DISCUSSION ON THE RECOVERY ACT OF 2009 MARC, TRAVERSE CITY, MICHIGAN

1. Medley Global Advisors DISCUSSION ON THE RECOVERY ACT OF 2009 MARC, TRAVERSE CITY, MICHIGAN Jessica Zufolo Senior Policy Director, Telecom, Media and Tech 202-904-2372 jzufolo@medleyadvisors.com

2. Recovery Act Basics • Signed into law on February 17, 2009, with a mandate that all grant and loan awards be issued by the end of September 2010. • NTIA broadband grants are expected to be issued in three separate, staggered rounds: 1st round this summer; 2nd round late fall -- December; 3rd round from April -- June 2010. • NTIA appears to be behind schedule so an extension may be sought with OMB, which will likely be granted.

3. RUS and NTIA: Recovery Act Facts • Congress gave both agencies ample discretion to develop rules governing the application process and conditions for receiving awards. • Congress gave $16 million to the Commerce Department’s IG to conduct audits. • Congressional oversight also expected. • Lots of state input will be needed throughout the rulemaking and award process.

4. BTOP Basics: $4.7B in Grants for Construction, Equipment Purchases and Adoption of BB • $4.7 billion in grants for the construction and adoption of broadband networks and services in rural and under served areas. • The program is weighted heavily toward public sector/public and non-profit entities. • Only one grant per state or local applicant. • Grant awards may be used for equipment purchases, network hardware/software including those used by public safety users. • The federal government will fund 80% of the total award amount, leaving the remaining 20% to the awardee.

5. Conditions on NTIA Grants Pose Risks: Final Rules Expected by June 30th • Lots of industry concern over how the NTIA will define the nondiscrimination obligations. • Lots of concern among investors and carriers over how the NTIA defines “unserved” vs. “underserved.” • Industry players will be less inclined to apply for grants if the NTIA defines its nondiscrimination rules rigorously to include open access type requirements.

6. Other Risks for Private Sector Applications: The “Buy America” Provisions • "Buy America" provisions in the Recovery Act prohibit any awardee from purchasing equipment manufactured overseas. • Cisco has been actively urging both agencies to provide a public interest waiver from the provisions for certain electronic products • The waiver would apply to Routers, Switches, WiMAX & WiFi routers, Optical Metro, Transport facilities, Storage, Data Center Switching and Load Balancing facilities and equipment

7. RUS Grant and Loan Programs • RUS received $2.5 billion to fund a new grant program, also can be used for the existing BB loan program. • The statute requires 75% of an area is rural with no access to any high speed service. • Priority status will be given to applicants that offer service to multiple providers, i.e. resale to CLECs/ unaffiliated entities.

8. RUS Grant and Loan Programs • Priority status will also be given to existing borrowers (primarily RLECs). • RUS must reconcile’ definition of “rural” with NTIA and the FCC. • RUS programs are weighted more toward providers (rural entities) vs. the NTIA’s BTOP program, which is weighted more toward states/ public sector entities.

9. Recovery Act Goals and the FCC’s Work on a National BB Plan • FCC must issue a plan by Feb 17, 2010. • FCC expected to coordinate heavily with RUS and NTIA on definitions (unserved vs. underserved), interconnection rules, etc. • Possible USF expansion to include broadband as a supported service is on the table. (The question is how do you pay for it?)

10. Industry Players Expected to Apply for Federal Grant and Loan Awards • Equipment Providers could benefit although “Buy America” provisions may pose barriers • RBOCs could apply for grants and partner with a public sector entity to score points but much depends on the rules. • Non Incumbent Wireless Carriers, particularly spectrally constrained smaller carriers (LEAP, PCS, CLWR), could apply for grant awards to offset network costs. • Unaffiliated wireless carriers may also apply for NTIA grants to reduce backhaul construction costs.

11. Industry Players Line Up (continued) • Cable large MSOs may apply for grants to augment network upgrades to DOCSIS but it will depend on conditions and definitions. • RLECs and Q will aggressively pursue grants and loans since many already participate in the RUS broadband loan program and will receive priority status for new money. • CLECs may also apply and partner with small businesses deemed economically and social disadvantaged to enhance their application. • SATELLITE PROVIDERS grant awards must technology neutral -- giving satellite firms able to deploy broadband an opportunity. • EDGE PROVIDERS may partner with public interest groups, foundations, cable and wireless operators to equalize the flow of grants going to LECS. • STATES are in a good position to win grant awards from NTIA and shape the rules.

12. Other Agencies Involved in Facilitating Broadband Access Under Recovery Act • Agencies involved in broadband investment include HHS, DHS, DOE, DOT, EPA and the Dept of Ed. • Other agencies within Commerce engaged in facilitating infrastructure investment: • NOAA received $830 million for improvements for weather forecasting and satellite development and research into climate change. • The Census Bureau received about $1 billion for outreach and public private partnerships with minority communities to conduct the 2010 census.

13. NIST: Involved in Smart Grid and Health IT • NIST received up to $610 million to issue grants and research fellowships. • It will also use some of this money to develop a set of rules and standards for the tech and utilities sector in developing a smart grid. • $20 million has been transferred from HHS to NIST to support security and interoperability of electronic medical records.

14. Medley Global Advisors Tel.: (202) 904-2372 700 12th St. NW, Suite 700 Washington, DC 20005 www.medleyadvisors.com