Lobbyists, telecommunications industry officials and others crowded into a public meeting on Tuesday to influence the government's $7.2 billion grant program for high-speed Internet expansion.

The meeting at the U.S. Commerce Department marked the first step in deciding which companies will benefit from broadband funding included in the Obama administration's economic stimulus program valued at nearly $800 billion.

The funding aims to encourage broadband networks to connect rural and other unserved areas to the Internet.

I think it's safe to say that we are not as far ahead in this technology as we need to be, Agriculture Secretary Tom Vilsack, whose department will give out as much as $2.8 billion of the funds, told the meeting.

The Tuesday meeting asked the telecom industry, experts and other interested groups to recommend what role current retail prices should play in the program and to suggest what criteria the government should set for awarding the money.

Small to mid-sized carriers with inroads in rural areas are the most likely to seek the funds, Wall Street analysts said. These carriers include CenturyTel Inc, Windstream Corp and Frontier Communications Corp.

States and local governments can also apply.

Companies say any strings that may be attached to the funding -- such as requirements for open networks -- could deter investment.

But the big turnout at the meeting showed the industry's high interest in the government's broadband funding.

I don't think we've had this many people in the Commerce Department since it was built, said Bernadette McGuire-Rivera, associate administrator of the department's telecommunications policy office.

The grants must be awarded by September 30, 2010, and the government must ensure projects are mostly complete within two years. Applicants must also show the project would not have occurred but for the federal funding.

The first money should be available between April and June and it will go out in three sections, she said.

Debbie Goldman, an economist with the Communications Workers of America, urged the government to keep the overriding aim of the stimulus in mind.

We are very concerned about one of the key goals that you mentioned and that is job creation, Goldman said. We're looking to you to include that as a top priority as you look at these grants.

The public interest group Free Press is urging regulators to establish minimum connection speeds in order to receive grants and it wants recipients to pledge to not degrade, discriminate or prioritize traffic in Internet service.

The latter idea promotes the principle of so-called net neutrality, which proponents say is needed so companies do not gain excessive control over content or applications.

(Reporting by Kim Dixon, editing by Matthew Lewis and Andre Grenon)

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