Qwest Communications (Q) has reportedly applied for federal stimulus funding to beef up broadband network access in the rural regions across 14 US states. The fourth-largest US phone company is seeking $350 million in grants from the “Broadband Initiatives Program (BIP)” administered by the US Department of Agriculture’s (USDA) agency Rural Utilities Service.
 
The BIP program, which is part of the federal government’s $7.2 billion broadband stimulus package, is aimed at promoting broadband deployments to unserved/underserved rural communities across the US. Millions of people in these areas currently do not have access to broadband services. 
 
Qwest will use the fund to expand its broadband network to offer downstream speeds of 12 to 40 megabits per second (Mbps) to more than 500,000 million homes, businesses, schools and hospitals across its vast service territories that comprise 14 Midwestern and Western states.
 
Colorado, Arizona and Minnesota, three of the 14 states, are among the major beneficiaries as Qwest plans to invest $100 million, $55 million and $54.5 million, respectively, to boost broadband infrastructure in these states. 
 
Total cost of the project is estimated at $467 million. The Rural Utilities Service is expected to review Qwest’s application by the summer of 2010 and release the fund (75% of total project cost) by September 30, 2010. The remaining cost of $117 million will be funded by Qwest. The company plans to begin the project in 2011 if the BIP fund is sanctioned on time.
 
Qwest’s initiative to boost broadband services in underprivileged rural regions mirrors the goals of the US telecom regulator Federal Communications Commission’s (FCC) National Broadband Plan (NBP) which was recently submitted to the Congress. The FCC has drafted a set of proposal aimed at providing the necessary infrastructure to connect all corners of the country with ultra-high speed broadband.
 
Qwest’s broadband Internet business is growing at a healthy pace driven by its continued investment in necessary infrastructure to boost network capacity and availability. The carrier is aggressively investing in deploying additional fiber-to-the-node (FTTN) capabilities to boost its broadband network performance. Qwest will use the FTTN and VDSL technologies to achieve the planned broadband throughput levels for its 14-state project. 
 
Qwest remains more challenged than the other US regional telephone companies such as AT&T (T) and Verizon (VZ) due to the lack of its own wireless and video services. The company’s traditional local phone operation remains under pressure due to the growing presence of cable TV and other competitive services.
 
Moving forward, we expect the company’s business prospects to be driven by continued strong demand for its broadband Internet service, expansion of fiber-based network capabilities and the new Ethernet backhaul wholesale service for wireless operators.
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