Round Two Broadband Stimulus Fundamentals

WASHINGTON, February 17, 2010 – The two branches of the government responsible for doling out grants and loans to improve the nation’s broadband connections announced on Jan. 15 revised parameters for their second round of funding.

A total of $4.8 billion has been made available for this second round, with $2.6 billion allocated to the National Telecommunications and Information Administration and $2.2 allocated to the Rural Utilities Service.

The Round Two process fortunately provides applicants with significantly clearer objectives than in Round One, and Round One applicants actually have been encouraged to reapply based upon these latest parameters.

Perhaps the most significant change is the clear separation that now exists between the two programs. In essence, Middle Mile applications have been directed to the NTIA, while Last Mile applications will go to RUS.

Separate notices of funds available (NOFAs) have been issued for NTIA and RUS, and applicants are directed to apply for to NTIA or RUS respectively, with no further joint applications. Round Two application packages for both programs were made available electronically on Feb. 16, with all applications due by Mar. 15. Awards will be announced on a rolling basis beginning in July 2010, and must be made by Sept. 30.

The following summary highlights important changes and other fundamental information contained in the BTOP and BIP Round Two NOFAs. The actual NOFAs contain the additional specific information required to adequately prepare a competitive application. The chances of success are maximized through sufficiently addressing these specific requirements as they relate to the revised scoring systems.

NTIA – Broadband Technology Opportunities Program (BTOP)

The revised focus of the BTOP program is on Middle Mile projects.

The concept is that adequate Middle Mile infrastructure must be in place to further enable Last Mile connectivity. The overall Round Two categories have been adjusted and funded as follows. Much of the information provided is specific to the CCI category, while applicants for PCC and SBA funding should refer to the actual NOFA for issues specific to these categories.

• Comprehensive Community Infrastructure (CCI) $2.35 billion
• Public Computer Centers (PCC) $150 million
• Sustainable Broadband Adoption (SBA) $100 million

Separate NOFAs. NTIA and RUS have issued separate NOFAs for BIP and BTOP to better promote each agency’s distinct objectives. The option of allowing applicants to file a joint application has been eliminated.

Comprehensive Community Infrastructure (CCI).

The comprehensive communities approach focuses on the deployment of Middle Mile broadband facilities, and the provision of new or substantially upgraded connections to community anchor institutions. The overall selection process actually addresses several areas of criteria to be considered. The highest priority for merit review will be given to CCI applications that satisfy the seven Middle Mile criteria listed below.

• New or improved Middle Mile infrastructure service to community anchor institutions;
• Projects that include public private partnerships;
• Projects with the intent to bolster economic growth;
• Projects with a commitment to serve community colleges;
• Projects with a commitment to serve public safety entities;
• Projects with a last mile component or commitment; and
• Projects that include matching funds equal to or greater than 30 percent.

Additional Consideration to Matching Funds.

The Round One NOFA required that applicants contribute a non-federal cost share minimum of 20 percent of the total eligible costs of the project. While this minimum requirement remains, additional consideration will be given to projects that propose to contribute a matching amount that equals or exceeds 30 percent.

Eligibility Factors

Eligibility factors, which will be used to determine whether an application is eligible for consideration have now been reduced to just three criteria.  These “gateway” requirements include: eligible entities as defined, a fully completed application and required matching funds.

Mapping Tool Eliminated.

The proposed funded service area mapping tool has been eliminated, and the service area delineations have been modified from Census blocks to Census tracts and block groups.

Review and Selection Process.

The review and selection process will consist of the following five phases.

• Initial Application Review;
• Scoring of Applications;
• State and Tribal Consultation;.
• Due Diligence; and
• Selection.

Eligible and Ineligible Costs.

For CCI projects, eligible costs are generally capital expenses, and not operating expenses. Direct costs are those that are directly related and traceable to the cost of the project being supported. Indirect costs are associated with the construction, deployment or installation of facilities and equipment.

Eligible Costs :

• To fund the construction or improvement of all facilities required to provide broadband service;
• To fund the cost of long-term leases, for terms greater than one year; and
• To fund reasonable preapplication expenses in an amount not to exceed 5 percent of the award.

Ineligible Costs:

• To fund operating expenses of the applicant;
• To fund costs incurred prior to the date on which the application is submitted;
• To fund an acquisition of an affiliate, including the acquisition of the stock;
• To fund the merger or consolidation of entities; and
• To fund costs incurred in acquiring spectrum as part of an FCC auction or other.

Scoring Process.

Each application will be evaluated against the following objective criteria by a minimum of two expert reviewers (formerly three in Round One).

Project Purpose (20 Points)

• Fit with Statutory Purposes;
• Fit with BTOP Priorities;
• Potential for Job Creation;
• Recovery Act and Other Governmental Collaboration; and
• Tribes and Disadvantaged Small Businesses.

Project Benefits (20 Points)

• Level of Need in the Proposed Funded Service Area;
• Impact on the Proposed Funded Service Area;
• Network Capacity and Performance; and
• Affordability of Services Offered.

Project Viability (30 Points)

• Technical Feasibility;
• Applicant’s Organizational Capability; and
• Level of Community Involvement.

Project Budget and Sustainability (30 Points)

• Reasonableness of the Budget;
• Sustainability of the Project; and
• Leverage of Outside Resources.

Additional Considerations.

The following additional considerations are listed below.

• The budget reasonableness and technical feasibility factors requirements have been removed;
• The number of expert reviewers has been changed from at least three to at least two;
• The process for requesting waivers regarding the matching fund requirement, Last Mile coverage obligation and restriction on the sale or lease of project assets has been clarified; and
• Awards are expected to be made within the following funding ranges. Amounts requested outside of these parameters must include a reasoned explanation for the variance in project size.

CCI $5 million–$150 million
PCC $500,000–$15 million
SBA $500,000–$15 million

• Projects must be substantially completed within two years of the start date of the award, and fully completed in no less than three years.
• Documentation must be provided that the project would not have been implemented during the grant period without federal grant assistance.
• Grant recipients shall have no obligation to the federal government regarding program income earned after the end of the project period.

The Round Two BTOP NOFA is available at: http://www.broadbandusa.gov/files/FedRegNOFA_R2_NTIA.pdf

For assistance with BTOP, contact the Broadband USA Help Desk by phone at 1-877-508-8364 or by email at BroadbandUSA@usda.gov

RUS – Broadband Initiative Program (BIP)

The revised focus of RUS for Round Two is on Last Mile projects.

With decades of experience of financing telecommunications infrastructure in rural America, RUS is uniquely equipped to focus on these Last Mile rural projects. Nonetheless, it is still important for RUS to continue funding certain Middle Mile projects. The RUS Round Two categories have been adjusted and funded as follows

Last Mile 1.7 billion
Middle Mile 300 million
Satellite and Other 100 million

Separate NOFAs.

NTIA and RUS have issued separate NOFAs for BIP and BTOP to better promote each agency’s distinct objectives. The option of allowing applicants to file a joint return has been eliminated.

Last Mile Projects.

Applications for Last Mile projects must predominantly provide broadband service directly to the premises or end users. Only those applications whose proposed funded service area contains 75 percent or more rural areas, within which not more than 50 percent of these areas have broadband service at the rate of 5 Mpbs both upstream and downstream will be considered for funding.

Middle Mile Projects.

RUS will still consider funding Middle Mile projects, but strongly encourages such projects only be undertaken by current RUS loan or grant recipients.
Satellite and Other. A Satellite Project category has been established to reach premises left unserved by other technologies. Note that a separate NOFA will be issued for this category subsequent to the opening of the window for Last Mile and Middle Mile projects. This category also includes funding for Rural Library and Technical Assistance projects.

25 Percent Loan Minimum.

This Second Round NOFA combines the rural remote and rural non-remote funding and therefore has a standard award of 75/25 grant/loan combination.

Cost Effectiveness/Reasonableness.

To effectively leverage Recovery Act broadband funds for last mile projects, RUS will limit Federal assistance to no more than $10,000 per premises passed.

Elimination of Census Block Reporting.

For the Second Round NOFA, RUS has eliminated census block reporting.

Eligibility Factors.

Applicants must satisfy the following eligibility requirements to qualify for funding.

• Eligible Entities;
• Fully Completed Application;
• Timely Completion;
• Technical Feasibility;
• Nondiscrimination and Interconnection;
• Eligible Service Areas;
• Non-Overlapping Service Areas;
• No Incumbent RUS Borrowers;
• Fully Funded;
• Financial Feasibility and Sustainability and
• Leveraging of Recovery Act Funds.

Eligible and Ineligible Costs.

Funds may be used to pay for the following (Last Mile and Middle Mile Only).

Eligible Costs:

• To fund the construction or improvement of all facilities required to provide broadband service;
• To fund the cost of leasing facilities required to provide broadband service;
• To fund reasonable preapplication expenses in an amount not to exceed 5 percent of the award.

Ineligible Costs:

• To fund operating expenses of the applicant;
• To fund costs incurred prior to the date on which the application is submitted;
• To fund an acquisition of an affiliate, including the acquisition of the stock;
• To fund the merger or consolidation of entities; and
• To fund costs incurred in acquiring spectrum as part of an FCC auction or other.

Scoring Process.

Each application will be evaluated against the following objective criteria.

• Proportion of Rural Residents Served. 10 Points
• Rural Area Targeting. 10 Points
• Distance From Non-Rural Areas. 5 Points
• Title II Borrowers. 8 Points
• Other Recovery Act Awards. 5 Points
• Performance of the Offered Service. 10 Points
• Service to Critical Community Facilities. 6 Points
• Applicant’s Organizational Capability. 10 Points
• Economically Disadvantaged Small Businesses. 3 Points
• Leverage of Outside Resources. 10 Points
• Extent of Grant Funding. 15 Points
• Cost Effectiveness. 8 Points
• Administrator’s Bonus Points. 10 Points

Additional Considerations.

The following additional considerations are also listed below.

• The Two-Step Application Process has been eliminated.
• RUS will accept applications from NTIA that it determines it will not fund, but that may be consistent with RUS’ BIP requirements and priorities.
• Applicants requesting more than a 75 percent grant component may request a waiver demonstrating the need for additional grant funding.

The Round Two BIP NOFA is available at: http://www.broadbandusa.gov/files/FedRegNOFA_R2_RUS.pdf
For any assistance with BIP, contact the Broadband USA Help Desk by phone at 1-877-508-8364 or by e-mail at BroadbandUSA@usda.gov

Jeff Eden has 23 years of experience in the telecommunications industry, and is available for consultation with regard to the broadband stimulus process at: jeff@edenbroadband.com