Initial Guidance and Analysis: Treasury Issues First Details on $10B Coronavirus Capital Projects Fund

Heather D. Mills, V.P. for Grant & Funding Strategies
Ziggy Rivkin-Fish, V.P. for Broadband Strategy

The Treasury Department has released initial information regarding pending rules and regulations for the American Rescue Plan Act’s (ARPA) $10 billion Coronavirus Capital Projects grant fund…and it’s clear now is the time to get organized if you have rural broadband projects you’re interested in moving forward.

What Details Did Treasury Reveal?

ARPA defined this program without using the word “broadband”—noting that funds were to be used for “capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency.” The brief statement posted by the Treasury makes clears that the program “allows for investment in high-quality broadband.”

The statement further notes that proposed projects “must be critical in nature, providing connectivity for those who lack it.” We still don’t know how Treasury will define “unserved” in its final rules, but there are some hints at least.

The statement also makes it clear that Treasury sees the Capital Projects Fund as complementary to the State and Local Fiscal Recovery Funds when it comes to broadband. The interim rules for the Recovery Funds show that Treasury intends to favor fiber optic investments, and to target symmetrical 100 Mbps service where feasible, which could indicate one aspect of what Treasury considers “high quality.”

How Should You Plan for Capital Project Fund Proposals?

ARPA and Treasury’s current guidance note that states are to submit proposals on how the Capital Project Fund allocations should be used. It’s important to understand that fixed funding amounts are allocated to states and that the states will now be required to submit proposed uses of those funds to Treasury for approval. Until we have more defined rules, Treasury’s guidelines indicate that states will have wide discretion for determining how to identify worthy projects.

That means, for example, that states with their own existing broadband grant funding programs could propose to simply inject all funding from the Capital Projects Fund into their current programs with alignment to overall program guidelines on timing and purpose of expenditure. Many of those state programs, however, have overly restrictive conditions designed to prioritize areas in economic distress where available internet access speeds are below 10/1. Such conditions may not meet Treasury’s program rules.

Treasury has indicated it intends to make NTIA’s National Broadband Availability Map (NBAM) available to states as a planning and implementation tool in the absence of an updated and accurate FCC broadband map.

Recommendation: If you have a likely project proposal, reach out to your state broadband office to see how they are thinking about a process for distributing the Capital Projects Fund allocations. If your project would not qualify under current state grant rules, consider advocating to your state broadband office to expand eligibility to include projects like yours.

While infrastructure is the focus, ancillary projects that make infrastructure projects more efficient will be eligible. To be clear, we’re talking about projects like broadband mapping. The FCC maps are roundly agreed to be seriously lacking—not even the USDA will rely on the Form 477 data to confirm availability of service. Additionally, other supplemental support programs that meet the stated goals may also be eligible.

Recommendation: Keep your eyes peeled for the anticipated opening of the NBAM to the public to see if and where it expands unserved areas. Also watch out for NTIA and/or Treasury’s expected rules and processes for challenging that map.

Overbuilding is not a program goal. It is not clear what the final Capital Projects Fund rules will be, but Treasury’s statement emphasizes the need to demonstrate bringing critical connectivity to those who do not currently have it. The companion State and Local Fiscal Recovery Funds also disincentivize overbuilds.

In other words, the Capital Projects Fund does not seem – according to the brief statement released – to be designed to create more affordable service options by increasing competition (such as by building new infrastructure in an area that already has high-speed wireline service). You likely are also out of luck if you are trying to improve the broadband infrastructure in your city in collaboration with an incumbent cable provider. You may have better luck there with an application to the less restricted Local Fiscal Recovery Fund program or your state broadband expansion grant program, if you live in a state that has such a program – and especially if your state decides to direct some of its State Fiscal Recovery Fund allocations to it.

Recommendation: Focus on projects that would bring broadband infrastructure to places where none currently exists.

But eligible projects are not confined to unserved areas alone. The goal is to build critical infrastructure to provide connectivity to those who do not have it. That could mean ensuring solid backbones along rural routes that have no infrastructure, and connecting to regional hubs. Such projects would alleviate current bottlenecks in capacity, reduce costs for backhaul and data center connectivity, and lower the cost of entry to remote clusters of unserved premises.

Building backbones would also benefit existing users who can receive broadband speeds but at high prices and with unreliable connections due to under-investment in existing infrastructure.

Recommendation: Consider incorporating middle-mile runs along routes without existing carrier fiber in your project concept. We await more rules on this approach.

We don’t know yet how the Rural Digital Opportunity Fund (RDOF) will matter to this program… but you can bet it will be an important conversation. The interim final rules for the companion State and Local Fiscal Recovery Funds leave some wiggle room by defining served as wireline broadband with at least 25/3 Mbps. That could potentially allow builds at least in RDOF areas won by fixed wireless providers and SpaceX.

Recommendation: As we note in our other grant updates, any planning at this time should have a plan A/plan B approach. And we firmly believe that any time spent thinking about and planning potential project proposals is never wasted: you can always repurpose content as needed for applications to future grant opportunities and to guide other funding approaches.

Expect an agnostic approach to business models and plans. The goal here is for this fund to be a part of the overall solution. The intent is to encourage creative approaches to solve the rural broadband problem. There won’t be a preference for private partnerships over public sector proposals.

Recommendation: With generous funding potentially available, you should take a long view of solving broadband gaps and focus on gigabit wireline technologies that will last decades rather than years.

Important questions remain. What will be considered unserved and underserved? Will the NBAM differ enough from the FCC maps to make a difference? And if so, will there be a challenge process that places the burden of proof on incumbents, or will an incumbent-favored claims process render the new map useless? Will projects that install wireline/fiber be favored for their ‘future proof-ness’? Will these funds be retroactive for certain types of projects in order to help pay for important pandemic-response infrastructure efforts already underway or started within the past year? And will all RDOF- awarded areas be excluded from consideration, or will there be allowances made for areas awarded to satellite bidders, like in past funding opportunities?

Recommendation: While we wait for the formal rules to be issued, CTC’s grant and funding strategies team and broadband strategies team are here to help.

Published: Wednesday, May 12, 2021 by CTC Technology & Energy