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Demanding Requirements on NTIA’s BEAD Program May Depress Broadband Participation

What are the downsides of having too many grant requirements?

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Photo of Ross Lieberman by Jericho Casper

KEYSTONE, Colo., June 7, 2022 – Panelists at the Mountain Connect 2022 conference in May warned against putting too many onerous conditions on prospective recipients of billions in federal infrastructure money, arguing some provisions will require further discussion or potential modification or else it will discourage applications.

Industry observers at the conference who studied the notices of funding opportunity for the $42.5-billion Broadband, Equity, Access and Deployment  Program, which was released by the National Telecommunications and Information Administration on May 13, argued that money from the program contains too many strings attached, including environmental, tax and rate regulation implications, for it to be fully viable as an option for service providers.

Steven Coran, chair of law firm Lerman Senter’s broadband, spectrum, utilities and communications infrastructure practice group, said BEAD applicants need to consider the tax implications of the program, as well as the reimbursement structure of the program. In addition, Coran said that planet resilience provisions, including environmental preservation studies, are additional expenses grant recipients should account for.

BEAD applicants need to similarly understand the labor standards required by the NOFO, added Valerie Wimer, vice president of business development at telecom consulting company JSI, because those provisions will also drive-up costs, especially with the current labor market.

“I think that putting too many onerous conditions on recipients is actually not in the public’s interest, and states and NTIA should really take this into account,” said Ross Lieberman, senior vice president of government affairs for cable industry group ACA Connects.

“First, it can depress participation in the program, so you end up having a less competitive grant program. Second, the providers are going to internalize these costs, and it will result in them asking for more money, resulting in less money available to reach the un- and under- served. Finally, providers could end up being in a situation where they are more likely to default after the fact, because they couldn’t properly anticipate what these conditions could mean for a network 20 years in the future.”

Julie Darrington, vice president of consulting at Vantage Point Solutions, added that, “There are significant impacts when you start layering on all of the different costs.

“When you think about the matching requirement, the taxable income, add in letter-of-credit costs, prevailing wages…When you start looking at all those pieces and parts it really impacts the financials,” she said. “From a financial feasibility standpoint, I’m concerned that the profitability and the long-term sustainability of [BEAD funded] networks are going to be tough in many cases, especially in rural areas.”

Concerns expressed about broadband rate regulation

Provisions in the BEAD NOFO require the inclusion of a low-cost broadband option. Some industry groups fear that might lead to regulation of broadband rates.

Yet Lieberman said the NTIA has yet to prescribe how states should rank, or evaluate, applicants based on these requirements.

“I haven’t seen any kind of deployment program with this level of rate regulation,” Lieberman told the audience, largely made up of municipal leaders and representatives of service providers. “This is an area that is not as well defined in the rules yet, and so we’re going to be watching to see how the NTIA and states end up dealing with this.”

Lieberman maintained that BEAD applicants need to consider the revenue that they will be able to generate from their proposed networks, to then determine what they are going to bid for, in order to be able to sustain the network for the life of the program. BEAD applicants first have to consider the cost to deploy a network, but they must then consider the slew of additional costs necessary to comply with grant requirements.

There is some discussion in the BEAD NOFO about the potential for multiple rounds of state funding. The panelists explained that as the grant process gets underway, the rules may ease up, but that shift cannot be expected for at least two to three years.

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.

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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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