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New Treasury Rules on Broadband Funding Give Local Governments Flexibility on Spending

The rules will give Capital Projects Fund applicants authority to decide what’s ‘affordable, reliable, and unserved.’

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Treasury Department Senior Broadband Policy Advisor Jeffrey Sural

November 4, 2021 – The U.S. Department of Treasury, tasked with writing the rules on how state and local governments can spend various federal relief funds made available for broadband expansion by the American Rescue Plan, recently released the guidelines [pdf] governing the Capital Projects Fund, a $10 billion pot of money available to states, territories, and Tribal governments [pdf] to confront the need for improved Internet connectivity exposed during the pandemic.

Compared to when Treasury released rules governing the State and Local Fiscal Recovery Funds earlier this year, this go ‘round brought cheers instead of jeers from community broadband advocates, as we are seeing federal broadband policy break new ground.

The flexibility the Capital Projects Fund gives state and local governments to decide how to spend the relief funds is what broadband advocates are most excited about. CPF applicants are able to use the money in creative ways to respond to critical needs in their community laid bare by the Covid-19 pandemic, as long as the resulting project directly enables remote work, education, and health monitoring.

The Treasury’s guidance for CPF [pdf] takes a holistic approach, as it not only invests in deploying broadband infrastructure, it directly addresses affordability and digital literacy, which are barriers to broadband adoption long-overlooked by federal broadband programs. In addition, the new rules include language to ensure that projects that use CPF funds take local needs into consideration, including requirements to survey communities to determine what exactly is an “affordable” price point for monthly Internet service, requirements to simultaneously invest in infrastructure and digital skills training, and requirements to consider how projects can bolster workforce training and development.

The CPF rules give applicants clear authority to decide what is deemed to be “affordable, reliable, and unserved” in their respective communities. The program also expands the definition of “unserved” to take into account whether Internet service in a region is affordable. If existing high-speed Internet service in a community is found to not be affordable, that will now be considered sufficient to declare that particular area as being “unserved.”

Other gems contained in the guidelines include: a new emphasis put on funding scalable fiber optic infrastructure, elevating investment in historically disadvantaged communities, and prioritizing investment in infrastructure owned or co-owned by local municipalities, nonprofits, and cooperatives — “providers with less pressure to generate profits and with a commitment to serving entire communities,” states the Treasury guidelines [pdf].

Turning the page on federal broadband programs

Unique to this program is the focus on determining where affordability is a barrier to broadband adoption and an emphasis on the importance of providing 100 Megabits per second symmetrical speeds, reports CTC Technology & Energy.

CPF guidelines direct applicants to incorporate plans to address affordability into their project proposals in new ways. Recipients of the funding are required to report pricing data as part of an ongoing effort to monitor costs to subscribers. The guidelines require recipients of CPF funding to participate in federal broadband subsidy programs, such as the current Emergency Broadband Benefit program, or subsequent federal programs that subsidize the cost of monthly Internet access. Furthermore, recipients are encouraged to “include at least one low-cost option offered at speeds that are sufficient for a household with multiple users to simultaneously telework and engage in remote learning.”

Additionally, under the new CPF rules, Treasury requires eligible projects to go beyond delivering connection speeds the federal government has required in the past, stressing the importance of funding projects that will deliver 100 Mbps symmetrical speeds and encouraging recipients to invest funds in fiber infrastructure where feasible, “as such advanced technology better supports future needs.” The guidelines recognize the need for more robust upload speeds, evident by Treasury’s updated definition of an unserved area — “one that cannot receive affordable, reliable, fixed wireline service of at least 100/20 Mbps.” The guidelines also encourage CPF recipients to prioritize investing in projects that will result in last-mile connections.

Another highlight of the Capital Projects Fund is that the program is designed to help restore a sense of community connectedness in an age of social distancing. To that end, the Treasury’s guidelines place an emphasis on funding applications aiming to construct and connect community education centers, and other anchor institutions, which can tailor initiatives and programs to respond to unique community needs. The CPF guidelines list multiple possibilities applicants constructing multi-purpose community facilities should consider utilizing the funding for, including:

  • career counseling services that provide community members with the knowledge needed to engage in work, including digital literacy training programs
  • activities to acquire knowledge and skills undertaken as part of a person’s participation in school, an academic program, extracurricular program, social-emotional development program for students or youths, internship, or professional development program
  • projects to construct or improve full-service community schools that provide a comprehensive academic program to their students and adult education in the community at large
  • projects that provide health monitoring and a broader range of services including health education classes

To hear more about the potential to use CPF funds to address digital inclusion, listen to Episode 14 of our bonus podcast series, “Why NC Broadband Matters.”

Not Making the Same Mistakes Twice

It’s encouraging to see that the Treasury Department was responsive to fixing what its first round of rules missed. The rules Treasury released in May of 2021 governing aid sent directly to local governments under the Local Fiscal Recovery Fund instructed recipients to focus broadband investments on unserved areas, defined rigidly under that program as areas that do not have 25/3 Mbps service reliably available.

A strict reading of those rules would significantly limit the ability of non-rural communities to invest in needed broadband networks by prioritizing broadband investment only in rural areas. Those rules would essentially leave out more densely populated cities, which are often served by incumbent providers offering speeds above 25/3 Mbps, but who have few affordable and reliable options for Internet service. The previous Treasury rules also did not prioritize funding community broadband networks.

After those rules were released, municipal leaders across the country rallied to call attention to the limiting language governing the Local and State Fiscal Recovery Funds. That led Treasury officials to release a FAQ clarifying and broadening the rules a bit, and helped nudge Treasury officials toward creating the improved guidelines governing the Capital Projects Fund.

Application process now underway

States, territories, freely associated states, and Tribal governments [pdf] are eligible to apply for CPF aid, which will be issued in the form of block grants. Although local governments are ineligible to be direct recipients of these grants, states are encouraged to allocate portions of their award to local governments, nonprofits, and co-ops.

The deadline for states, territories, and freely associated states to submit an application and grant plan through the Treasury Submission Portal is December 27, 2021. For Tribal governments, the application also serves as their grant plan. The deadline for Tribal governments to request funding through the Treasury Submission Portal is June 1, 2022.

Described as a “60-second process” by Senior Broadband Policy Advisor for the U.S. Treasury, Jeffrey Sural, during a recent National Digital Inclusion Alliance webinar, submitting the initial application requires applicants to indicate their desired award amount, summarize how the funds will be allocated, designate an authorized representative or point-of-contact, and sign a grant agreement.

There are multiple eligible uses of CPF funding, but the program’s guidelines categorize acceptable uses of the funds into three main categories: Broadband Infrastructure Projects, Digital Connectivity Technology Projects, and Multi-Purpose Community Facility Projects.

  • Broadband Infrastructure Projects are those which will result in the construction and deployment of broadband infrastructure.
  • Digital Connectivity Technology Projects are projects facilitating the purchase or installation of devices like laptops, desktops and tablets.
  • Multi-Purpose Community Facility Projects are projects to construct community education centers or anchor institutions which provide the public with access to computers with high-speed Internet service.

States will have access to a total of $9.8 billion of the Capital Projects Fund, with $100 million set aside for Tribes, and another $100 million earmarked for freely associated states. Each U.S. state will likely create their own program to suballocate CPF funds to local applicants. The results and impact of the program created by each state will likely vary. See allocations available to each state here.

Editor’s Note: This piece was authored by Jericho Casper, a reporter for the Institute for Local Self Reliance’s Community Broadband Network Initiative. Originally appearing at MuniNetworks.org on November 2, 2021, the piece is republished with permission.

Contributing Reporter Jericho Casper graduated from the University of Virginia studying media policy. She grew up in Newport News in an area heavily impacted by the digital divide and has a passion for universal access and a vendetta against anyone who stands in the way of her getting better broadband.

Funding

Florida, Georgia, Iowa, Minnesota, Missouri and Utah to Receive Nearly $1 Billion in American Rescue Plan Funds

The states will use their funding through the Capital Projects Fund to connect more than 180,000 homes and businesses.

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WASHINGTON, December 1, 2022 – The U.S. Treasury Department on Thursday announced the approval of broadband projects in an additional six states under the American Rescue Plan’s Capital Projects Fund Florida, Georgia, Iowa, Minnesota, Missouri and Utah.

Together, these states will use their funding to connect more than 180,000 homes and businesses to affordable, high-speed internet.

The Capital Projects Fund provides $10 billion to states, territories, freely associated states, and Tribal governments to fund critical capital projects that enable work, education, and health monitoring in response to the public health emergency. In addition to the $10 billion provided by the CPF, many governments are using a portion of their State and Local Fiscal Recovery Funds toward connecting to affordable, reliable high-speed internet.

“The pandemic upended life as we knew it—from work to school to connecting with friends and family—and exposed the stark inequity in access to affordable and reliable high-speed internet in communities across the country in rural, Tribal, and other underrepresented communities,” said Deputy Secretary Wally Adeyemo. “This funding will lay the foundation for the Biden-Harris Administration’s historic investments to increase access to high-speed internet and reduce internet bills for American households and businesses.”

In accordance with Treasury’s guidance, each state’s plan requires service providers to participate in the Federal Communications Commission’s new Affordable Connectivity Program.

The Affordable Connectivity Program helps ensure that households can afford the high-speed internet they need for work, school, healthcare, and more by providing a discount of up to $30 per month (or up to $75 per eligible household on Tribal lands). Experts estimate that nearly 40% of U.S. households are eligible for the program.

The Administration also commitments from 20 leading internet service providers to offer all ACP-eligible households high-speed, high-quality internet plans for no more than $30 per month. As a result, ACP-eligible households can receive internet access at no cost and can check their eligibility for free internet and sign up at GetInternet.gov.

In addition to requiring funding recipients to participate in the Affordable Connectivity Program, Treasury’s guidance requires recipients to consider whether the federally funded networks will be affordable to the target markets in their service areas and encourages recipients to require that a federally funded project offer at least one low-cost option at speeds that are sufficient for a household with multiple users.

The following descriptions summarize the six state plans that Treasury approved today:

  • Florida is approved for $248 million for broadband infrastructure, which the state estimates will connect 48,400 households and businesses – representing approximately 10% of locations still lacking high-speed internet access. Florida’s award will fund Florida’s Broadband Infrastructure Program (BIP), a competitive grant program designed to expand last mile broadband access to homes and businesses in rural areas of the state. Funding from CPF will help Florida continue to prioritize fiber-optic networks and projects proposing affordable service. The BIP is designed to provide internet service with speeds of 100 * 100 Mbps symmetrical to households and businesses upon project completion. Florida submitted plans for the remainder of their CPF funds and these applications are currently under review by Treasury.
  • Georgia is approved to receive $250 million for broadband infrastructure, which the state estimates will connect 70,000 households and businesses – representing 15% of locations still lacking high-speed internet access. Georgia’s award will fund the Georgia Capital Projects Fund grant program, a competitive grant program that is designed to fund broadband infrastructure projects that provide service to areas identified by the state to currently lack access to reliable broadband that can meet or exceed 25 * 3 Mbps, and that adopt practices that support both efficient broadband expansion and community engagement. The Georgia Capital Projects Fund is designed to provide internet service with speeds of 100* 100 Mbps symmetrical to households and businesses upon project completion. Georgia submitted plans for the remainder of their CPF funds and these applications are currently under review by Treasury.
  • Iowa is approved for $152.2 million for broadband infrastructure, which the state estimates will connect 18,972 households and businesses – representing approximately 16% of locations still lacking high-speed internet access. Iowa’s award will fund the Empower Rural Iowa Broadband Program, a competitive grant program designed to address inequities in access to broadband throughout the state of Iowa. Using a three-step process, the program combines mapping data, input from communities, and applications from service providers. Funding from CPF will help Iowa bring broadband service to areas identified having a critical need for broadband. Empower Rural Iowa Broadband Program is designed to provide internet service with speeds of 100 * 100 Mbps symmetrical to households and businesses upon project completion. The plan submitted to Treasury and being approved today represents 100% of the state’s total allocation under the CPF program.
  • Minnesota is approved for $44 million for broadband infrastructure. Minnesota’s award will fund two additional broadband infrastructure programs: Minnesota’s Line Extension Program, a competitive grant program designed to address the needs of individuals who are located near infrastructure for high-quality broadband service but where the cost of the last mile connection is a barrier; and the Low-Density Pilot Program, a competitive grant program that provides financial resources for new and existing providers to invest in building broadband infrastructure in low-density areas of the state that currently lack high-speed internet. Funding from CPF will help Minnesota continue its efforts to provide reliable internet access to predominately rural locations previously facing cost barriers. Both programs are designed to provide internet service with speeds of 100 * 100 Mbps symmetrical to households and businesses upon project completion. Minnesota submitted plans for the remainder of their CPF funds and these applications are currently under review by Treasury.
  • Missouri is approved for $196.7 million for broadband infrastructure, which the state estimates will connect 37,979 households and businesses – representing approximately 8% of locations still lacking high-speed internet access. Missouri’s award will fund the Missouri Broadband Infrastructure Grant Program, a competitive grant program designed to fund broadband infrastructure projects in areas that currently lack access to high-speed, reliable broadband. Funding from CPF will help Missouri bring service to areas where broadband infrastructure projects would not be feasible without assistance. The Missouri Broadband Infrastructure Grant Program is designed to provide internet service with speeds of 100 * 100 Mbps symmetrical to households and businesses upon project completion. The plan submitted to Treasury and being approved today represents 100% of the state’s total allocation under the CPF program.
  • Utah is approved for $10 million for broadband infrastructure, which the state estimates will connect 3,080 households and businesses – representing approximately 5% of locations still lacking high-speed internet access. Utah’s award will fund the Broadband Infrastructure Gap Networks Grant Program (Gap Networks Grant Program), a competitive grant program designed to address gaps in broadband infrastructure where reliable broadband service is currently unavailable. Funding from CPF will help Utah continue its efforts to bridge the state’s remaining digital divide. The Gap Networks Grant Program is designed to provide internet service with speeds of 100 * 100 Mbps symmetrical to households and businesses upon project completion. Utah submitted plans for the remainder of their CPF funds and these plans are currently under review by Treasury.
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Funding

Florida, Mississippi, S.D. and Utah Awarded Broadband Planning Grants

‘This award will provide access to those communities who have for too long went without affordable internet connectivity.’

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Photo of Rep. Bennie Thompson, D-Miss,  by Andrew Harnick

WASHINGTON, November 29, 2022 – The National Telecommunications and Information Administration of the U.S. Commerce Department announced Tuesday that Florida, Mississippi, South Dakota and Utah were awarded their first broadband planning grants under the Infrastructure Investment and Jobs Act.

Florida was awarded $7.4 million, Mississippi with $5.8 million, South Dakota with $3.1 million and Utah with $5.6 million.

“I take great pride in knowing that this award will provide access to those communities who have for too long went without affordable internet connectivity, ” said Mississippi’s Rep. Bennie Thompson.

This is part of the Broadband, Equity, Access and Deployment program and Digital Equity Act program of IIJA with the goal to deploy high-speed internet service networks and develop digital skills training programs.

$65 billion will be invested into expanding affordable high-speed broadband under the infrastructure law.

NTIA launched high-speed internet grant programs to build high-speed internet infrastructure across the country, create low-cost internet service options and address digital equity. The grants for 56 eligible entities are expected to be announced on a rolling basis.

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Funding

Small ISPs Face Economic, Incumbent Bundling Headwinds: CoBank Economist

CoBank also mentions that Space X and T-Mobile will begin testing a satellite service by the end of 2023.

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Drew Clark, CoBank's Jeff Johnston, Capital Partners' Angelo Lacroix and Andrew Semenak of Pinpoint Capital Management

WASHINGTON, November 29, 2022 — An economist at a bank that provides loans for rural infrastructure projects said this month on a Broadband Breakfast Live Online event that smaller internet service providers are likely to face challenges on two fronts in the near future: getting financing for fiber projects in a down economy and from the service-bundling prowess of the larger national players.

With economic weakness forecast in the next 12 to18 months, banks will become more hesitant to lend, said Jeff Johnston, lead economist at CoBank, a $170 million cooperative bank that provides lending and private equity services for rural infrastructure projects by smaller providers. That’s despite an unprecedented amount of federal funding, including $42.5 billion from the Infrastructure, Investment and Jobs Act still to come.

Johnston also warned about larger providers taking up market share in certain regions from the smaller providers because they can bundle services. In a fourth quarter financial report in October 2022, Johnston warned local broadband fixed-wireless providers that incumbents like Verizon and T-Mobile are ramping up smartphone bundle deals with wireless services as a strategy to pry consumers away from smaller providers.

Drew Clark, CoBank’s Jeff Johnston, Capital Partners’ Angelo Lacroix and Andrew Semenak of Pinpoint Capital Management

“Broadband operators located in smaller and/or rural cities could face competitive threats if the national operators decide to target these markets,” the report said. “Their fixed wireless market strategy is largely a function of where they have excess capacity in their networks. We do not see standalone fixed wireless operators as much of a threat to fixed line broadband operators as they don’t have a smartphone bundle to offer, which dilutes their value proposition in markets where fixed line broadband already exists.”

Angelo Lacroix, investment director at Capital Partners, added that “we’re not so concerned about customers falling away because they cannot pay the bills; it’s more about losing customers to competitors.”

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. Watch the event on Broadband Breakfast, or REGISTER HERE to join the conversation.

Wednesday, November 16, 2022, 12 Noon ET – How to Value Your Fiber Company

The United States is currently in the midst of what can only be described as a fiber boom. Wireless and 5G technologies aren’t going away, but stringing fiber deeper into neighborhoods is necessary. And because of this understanding, fiber businesses can become very valuable. In this special session of Broadband Breakfast Live Online, we’ll explore the important question of how to value your fiber business.

Panelists:

  • Andrew Semenak, Managing Director, Pinpoint Capital Advisors
  • Angelo Lacroix, Investment Director, DIF Capital Partners
  • Jeff Johnston, Lead Communications Economist, CoBank
  • Drew Clark (moderator), Editor and Publisher, Broadband Breakfast

Andrew Semenak has over 20 years experience in corporate finance and investment banking with large global firms. He is the founding partner of Pinpoint Capital Advisors and has advised on numerous domestic and international capital raisings and mergers and acquisition transactions. Andrew’s relationships span leading small and mid market companies, private equity and infrastructure funds, pension plans, sovereign wealth funds, family offices, endowments and insurance companies.

Angelo Lacroix is an Investment Director covering core plus and value add infrastructure investments in North America for DIF Capital Partners with a strong emphasis on digital investments like fiber and data centers. DIF Capital Partners is a leading midmarket private equity infrastructure investor with over 14bn of assets under management. Angelo is a CFA Charterholder with over a decade of transaction experience and has previous global work experience at KPMG Corporate Finance as well as Macquarie Capital.

Jeff Johnston has over 25 years of telecom experience that includes 11 years as a Wall Street analyst covering tech media and telecom, and 13 years of product management and business development experience for telecom operators. He is currently a lead communications economist in the Knowledge Exchange research division for CoBank, a $160 billion commercial bank that finances rural infrastructure (communications, power and energy) and agriculture.

Drew Clark (moderator) is CEO of Breakfast Media LLC, the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney. Under the American Recovery and Reinvestment Act of 2009, he served as head of the State Broadband Initiative in Illinois. Now, in light of the 2021 Infrastructure Investment and Jobs Act, attorney Clark helps fiber-based and wireless clients secure funding, identify markets, broker infrastructure and operate in the public right of way.

WATCH HERE, or on YouTubeTwitter and Facebook.

As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.

SUBSCRIBE to the Broadband Breakfast YouTube channel. That way, you will be notified when events go live. Watch on YouTubeTwitter and Facebook

See a complete list of upcoming and past Broadband Breakfast Live Online events.

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