16 Nov 2021

Broadband and the Infrastructure Investment and Jobs Act

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The Infrastructure and Investment and Jobs Act (the Act) has finally become law! Signed by the President on Monday, November 15, it is widely touted as the most consequential piece of infrastructure legislation in a generation. Now comes the complicated part: implementing the provisions of this 1039-page Act.

For months, folks have heard the “$65 billion for broadband” sound bite, listed along with billions more for roads, bridges, rail, mass transit, electric, water, sewer, and other infrastructure needs. Since it’s now law, it’s time to “unpack” the various components of the broadband-related provisions of the Act and to begin thinking about what all of this will mean for state and local government and private internet service providers over the next decade.

Here is the breakdown for the various components of the $65 billion dedicated to high-speed internet access, affordability and adoption:

ItemPrimary FocusAmount (billions $)Act Sections
New Infrastructure (BEAD)Access42.45§§60101-60105
Broadband Affordable Connectivity FundAffordability14.20§§60501-60506
Digital Equity Act of 2021Adoption2.75§§60301-60307
Rural Broadband — USDA RUSAccess2.0Division J, Title I
Tribal LandsAccess & Adoption2.0§60201
Middle-Mile InfrastructureAccess1.0§60401
Private Activity Bonds for Broadband InfrastructureAccess0.6§80401
Total 65.00 

Each broad category listed above will have different procedural requirements and timelines for implementation.

New Infrastructure “DATA” leads to “BEAD” (§§60101-60105)

It wouldn’t be a new federal law without a bunch of new acronyms, and this Act certainly has more than its fair share! Most of the broadband funding will be distributed to states and territories as part of a new “Broadband Equity, Access, and Deployment” (BEAD) Program. BEAD and many of the other new provisions of the Act are expected to be administered by the Department of Commerce’s National Telecommunications and Information Agency (the NTIA). NTIA hosts the BroadbandUSA website and is currently administering a number of broadband infrastructure grant programs funded under the Consolidated Appropriations Act of 2021.

The BEAD Program appropriates up to $42.45 billion to plan and build high speed fixed internet service in “unserved and underserved locations.” The Act defines an unserved location as one that lacks reliable internet service at speeds of at least 25 megabits per second (Mbps) download and 3 Mbps upload (25/3 Service) and underserved locations as those that lack reliable internet service of at least 100 Mbps download and 20 Mbps (100/20 Service). For a project area to qualify and be eligible for funding, at least 80% of the locations must be unserved or underserved.

Both definitions also require that the new services are sufficient to support real-time interactive activities by reducing the “latency” of the connection. Latency is the delay in transmitting data to and from the user over the internet, and activities such as telecommuting, running cloud-based applications and streaming video games require low latency times as well as relatively high data transfer rates. As a practical matter, this requirement likely eliminates funding for high-earth orbit satellite service as a technology that can be funded, but not new low earth-orbit satellite technologies such as “Starlink.”

A significant condition for distributing this money will be the publication of new DATA maps by the Federal Communication Commission (FCC). These maps will identify unserved and underserved locations throughout the United States that will be eligible for funding under the BEAD Program. The Act seems to assume that these maps, that Congress required the FCC to create in the Broadband DATA Act last year, will be available within the next year or so, but no deadlines are established for their release.

The BEAD Program contemplates that money will be distributed to each state, and that the states in turn will apply those funds in accordance with an approved comprehensive plan. The process should begin within 180 days when NTIA’s publishes a notice of funding opportunity (a “NOFO”). The NOFO will formally request state participation in the BEAD Program, outline the process, and detail requirements that states will need to follow to obtain funds. This procedure will be complex; it involves submission by each state of a letter of intent to participate in the Program, a Preliminary Plan, and a Final Plan. The Act provides funding to NTIA to administer the Program and to provide states technical assistance.

A minimum of $5.1 billion ($100 million to each state and, collectively, all U.S. territories and possessions) is set aside to ensure that every state gets something, but the balance of the funds will be distributed based on a formula that takes into account each state’s percentage of unserved, underserved, and high-cost locations located within their borders. States will learn how much money will be available to them (based on the state’s relative percentage of unserved and underserved locations) once the DATA maps are complete. The process provides for periodic installment payments to states during each stage of the approval process to help states finance the cost of developing their comprehensive plan.

The Act lays out in some detail the procedure for obtaining funds, and to cover them all in detail is far beyond the scope of this blog. However, here are some highlights.

  • Hopefully sometime next year — NTIA will tell each state how much money they should expect based on the number of unserved, underserved, and high-cost locations within the state based on the completed DATA maps. The expectation is that the state’s plan will provide a minimum of 100/20 Service for all unserved locations in the state. Thereafter the state can prioritize access to underserved and certain community anchor locations.
  • To receive funds, each state must prepare and submit a plan for spending the funds provided. Following submission of the state’s letter of intent, the Act contemplates a two-stage process – a preliminary and a final plan. The plan must include provisions for local government input, and significant input by NTIA seems to be contemplated as well. The plan needs to cover at least a 5 -year period.
  • Each state must contribute 25% toward the cost of their plan (in other words no more than 75% of the costs funded can come from the BEAD Program). However, ARPA funds and CARES Act money that has been distributed to states and local government can be used to fund this “match” requirement.
  • The Act contemplates the BEAD Program funds will be distributed to “subgrantees” to implement the plan. Subgrantees can include local government, nonprofit or for-profit entities. Any subgrantee will be subject to the same spending requirements and BEAD Program rules as those applicable to the state.
  • The Act permits entities that have previously received grants or other amounts from a federal, state, or local program to pay for broadband service expansion, can also receive funds under the BEAD Program, so long as the amounts received pays for costs not covered by the other funding award.
  • Subgrantees (ISPs) that receive funds under the BEAD Program must provide a minimum of 100/20 Service and must meet certain performance requirements and standards; including offering service to any customer in the area that desires service and offering at least one low-cost service plan.
  • The state’s plan cannot exclude cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments as “subgrantees.”

If any State decides not to participate in the BEAD Program, or fails to satisfy the requirements for participation in the BEAD Program, a local government or region within the state can apply for and receive funding.

If all of this strikes you as a time-consuming and complex process, you are reading things correctly, and it’s important to keep in mind that while the Act represents a “once in a generation” commitment to infrastructure investment, it’s likely to take the better part of a “generation” to plan, construct and deploy over 40 billion dollars’ worth of broadband infrastructure.

Broadband Affordability – The Affordable Connectivity Fund Replaces the EBB Program §§60501-60506

Broadband “access” is of little use if the service provided isn’t affordable. The Act appropriates $14.2 billion to fund a revised version of the Emergency Broadband Benefit (EBB) program. The EBB was originally funded at $3.2 billion as part of the Consolidated Appropriations Act of 2021, and it provided a $50 per month benefit for high-speed internet service to qualifying households, along with a one-time payment toward equipment to access the internet (capped at $100). The new Affordable Connectivity Fund caps the qualifying individual household benefit at $30 a month. This $30 per month benefit can be used to pay for whatever level of internet service the household desires. The idea is to give qualifying households the option of selecting a faster internet service (and paying more) if that is needed to meet their needs. The Act also contains directives and rules designed to enhance consumer awareness and curb perceived abuses that limit eligibility to the new Affordable Connectivity Fund.

Broadband Adoption – The State Digital Equity Capacity Grant Program §§60301-60307

The Act creates a new grant program within the Commerce Department called the State Digital Equity Capacity Grant Program. This program is funded with $2.75 billion and is expected to be administered by NTIA. The funds will be distributed to an entity appointed by the governor of each participating state pursuant to that state’s “Digital Equity Plan.” To receive a grant under this program, the state’s Digital Equity Plan must satisfy criteria designed to increase the availability and use of broadband applications and internet-based technology. The state’s plan can address issues of digital literacy, cybersecurity and privacy, access to affordability programs, workforce development, education and health outcomes, and civic and social engagement. In developing and administering the state’s Digital Equity Plan, the state is expected to work in partnership with state agencies, local government, and nonprofit entities.

Rural Utilities Service—Distance Learning, Telemedicine, and Broadband Programs Division J, Title I

The Act provides an additional $2 billion of funding for the Distance Learning, Telemedicine, and Broadband Program administered by the USDA. This appropriation is for the current fiscal year ending September 30, 2022, and funds will be available until spent. The new appropriation is for unserved areas (50% or more of locations having service at speeds less than 25/3 Mbps). To the extent possible the Act requires that projects receiving funds under this program be capable of providing at least 100/20 Service. The Act permits funds granted or loaned under the program to be used to pay for attachment fees and pole replacement costs incurred by electric cooperatives, so that fiberoptic cable or other wireline infrastructure can be co-located on the utility poles. Other provisions waive the requirement for local matching funds to qualify under the USDA program for areas with persistent high levels of poverty.   

Tribal Lands §60201

The Act provides an additional $2 billion of funding broadband on Tribal Lands under the existing Tribal Broadband Connectivity Program established by Consolidated Appropriations Act of 2021 and administered by NTIA. In addition, the Act makes some technical amendments to the program to provide more realistic deadlines for expenditure of funds and completion of projects. Funds provided under the Tribal Broadband Connectivity Program can be used for planning, infrastructure, and adoption on Tribal lands.

Middle Mile Funding §60401

The expansion of internet service in unserved and underserved areas has been impeded in part by the lack of affordable and reliable connection points to carriers that transport data from a local internet service provider’s endpoint to the internet “backbone” – a location that transports data across the nation and around the world. This portion of the internet is generally referred to as “middle mile” infrastructure.

The Act attempts to address this issue by establishing a new program, also expected to be administered by NTIA, that will make up to $1 billion of grants to fund middle mile infrastructure. Grants will be awarded under the program based on a competitive process that prioritizes areas in greatest need of middle mile connection and will include areas in need of connection options and alternative data routes in the case of failure of an existing primary middle mile connection. Telecommunications companies, technology companies, electric utilities, and utility cooperatives are all eligible to participate in the program. Grant recipients will be required to offer service on a nondiscriminatory basis to all ISPs in the area covered by the award.

Private Activity Bonds for Broadband Infrastructure §80401

The interest on tax-exempt bonds (bonds and other forms of state and local government debt) is generally exempt from income tax, and these bonds have been used to finance public, and some privately-owned projects. Because investors do not pay income tax on interest received on the bonds, they are willing to accept a lower interest rate, and this reduces the overall cost of financing a capital project. One category of tax-exempt bonds is a “private activity bond” and they have been used to provide tax-exempt financing for certain capital costs for specific types of projects that will be owned and operated by private companies.

The Act adds a new category of tax-exempt private activity bonds for broadband infrastructure projects.

Generally, these bonds must finance capital investment for projects in unserved areas and there are numerous technical restrictions applicable to the use of the borrowed funds.  Private activity bonds must be issued by a state or local government and the overall amount of private activity bonds issued by a state is limited. This means that private activity bonds must receive an allocation of a state’s overall limit (its annual private activity “bond volume cap”). In Missouri the Department of Economic Development is responsible for allocating the state’s bond volume cap to particular projects.

Digital Connectivity:  Are We There Yet?  

At least some of the accolades that have accompanied final passage of the Act are warranted. Even in the “post-COVID” era, spending a trillion dollars (a thousand, thousand, million dollars) still should get our attention. It is a lot of money, but most would agree, much of our nation’s infrastructure is badly in need of expansion and upgrade. Of course, the fact that Congress was able to “do something” – particularly something of this size — with help from both political parties is a unique achievement these days.

However, it’s important to keep things in perspective. If your family or business does not have access to adequate high-speed internet service now, passage of the Act won’t mean you’ll have it next week, next month, or even quite likely next year. The BEAD Program will take many months to initiate, and many years (think five to ten years) to fully implement. Other programs, such as the Affordable Connectivity Fund, additional funding for the Rural Utility Service, and some of the other adoption grant programs, may be funded more quickly, particularly if the responsible federal agencies quickly publish a Notice of Funding Opportunity, and act promptly to approve and distribute the funds.

So, while we certainly do seem to be on the road to “digital connectivity,” there likely are many more miles to travel before we arrive at that destination.

11 Nov 2021

Closing the Digital Divide: Houston, Missouri Finds a Solution

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Don Tottingham, longtime Mayor of Houston, Missouri, loved his City and thought it was a great place to raise a family. But he also recognized it had a major infrastructure issue: its residents and most small businesses lacked an adequate, reliable, high-speed internet connection.

The Vision

Mind you, Houston, Missouri, a city of approximately 2100, located in the south-central part of the state, is not entirely without high-speed internet service. Some businesses and many schools, libraries and other public institutions had the money needed to fund special, high-speed internet connections, but upon investigation Houston public officials found that the commercial providers who offered this service to businesses in the City, could not make a “business case” for extending service to all the individual residences and small businesses in the City.

This situation may sound familiar to many small towns, subdivisions, and even some neighborhoods in larger cities. However, what is unusual is that Houston’s local officials decided to do something about the problem. They decided to build a fiberoptic internet network that will offer service to all residents and businesses in the City.

I spoke recently with Houston City Administrator, Scott Avery (via Zoom) to learn more about the City’s vision and lessons learned as the project has moved forward.

When we spoke, the City’s network was under construction:  an 18-mile fiberoptic cable “ring” around the community had been completed, internet access for the City’s new network with two separate providers had been secured, and work was underway on the second stage of a four-stage neighborhood build-out to homes and businesses throughout the City.

Service has been offered to residences and businesses in the completed sections of the City beginning in March 2021, and when the network is finally completed (expected by year-end), every home and business in the City will have the option of connecting to the internet at speeds of up to 1 gigabit per second!

Community Outreach – Meeting the Needs of the Community

Mayor Tottingham lost his battle with cancer in July 2019, but by that time the City had already hired an engineering firm to conduct an internet feasibility study. The results of that feasibility study and a key component, a community survey, became available at about the time the time Scott Avery came on board as City Administrator in September.

Scott noted two key findings of the community survey. First, 78% of respondents said they would subscribe to reliable internet service offered by the City. This of course was strong confirmation of public support for the City to move forward with municipal broadband. Second, the survey showed that the overwhelming concern for residents and businesses was to have reliable internet service– meaning service that was robust enough to allow them to connect online and have confidence that the connection would remain stable for as long as it was needed. This led the City to intentionally construct a network designed to be highly reliable and capable of expanding to meet both current and future needs of residents and businesses.

Scott observed that the community outreach effort was crucial not only for Houston’s leaders, but for any community that wants to address the lack of high-speed internet access and adoption. “We could sit here in city hall and guess all the time without actually understanding what services they want the City to provide.” He added, “Having the survey gives you a chance to ‘paint the picture’ to let folks know what you are doing.” and that “helped answer the questions Aldermen had when considering whether to make the investment.”

Houston’s project is closely tied to its municipal electric utility system. Funds from the electric system have financed the expansion; city employee linemen have been cross-trained to install and repair fiber; the fiber is mounted on City-owned poles; and billing and back-office administration are incorporated with those already used for the City’s electric, water, and sewer utilities. Once fully operational, the network is expected to deliver better utility and other government services to the community, as well as provide the City’s residents and businesses reliable high-speed internet. 

“In the Trenches” – Building a Fiber Network

In early 2020, based on the findings from the survey and the feasibility study, the City decided to move forward with a City-owned and operated internet network. It selected a contractor through a request for qualifications process, and secured contracts to connect the City’s network to the internet from two separate providers. Scott’s experience in emergency services, and the community’s concerns about reliability, led to the decision to have a second provider for the City’s network. By doing this, the City has redundant access to the internet, so that a service failure with one provider would not cause the City’s network to go down, as the other provider’s capacity alone was more than that needed to service the City’s users. The City also took advantage of favorable pricing to buy more capacity (bandwidth) from these providers than was strictly necessary based on the engineer’s design. The goal was to build a system that could easily grow to meet increases in demand or perhaps a new business such as a data center that might need much higher levels of bandwidth.

The City published pricing and service levels in 2020 before network construction began. It now offers a range of service options for households ranging from $30 a month for 25Mbps (upload and download) to $90 a month for gigabit level service (1000 Mbps). Business customer options range from $75 to $250 per month but provide the customer priority routing over the network.

When it created the various options and pricing, the City focused on two considerations. First, what was the minimum level of service citizens needed to do most household tasks such a streaming video and working or taking online classes from home. Even for individuals that select the lowest service level, their connections speeds should be sufficient for those purposes.  Second, the service is priced at a level sufficient to operate and maintain the City’s network over the long term, but with no expectation of making a profit. As Scott put it — “the goal, the focus, all along is that a single mom with four kids at home – trying to get them an opportunity that they wouldn’t have had otherwise, and I think this fiber broadband and an online education opens doors for people in this community more than anything else because it attaches them to the outside world.”

With this amount of advance planning and help from outside experts, existing right-of-way, poles throughout the City to run fiberoptic cable, and a city staff experienced in operating other utilities, you might expect things would have gone relatively smoothly. Scott was quick to admit that wasn’t the case. “We started construction in March of 2020. I don’t know if you heard what happened in March of 2020, but there was a shut down from this thing called COVID.” As I laughed, he pointed to his graying hair and observed, “I had brown hair when we started this project.”

Joking aside, the COVID lockdown initially stopped and then slowed the progress on the project. Once things began to reopen, the City was faced with labor delays and shortages of fiberoptic cable and related equipment needed to construct the network. This problem is not unique to Houston, it has plagued even the largest internet providers throughout the United States. The City’s network build-out is now 14 months behind schedule, but in large part because City employees are now able to handle fiber installation even if the outside contractor is delayed, they are in a much better position to move forward to complete the build out. The City has also discovered a few “work arounds” to mitigate the supply chain issues. For example, it recently was able to fill a need for 65 “fiber dead-end connectors” by sourcing what was needed from several suppliers that could fill part, but not all, of the City’s order.

These delays also have reduced the number of subscribers from those initially projected, but the City believes this will be reversed once the entire network is complete and folks understand the value of service being offered. Noting the public’s problem with unreliable internet, Scott observed that the City’s new network has not suffered a service outage since it “went live” in some sections of the City in March.

Lessons Learned

A final list of “lessons learned” from Houston’s approach awaits completion and full operation of the new network. One lesson that Scott offered was the need to make certain that engineers and other outside advisors understand that municipal leaders, even those that lead a city’s IT department, likely do not “know what they don’t know” when it comes to designing and constructing an internet network. Open communication is critical to avoid unpleasant surprises for any community contemplating a broadband project. Other lessons he mentioned were more closely tied to the extraordinary challenges of the COVID pandemic. For example, the City’s solution to supply shortages previously described, and the need to develop effective strategies to keep the project moving forward even when contractors are stretched too thin and face severe labor shortages.

What seems equally clear is that any city or county undertaking a project like this needs to have a clear vision of its ultimate objective, a public mandate to move forward, and a tenacious innovative staff that remains calm and focused on the ultimate objective in the face of the unforeseen challenges and setbacks. Here Scott’s experience in emergency services likely was a huge plus for the City. As he put it – no matter how many problems come your way, at least you know nobody is going to die, and that certainly helps keep things in perspective. 

There is also one final “lesson” for other communities facing similar challenges of inadequate internet service that may not be as apparent:  Houston’s approach may not be appropriate or necessary to address the problem. Not every community will have the experience, leadership, and resources needed to construct and offer-high speed internet to every home and business as a municipal utility. Even in communities that do, the citizens may not want their city or county to take on this role.

However, that doesn’t mean there isn’t an appropriate role for local government to play in efforts to close the digital divide. Every city and county in the state has received federal funds to plan and pay for necessary broadband infrastructure. There are variety of contractual arrangements that local governments can use to encourage the expansion of privately-owned high-speed internet for unserved and underserved areas. However, public funds and public support for private internet expansion needs to have a public purpose — it needs to meet needs of the citizens of the community for more effective government, and real improvements to the health, education and economic well-being of the community. The first logical step in that process is to develop a comprehensive plan that identifies and meets the needs of the community.

1 Nov 2021

Missouri Legislature Broadband Update

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Several bills were introduced in the last session of the Missouri General Assembly related to Broadband. Of particular interest were HB 321 and SB 184.  This legislation was similar to bills introduced in the 2020 legislative session and would have authorized investor-owned electric utilities to offer broadband service to its electric service customers in much the same way that many rural electric cooperatives and a few city-owned electric utilities do today.

In recent years electric utilities have begun to install fiberoptic cable-based internet networks on electric power poles to regulate electric transmission and distribution over their network, and some investor-owned utilities would like to use that same fiber to provide their customers internet service as well. However, to do so they need legislation to authorize this new line of business and establish the regulatory treatment of this new line business by the Missouri Public Service Commission. Efforts to pass the legislation this year were again unsuccessful.

Whether investor-owned electric utilities can play a meaningful role in bridging the digital divide remains unclear. In one encouraging development, in October 2021 the Missouri Public Service Commission did authorize Ameren to lease approximately 1 1/2 miles of its fiber optic cable to an internet service provider.

What did pass this most recent legislative session was yet another “special district financing” option. This legislation joins last year’s amendments to the Missouri’s Community Improvement District (CID) and Neighborhood Improvement District (NID) statutes (discussed in an earlier blog). The new legislation amends Chapter 71 of the Missouri Statutes to add a new section — 71.1000. The new law permits two or more municipalities to form a “broadband infrastructure improvement district” or “BIID.” Broadband Infrastructure Improvement Districts are authorized to partner with a telecommunication company to deliver broadband internet service to the municipality’s residents in “unserved or underserved areas.”

Just what the term “partner” means was undefined in the final bill, but one would expect it could include a wide variety of contractual arrangements known as public-private partnerships or (P3s) involving a sharing of risks and rewards of owning and operating a local internet network. We do know that in every case the telecommunication facilities must be “wholly owned and operated by” a telecommunications company (rather than the BIID or the municipalities that created it). The new statute provides that a broadband infrastructure improvement district can finance operations through grants, loans, bonds, user fees and (with voter approval) a 1% sales tax.

So why hasn’t this new legislation gained more attention? Probably a couple of reasons.

First, like the CID and NID legislation passed last year, a BIID can only operate in areas that are certified by the Missouri Department of Economic Development as unserved or underserved. This requirement was not part of the bills (HB 735, HB 1378 or SB 570) that were originally introduced, but it did end up as a requirement in the law that was finally passed. The “unserved or underserved area” definition used in the new broadband infrastructure improvement district legislation and the CID and NID amendments last year is contained in Section 620.2450, which is the statute that authorizes direct grants of state funds for broadband infrastructure projects.

Using that standard, any area that has wireline (cable or fiber) or fixed wireless service (e.g., satellite) at download speeds of at least 25 megabits and upload speeds of at least 3 megabits per second is deemed “served” and cannot use the new BIID legislation. Many applications today for commercial and even household use require a connection that is faster than that, and communities served at that level will not be able to partner with private providers to upgrade and expand service to meet those needs using the BIID statute.

Second, for municipalities that believe they are unserved or underserved, the Department of Economic Development has not issued guidance on how a newly created NIID (or a CID or NID under last year’s legislation) can meet the unserved or underserved standard, and until it does, the new statute and the CID and NID legislation enacted last year, cannot be used.

For communities that cannot meet the unserved or underserved criteria, other provisions in Missouri law may already permit the type of cooperative “partnerships” contemplated by the new statute. Sections 70.210-70.325 of the Missouri Statutes authorizes municipalities (and most other types of local governments) to “partner” by contract with other municipalities, the state and federal government, nonprofits, and businesses to achieve valid public purposes. As the last few months have demonstrated, having the infrastructure in place to deliver affordable, reliable, high-speed internet service to every home and business in a community is critical to the effective delivery of government services, and it is an essential prerequisite to economic development for all communities as well. Addressing either of these needs likely could serve as a basis for the type of cooperative effort contemplated by the BIID legislation.

Next year promises more legislative activity to improve internet access and adoption. Governor Parson recently announced his administration would seek legislative authorization to spend $400 million of federal funds made available to state by the American Rescue Plan Act (ARPA) for broadband infrastructure and adoption. This amount is in addition to the ARPA funds already made available to every municipality and county in the state, that also can be used to plan and construct broadband infrastructure.