Earlier this month, Vice President Joe Biden announced the availability of $4 billion in Recovery Act loans and grants to help bring broadband service to underserved rural communities across America. If you want to help determine which projects are stimulus worthy, then get involved. http://gigaom.com/2009/07/09/where-will-4-7b-in-broadband-bucks-go-you-decide/ Before the first round of money starts to flow in November, certain details need to be sorted out such as, well, the actual definitions of broadband, underserved and rural. Good luck with all that.

The goliaths (IBM, Intel, Cisco etc.) will get the lion’s share of any stimulus spending on IT, and broadband is no exception. IBM has been the leading proponent of stimulus spending in broadband – its lobbying partner has claimed that major deployment of broadband could create 300,000 jobs for the telecom and tech industries. But there will be plenty of room for nimble and well positioned smallcaps to benefit as well – either directly or indirectly. Telecoms that already serve rural areas are a logical place to look. Charlotte-based Fairpoint Communications (NYSE:FRP) could certainly use the infusion as its stock trades at .62, well off its $ 9.44 high. The Company provides communication services to residential and business customers in rural and small urban communities in the United States and announced the hire of Duke Energy CFO David Hauser as its new CEO on July 1.

Iowa Telecom (NYSE:IWA) provides local telephone, long distance, Internet, broadband and network access services to residential and business customers in rural Iowa, Minnesota and Missouri. The Company operates 294 telephone exchanges serving 423 communities as the incumbent local exchange carrier and provides wireline services in approximately 67% of these communities. Within the last two weeks it has purchased 3 small telecom players worth $85M and had coverage initiated by Soleil Securities. Trading at $11.18, (9.24 low/ 20.88 high) the Company sports a 14% dividend which is certainly tempting, but like all stocks with an outsized dividend … caveat emptor. Soon to be public Yonder Media* provides fixed wireless solutions that are a fraction of what traditional “wireline” carriers would have to spend in infrastructure. Active in Nevada, Yonder plans expansion across the west, southwest and south central United States through a balanced mix of acquisition and conversion. oldfashiinedswitch

Healthcare and education are the most cited imperatives to closing the broadband gap between rural and non-rural communities. A GAO letter to the office of Henry Waxman, House Chair of the Energy and Commerce Committee states that “broadband technology makes it possible for patients to go to clinics near their homes and receive medical attention from specialists hundreds of miles away.” The National Rural Health Association’s (NRHA) Services Corporation claims that there are half as many specialists per 100,000 residents in rural communities compared with urban communities. Clarient*(Nasdaq:CLRT) of Aliso Viejo, Calif.. operates a commercial cancer laboratory that provides oncology testing and drug-development services on site and over the Web. Community pathologists are a key client base for Clarient, and its technology provides them with world class cellular assessment and cancer characterization technology. Virtual Radiologic Corporation (Nasdaq:VRAD) of Minneapolis provides teleradiology services to rural hospitals and was recently selected as a preferred provider to the NRHA. Its teleradiology solutions address a growing problem in the health care industry – the shortage in the number of radiologists available to meet increasing demand for diagnostic imaging services. The Company’s radiologists are expected to provide more than 2.5 million diagnostic interpretations in 2009.

Teachers of specialty subjects such as advanced science and math, music and language are hard to come by. Even more so in small town America. K12 of Herndon, VA (NYSE:LRN) provides online lessons, assessment and other tools for the – as you’d guess – the K-12 market. Competition is fierce for the college and professional skills market – from start ups as well as colleges offering their own online programs. One that stands out is American Public Education (Nasdaq:APEI) of Charles Town WV. This Company was also noted in our January 31 blog. Its focus is military and public service communities, and it is interesting to note that 44 percent of U.S. military recruits come from rural areas.

*Client of Allen & Caron, publisher of this blog

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