Broadband redux

In early 2008, the broadband industry seemed poised for a breakthrough. Patton Boggs techcomm partner Jennifer Richter recalls the buzz. “Investment banks were engaged, some truly innovative technologies were emerging, and there were many spectrum deals on the table,” she says. “And for the long-discussed national infrastructure strategy, wireless was being embraced as the answer.”

By year’s end, though, the recession had iced the excitement, contracting it into tight-fisted anxiety. “The outlook,” says Richter, “had turned bleak.” For companies like Ashburn, Virginia-based Digitalbridge Communications, this setback could have been interminable. Founded by a trio of telecom veterans in late 2005 to “meet the broadband needs of underserved America,” the carrier pioneered commercial wide-area broadband wireless (WiMax) service in the U.S. With its June 2007 launch in Rexburg, Idaho.

On a network cost basis alone—around $50 per household compared to between $750 and $1,000 for DSL and $2,500 for fiber optics—WiMax, with its global interoperable standard, is a clear front-runner in the drive to close America’s urban-rural gap. DBC Co-founder and Chairman William Wallace calls the technology “transformative in its own right.”

While subsequently expanding to 15 communities in six states and proving its ability to reach many more, DBC’s ambitions were slowed by the downturn—until the stimulus package rebooted broadband’s hard drive. “The stimulus bill facilitates the opportunity for fast, far-reaching deployment across rural America that was not there before,” says Wallace, whose great-uncle Henry helped electrify rural America as Secretary of Agriculture under President Franklin D. Roosevelt.

“The $7.2 Billion rural broadband stimulus program may not move the needle for major carriers,” says Richter, “but for DBC and the sector as a whole, the policy and funding game is back on.”

So is the excitement. “From cyber-security to smart it systems, a national broadband infrastructure will spur myriad macroeconomic developments,” says Richter, “while energizing microeconomics through job creation, enhanced learning and greater connection to the wider economy.” Look for a boost to the economy and investor interest, too. According to the Brookings Institution, the national GDP rises fractionally for every 1 percent of new broadband penetration. Meanwhile, Richter reports, “investment banks are talking wireless broadband again.”

Hotter prospects

DBC is “a poster child of the stimulus bill,” Richter remarks. Another poster-ready company is Fort Collins, Colorado-based Abound Solar. Whereas westbound pioneers once sought refuge from the withering sun, Abound Solar welcomes all the heat it can get.

Beer-can logic might seem an unlikely formula for success, but after watching can manufacturing at the local Anheuser-Busch plant, Colorado State University professor W.S. Sampath had a bright idea: if he could adapt the same low-cost, high-throughput process to solar panel manufacturing, he could make solar electricity cost-competitive with fossil fuels.

That was in 1987. After 15 years of lab work, mostly funded by the National Science Foundation and the U.S. Department of Energy (DOE), Sampath’s team had engineered an innovative thin-film photovoltaic panel—and a proprietary low-cost, high-speed, environmentally friendly means of producing it. Most significantly, they had engineered through solar’s historical barrier to achieving “grid parity” with fossil fuels: they had a cell that could compete on a per-watt basis.

Abound Solar (originally AVA solar) was spun out of Colorado State in January 2007 to commercialize the technology, attracting $150 million in venture capital and $3 million from the DOE to perfect its technology. After breaking ground on a factory north of Denver last April, Abound, one of BusinessWeek’s “hottest start-ups” that year, was poised to meet market demand described by Chief Financial Officer Stephen Abely as “insatiable.”

Capital for rapid ramp-up and expansion was the last hurdle, but when a prospective loan fizzled, the traction for Abound’s gigawatt-sized ambitions turned slippery—until the stimulus salted the track, via provisions including expanded funding for the DOE’s loan guarantee program. Abound has a pending application, and the response from the DOE’s loan office “has been very encouraging,” says Abely.

Policy support will also be critical, as abound, already established in solar leader Germany, prioritizes its U.S. Customer base. Abound CEO Pascal Noronha, who met with President Obama earlier this year as part of an industry group to talk about clean energy, is calling on Washington to get behind solar power plant construction; the company is also seeking customers among energy renewal projects sponsored by the Department of Defense and HUD.

Colorado has played a role in promoting abound as well. “In an important show of local support,” relates Patton Boggs energy partner Michael Driver, “Senator Mark Udall launched his recent Colorado Workforce Tour with a well-publicized visit to Abound’s plant. Both he and Governor Bill Ritter are focused on helping their constituencies interface with the federal government and the stimulus plan.”

 

 

 

 

 

 

 

 

Abound expects to produce more than 3 million solar modules annually—enough to provide decades of clean, renewable power to 40,000 homes. Already employing 175 people, the company could create as many as 2,000 new factory jobs, while also stimulating employment for its suppliers. Abely calls this “a showcase for how proactive government policies and initiatives can get things done.”

Wind power, already established in Europe as a primary source of power and with a mature infrastructure in the U.S., Stands to be another major current of change, encouraged by what Denver-based Patton Boggs associate James Muchmore sees as significant shifts in political and investor focus. “Energy tax credits are traditionally short-lived,” he says, “but the programs now being associated with wind and other renewable energies are raising investor confidence in longer-term, sustainable dividends.”

Better outcomes

The $2 trillion U.S. health care industry, under which some 48 million Americans go uninsured and 24 million are underinsured, could use a triple bypass. “We don’t actually have a health care system,” announced Mike McCallister, president and CEO of health benefits giant Humana Inc., At the Wharton Health Care Business Conference last February. McCallister described a jumble of “different systems that are glued together,” producing incentives that “are wrong for virtually everyone.”

From the redundancy of filling out identical medical forms to prescription-writing errors, the present system is rife with costly, often dangerous inefficiencies and waste. Among the remedies prescribed by McCallister is the modernization of the health information technology (HIT) infrastructure. Not coincidentally, HIT is a priority, $19 billion stimulus objective too: with electronic health records at its core, a digitized health information network is envisioned as the foundation of a new era of quality, safety and efficiency in health care delivery.

Patton Boggs health care partner Martha Kendrick sees this as the industry’s most significant investment in years. “On one level, it is foundational,” she says, “but clearly, it will be transformational. Five years from now, we will see a very different health care matrix in this country.”

Promising to reduce medical errors and administrative inefficiencies, the network would also improve tracking of disease outbreaks, expand health care access to underserved areas, and facilitate comparisons of treatment effectiveness.

One company that is poised to lead the way toward the HIT future is Skaneateles Falls, New York-based Welch Allyn. “The idea is to create better information in health care, to create better decision-making and better outcomes at the point of care,” says senior counsel and director of government affairs Kim Townsend. Welch Allyn is developing network-ready digital technologies while partnering with electronic health records providers, community and rural health centers, and VA hospitals. The goal is to connect patients and providers into a central HIT system like nerves to a spinal cord. “We call it bridging the last 100 feet in health care information and delivery,” Townsend says.

Another firm facilitating the future of HIT is S3 of Austin, Texas. Founded in 2002, the company’s showcase product is TeraMatch, algorithmic matching and reconciliation software capable of intelligently processing immense volumes of complex data. “From electronic health records to Medicaid and Medicare claims to contract monitoring, the stimulus provides us with a wealth of new opportunities,” says Andrea Gillentine, S3’s executive vice president of operations, “especially where auditing is concerned.” Fraudsters take note: S3 is the new sheriff in town. “Traditionally, auditing systems have not leveraged new technologies to generate better outcomes,” says Gillentine. “We can effect true change.”

The hit vision is compelling, but there is much groundwork to be done. “The excitement of stimulus dollars aside,” says Todd Tuten, a health care partner at Patton Boggs, “this is inherently a public policy discussion. Continued development of the operating standards and reimbursement rules is certain to drive policymaking for years.”

 

Building the network is no overnight task, either. “To work, the system must be truly interoperable,” says Patton Boggs health care associate Karen Thiel. “This is a complex challenge, around which swirls a moving set of technical and policy questions.” Privacy standards—currently a hodge-podge of laws across all 50 states—is one issue, and then there is the overriding question of the willingness to engage and share. “The system will only work with cooperation between providers across the health care spectrum,” says Thiel.

The stimulus contains unambiguous, carrot-and-stick incentives to make this happen. “There are rewards for meaningful participation,” says Kendrick, “and penalties facing hospitals and physicians for not getting with the program.”

Clearly, then, business leaders should not count on simply plugging the stimulus package’s economic starter cable into their corporate engines and cruising off to some promised land. “While the stimulus is fostering a fertile environment for innovation and producing a rush of good ideas,” says Driver, “translating those ideas into revenues is a different matter. Between entrenched practices and the transformative stimulus agenda, negotiating the new agency and statutory requirements becomes something of a new art form.”

Electrifying results

The stimulus strategy that may be the most muscular of all is the Department of Energy’s office of Electricity and Energy Reliability Smart Grid program. Digital sensors, advanced analytics, smart meters and other advanced technologies aim to make the electric grid self-monitoring, able to continuously adjust for peak and off-peak periods. Energy consumers will play a role through use of next-generation smart appliances.

“Not only does the smart grid hold great promise in communicating supply-and-demand issues to consumers and the utilities, but through intelligent monitoring and feedback, it promises to resolve the operational problems associated with integrating renewable energy sources into the power grid,” says Patton Boggs energy regulatory partner Debbie Swanstrom. “The grid will know whether the sun is shining or the wind is blowing.”

Swanstrom notes that a smart grid upgrade will cost much more than is currently available from government funds. “The stimulus is just a down payment,” she says. “Over the long run, it is critical that both state and federal regulators support the recovery of the costs of these advanced technologies in consumer rates and provide the regulatory flexibility needed for utilities to obtain financing.” It will be important to select the most useful and cost-effective technologies so that “taxpayers and electricity consumers get the best bang for their buck,” she adds.

As with the transformation of alternative energy, health information and other stimulus initiatives, the smart grid renaissance has only just begun. “It would take countless billions of dollars to fully realize this concept of transformation,” says Greene. “The stimulus is just the beginning, by design a kick-start to the policymaking necessary for real change.”

There’s another elemental factor to consider beyond all the campaign slogans and policymaking and promises, and this one does not cost a dime. “To really get to that low carbon economy, to that national broadband network, to those better patient outcomes,” says Greene, “we have to recondition our expectations. The future economy is based on investing in long-term dividends, not in instant gratification.”

There are many walls to build—and tear down—before these visions become tangible, but there is a sense that a long overdue-moment has finally arrived. As Patton Boggs techcomm partner Cynthia Schultz says, “I always imagined that we would get it right in connecting the nation.”