to develop a national strategy for broadband.

No new FCC chairman has been named, but Julius Genachowski, a technology executive and former FCC staffer, is widely expected to be nominated.

Gerald Granovsky, a senior analyst at Moody's, said a key area to watch is reform of the universal service fund, which provides nationwide telephone service.

There is an effort to use some of the money collected from that fund for broadband, which is currently not technically allowed in the law.

(Editing by Jeffrey Benkoe)

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