By Ziggy Rivkin-Fish, CGEIT, V.P. for Broadband Strategy
If you are like many of our friends right now, you may be unsure about which federal funds to target for broadband expansion. Some of you may consider going after the Coronavirus State and Local Fiscal Recovery Funds (FRF), authorized in the American Rescue Plan Act (ARPA), which is currently an object of hot debate and often competing priorities. Others may be interested in the Treasury Department’s Coronavirus Capital Projects Fund (CCPF), because—unlike FRF—it is solely focused on broadband projects. You may even think about bypassing these funds altogether in favor of future stimulus funding that may include broadband alongside other areas of infrastructure policy.
With all these considerations and the gravity of your decision, it is important to weigh your options. We hope that our expert advice can help you decide which funding strategy is best for you.
Your Federal Funding Landscape Explained
Coronavirus State and Local Federal Recovery Funds (FRF): Department of the Treasury
- FRF is likely the most unrestricted opportunity you will have when it comes to broadband infrastructure investments. If your community is currently shackled when considering needed broadband investments because it is “mostly” served—even though the broadband is unreliable, below functional speeds, or unaffordable—FRF may be your best opportunity for addressing gaps in coverage.
- So far, FRF is the only opportunity to potentially offset bad RDOF outcomes for most projects. Many states and counties have been marred by FCC’s Rural Digital Opportunity Fund Auction (RDOF) outcomes, with SpaceX and fixed wireless providers winning sizable areas using specious speed claims and unaffordable prices. Other funding opportunities will likely be hampered by industry and congressional pressures to avoid “duplication” and “overbuilding” that would make these areas ineligible for funding, but FRF interim rules specifically define “served” as only including reliable wireline 25/3 Mbps services. (Tribal entities may also apply for NTIA’s Tribal Broadband Connectivity Program to address bad RDOF outcomes.)
Coronavirus Capital Projects Fund (CCPF): Department of the Treasury
- The CCPF may be a good alternative, but it depends on how your state government decides to administer the funds. Treasury has provided an initial statement framing this fund in anticipation of rules, but they have indicated that it is a companion piece to FRF and may adopt some similar guardrails on eligibility and solution requirements. However, after our initial review, we expect somewhat more restricted rules than FRF, but much of that depends on how your state decides to administer the projects. For example, states may use their own policy priorities—on top of Treasury’s guidelines and requirements—in deciding whether to build infrastructure itself, funnel funds directly to a state broadband grant program, or directly solicit project proposals from ISPs and local communities.
Upcoming infrastructure and stimulus funding
- Upcoming infrastructure and stimulus funding bills targeting broadband expansion are far from a sure thing. Even if broadband expansion is included in upcoming bills, congressional negotiations and industry pressure may result in restrictions so onerous that is practically precludes most desired initiatives.
Other funding streams
- The Commerce Department’s National Telecommunications and Information Administration’s (NTIA) Broadband Infrastructure Program (BIP) released interim final rules, and it may have restrictions that severely limit what projects are deemed eligible. Treasury adopted FCC’s minimal speeds of 25 Mbps downstream and 3 Mbps upstream as its qualifying threshold of what constitutes “unserved” areas. Assuming this reflects an administration policy priority, we expected NTIA to adopt the 25/3 Mbps benchmark for funding eligibility. This low benchmark limits the pool of areas eligible for NTIA grant funding. The enabling legislation also clearly requires proposed projects not to duplicate federally funded areas, so it may exclude all RDOF-funded areas. In fact, in a recent webinar, NTIA suggested RDOF-funded areas should be excluded, but they also recognized that some would be going through a long process of certification and therefore could be eligible for federal funding – but the timeline just doesn’t work out to clarify this in time for submitting the grant application. And NITA has not clearly indicated whether SpaceX satellite areas would be considered ineligible. In other words, NTIA grant funds could be a lot more restrictive than FRF or CPF funds.
While these limitations restrict possible proposed service areas, we must also highlight that these funds can be applied toward unserved areas bridging or right outside RDOF-awarded areas and incorporate middle-mile and backhaul fiber necessary to reach those unserved areas.
- United States Department of Agriculture’s (USDA) ReConnect will have strings attached. While we do not anticipate ReConnect grant funding to open until early 2022, USDA has more strings attached in enabling legislation than other grant programs. USDA does have some discretion, but it only funds infrastructure in unserved areas. While we hope USDA will readjust its eligibility requirements from 10/1 to 25/3 Mbps, there are no guarantees. We still expect it to have stringent eligibility requirements and require large matching shares for its grant program.
- Economic Development Administration (EDA) has more flexibility and generous funding but remains a heavy lift. EDA has lately seen more projects with a strong broadband component. It does not have any rules regarding what broadband speeds are eligible, but it requires documentation on economic impact and has strongly preferred projects that extend to businesses rather than residential buildings, even with a remote work justification. EDA requires the applicant—a public or nonprofit entity—to own the infrastructure. Since many of our government clients do not want to manage, let alone operate broadband infrastructure, and EDA will not allow handing over assets to a private partner, a workable business model requires some creative thinking. EDA also generally focuses on direct impact to business locations and are less interested in residential ones. That translates to a heavily involved process for finding the right model regarding ownership, control, management, and operations; identifying beneficiary businesses; and soliciting letters of support. But look out for the EDA to release NOFOs regarding the $3 billion in ARPA funds in short order. We anticipate some funds to be directly set aside for broadband projects.
- The recommended, but not required, 10 percent match for NTIA BIP is a welcome low bar and does not require cash commitments from strained local government budgets. NTIA has indicated it will consider grant proposals favorably if they include a 10 percent or higher match from the partnership, but it does not need to be in cash. Thankfully, the 10 percent threshold is fairly low and in-line with what an ISP partner can contribute, and because in-kind matching is allowed, planning efforts and staff support hours qualify.
In light of this analysis, we recommend that you discuss setting aside funds from your local allocation of FRF—however modest it may be—with your government decision-makers to target underserved areas that would otherwise prove difficult to fund with federal or state grant funding. Just keep in mind that such projects should fulfill the FRF’s proposed requirements of 100/100 Mbps and only allow cable with 100/20 Mbps if the project can show there are significant cost or physical barriers to deploying a symmetric solution, and it can indicate a roadmap to symmetric speeds.
NTIA funds could be targeted toward unserved areas bridging or right outside RDOF-awarded areas and incorporate middle-mile and backhaul fiber tying the areas together and providing additional resiliency and capacity – including in the form of multi-year leased IRU fiber, which NTIA has indicated are allowable costs. State or local FRF funds can then be set aside as backstop if an NTIA grant Is not awarded.
FRF funds—local and state (if there aren’t additional restrictions added by a state grant program)—are more flexible. As long as unserved areas are specifically targeted, there are no restrictions from picking up areas that may have prior service. This is important for areas that do not qualify for traditional grant programs because they are technically served with 25/3, but actual performance is poor, or have costly subscriptions pricing creating adoption barriers. It can also be a solution for areas where it is difficult to demonstrate that areas are in fact unserved, e.g., due to spotty fixed wireless connectivity.
EDA grants should be considered for specific economically depressed areas that may be technically served but lack the broadband speed options necessary to sustain economic growth; retain and attract businesses; and allow critical remote work, remote learning, and telehealth options; and stem population flight.
CTC’s Grant and Funding Strategies team continues to analyze the latest developments in infrastructure funding. Please contact us if you have questions or would like to discuss how CTC can assist you.