Broadband stimulus exempted from 'buy American'

The networking industry is too globalized even to determine whether equipment is US-made, the Commerce Department says

The U.S. government has exempted broadband builders who want federal grants from a "buy American" provision of the US$787 billion stimulus package passed in February.

Under the American Recovery and Reinvestment Act of 2009, designed to jump-start the U.S. economy with spending on various domestic projects, all the iron, steel and manufactured goods used in a public building or public works project need to be produced in the U.S. That includes the $4.7 billion allocated to the Broadband Telecommunications Opportunity Program (BTOP) for building and expanding high-speed communications networks.

On Friday, the National Telecommunications and Information Administration, which will provide the grants for BTOP, exempted service providers from that provision for most types of equipment that go into a broadband network. This includes switching, routing, transport and access equipment, as well as customer premises equipment such as modems and set-top boxes. Service providers are also exempt from the rule when choosing billing and operations systems.

"It would be difficult, if not impossible, for a BTOP applicant to have certain knowledge of the manufacturing origins of each component of a broadband network, and the requirement to do so would be so overwhelmingly burdensome as to deter participation in the program," wrote Anna Gomez, acting assistant secretary for communications and information, in a Commerce Department notice issued Friday.

Fiber-optic cables, coaxial cables, cell towers and other facilities that are produced in the U.S. in sufficient quantities are not exempted from the "buy American" provision, Gomez noted.

Like most of the electronics industry, the broadband equipment market is spread around the world among a wide range of brand-name vendors and contract manufacturers. Some parts of the business are dominated by vendors outside the U.S.

For example, Cisco Systems and Juniper Networks dominate service-provider core routers, with worldwide market shares of 53 percent and 31 percent in the first quarter of this year, according to Dell'Oro Group. Cable set-top boxes also come predominantly from two U.S. vendors, Motorola and Cisco.

However, the DSL (digital subscriber line) equipment industry is largely owned by Alcatel-Lucent, the Paris-based company that resulted from the troubled merger of Alcatel and U.S.-based Lucent Technologies in 2006. Alcatel-Lucent, Fujitsu and the Canadian Nortel Networks were the three main sellers of optical network equipment in North America in the first quarter, according to Dell'Oro. Nokia Siemens Networks, a joint venture of Finland's Nokia and Germany's Siemens, is another major player in carrier infrastructure.

"Things today are not black and white in the communications business," said Frank Dzubeck, a longtime telecommunications analyst at Communications Network Architects, based in Washington. "You can't build these things today without a significant participation from globalized vendors."

The "buy American" part of the stimulus bill reflected Washington lawmakers' lack of understanding of broadband and the Internet, he said.

"They build bridges, they build roads, they understand that stuff. They don't understand that the next generation of this country needs broadband to go to work," Dzubeck said.

The waiver shouldn't come as a surprise to anyone, but it is interesting that it has no provision even for vendors having a manufacturing presence in the U.S., Dzubeck said. This leaves the field open to vendors such as Huawei Technologies, a Chinese vendor with a growing global presence, though Dzubeck does not expect Huawei to become a major player in the U.S. soon.

Tags broadband

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Stephen Lawson

IDG News Service

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