Remember the FCC RDOF Auction? When is a “Funded Area” Actually “Funded”?

By Marc McCarty

Today I re-read my Blog from December 2020 about the winners of the FCC Rural Digital Opportunity Fund (RDOF) auction awards. It was an exciting time! Over $9.2 billion awarded — $346 million to Missouri providers that promised to connect nearly 200,000 Missouri locations to high-speed internet!

Twenty months later, while some Missourians now have the service available, many do not, and for some the connection promised by the funding will never come at all.

Why?

Part of the answer was described in the December 2020 Blog:

“Companies receiving awards are required to submit much more detailed information to the FCC throughout next year before their award is final.  That information includes engineering data, deployment plans and financial data, and failure to submit it by the deadlines can result in forfeiture of the award.” 

As this map shows, as we approach the second anniversary of the initial FCC award announcement, companies who won awards in the areas of the state shaded in yellow still have not been able to satisfy the FCC’s criteria to begin receiving funding. Those areas shaded in red represent locations where companies have “defaulted” and lost their chance for federal funding.  This map does not include the latest disqualifications of “winning companies” — $885 million to Star Link (disqualified because it could not show it could deliver service to all locations at the promised speeds) and $1.3 billion to LTD Broadband (disqualified because it failed to obtain necessary state issued licenses to offer internet service). LTD Broadband’s disqualification is particularly relevant for Missouri because it represents the majority of Missouri locations that had not been funded.

Of course, even in areas where the final applications for funding have been approved by the FCC, another reason many folks are waiting for broadband service is that the funding is spread over 10 years and the providers have 6 years to meet their obligation. 

On August 15, the Department of Economic Development began taking applications for up to $265 million of state grant funding for broadband infrastructure, and Missouri likely will receive hundreds of millions of dollars more funding over the next few years through the Infrastructure Investment and Jobs Act programs.

Government officials are very concerned that this new funding does not go to areas already covered by another federal grant funding award. For example, under the DED program:

“project areas where high-cost support from the federal Universal Service Fund has been received by rate of return carriers, funding from the National Telecommunications and Information Administration Broadband Infrastructure Program, or where any other federal funding has been awarded to provide broadband service at speeds of 100/20Mbps will not receive Program funding.”

This of course, seems very logical. Why should the federal or state government pay twice for the same promised broadband access?

However, this logic breaks down when the promised federal funding is delayed for months or even years and then ultimately denied, or where the funded project cannot deliver the promised levels of broadband access.

This is a problem that is unlikely to go away. The FCC, NTIA and USDA (Reconnect) all have had funding programs in place over the past several years, with slightly different criteria for eligibility, requirements for connectivity levels, and build-out timelines. In some cases, the funding program did not require, and the provider did not commit to build out the locations to the current 100/100 Mbps or 100/20 Mbps standard.

Some of these issues can be addressed through a focused grant application and challenge process of the type DED has implemented. After all, providers that do expect to move forward with federal funding should be able to make that intent known. Further, in situations where “preliminary” awards were granted only to ultimately be rejected during an extended evaluation process – such as Star Link and LTD Broadband — the DED Broadband office has already taken steps to encourage applicants to make the case for funding through a new addition to its broadband program grant FAQ:

Questions added August 22, 2022:

Q31:The Federal Communications Commission today announced that it is rejecting the long-form applications of LTD Broadband and Starlink to receive support through the Rural Digital Opportunity Fund program, what does that mean for my broadband application?  

A31:Due to the FCC rejecting the long-form applications of LTD Broadband and Starlink, areas within Missouri that may have been considered federally funded/awarded may no longer be considered federally funded. In the application, for Section IV Questions 13 & 13a, if your proposed service area was a previously funded area, but it is no longer, provide an explanation of how the area was previously awarded,  and why that proposed service area is eligible for this Program’s funding.

Certainly, it also would be helpful if all federal agencies had more consistency in their requirements and process for funding programs and more transparency to identify when an “awarded” area:  (1) actually is reasonably likely to qualify for funding and (2) is building infrastructure capable of meeting modern standards for broadband service (100/100 Mbps or 100/20 Mbps).

Finally, it might be appropriate to consider more objective criteria for determining if an area that is unserved or underserved actually should be excluded because of a competitor’s challenge.  For example, Ohio’s state grant program definitions exclude unserved and underserved communities from participation in its grant program only when a competitor’s network is actually under construction and expected to be deployed within 24 months. Likely there are other ways of addressing this issue, but for the sake of residents and businesses currently on the other side of the digital divide, solutions need to be found. For Missourians without access, it is little comfort to learn that they live in an area that cannot participate in new rounds of federal and state funding for broadband, because funding was promised but never provided in a prior award or was used to construct infrastructure that doesn’t meet current standards. In either case, these folks are unconnected, with no realistic prospect of becoming connected, unless their homes and businesses are eligible to participate in future federal and state grant programs.

A Wrap-up – Broadband and the 2022 Missouri Legislative Session

posted in: Legal and Regulatory | 0

The Missouri General Assembly closed out its regular session on May 13, 2022 (Friday the 13th). The General Assembly committed unprecedented amounts of new public investment in high-speed internet infrastructure. Yet, the amounts provided were substantially less than what the Governor proposed last fall and did not address some of the key objectives identified in his budget proposal. Aside from the appropriation, limited progress was made on other fronts as well, and these are discussed in more detail below.

The ARPA Broadband Appropriation

Much of the General Assembly’s work this session centered on the Governor’s American Rescue Plan Act (ARPA) spending proposals – a key component of which was spending for Broadband. Using federal money provided by ARPA, the Governor proposed a multipronged approach that included infrastructure funding (broadband access), adoption (digital skills training) and affordability. In this regard, the Governor’s proposal mirrored the approach of the Infrastructure Investment and Jobs Act (the IIJA) enacted by Congress last year and described in an earlier blog.

As shown in the following table, while the General Assembly provided funds for internet access, it did not approve funding for the Governor’s adoption or affordability proposals. Administration of the new grant funding program (as well as development of a 5-year plan to apply for and secure more federal funding from the IIJA programs) will be provided by Department of Economic Development’s Broadband Office (DED), which received $10 million of additional funding this session.

ProgramGovernor Parson’s Proposal (Missouri Department of Economic Development (DED)General Assembly Appropriation
Access (Infrastructure)$250 Million  — Competitive Grant Program for locations lacking fixed wired or wireline service of at least 100 Mbps/20Mbps250 Million
“Digital Literacy”  (Adoption/Digital Skills)$30 Million – Competitive Grants  to Nonprofit and Educational OrganizationsNot Funded
Affordability (Assistance for broadband subscription cost )$30 Million – Would funds an additional $10 per month benefit to households eligible for the $30 per month benefit provided as part of the IIJA’s Affordable Connectivity ProgramNot Funded
Pole Replacement (supports fiber on pole deployment)$0* *Pole replacement costs could be funded through broadband infrastructure grant program  $15 Million
New Cell Towers for Wireless Access$30 Million$20 Million

There are a couple of observations that seem relevant here:

  • First, while the amount of money appropriated for broadband infrastructure far exceeds previous funding, it will not be enough to provide broadband to every location in Missouri that needs one.

The Governor’s proposal was expected to be enough to connect approximately 75,000 households in the state.  However, in a webinar presentation last month DED noted that a recently completed gap analysis showed that nearly 500,000 locations in Missouri lack broadband service at speeds of 100/20 Mbps (the new standard for “underserved” locations). The cost to connect those locations was estimated at a little less than $2 billion, whether wireless or wired technologies are used to provide service.

That said, the goal of funding universal broadband access across Missouri seems to be well within reach. The $285 million appropriated by the General Assembly this session is money the federal government provided to the state through the ARPA last year. An additional $1.3 billion (the second installment of State and Local Fiscal Recovery Funds (SLFRF)) will be deposited with the state later this year. This money also can be used to fund broadband and other infrastructure needs. Thereafter, Missouri is eligible to receive a sizable portion of the $42.5 billion available to states to fund broadband infrastructure as part of the IIJA. Finally, of course, assuming a public-private partnership model is used to provide broadband access, no one thinks that the federal and state governments will need to finance the entire cost of building out broadband to all underserved locations, as the private sector can fund the investment as well.

In other words, over the next several years, there appears to be an opportunity to access enough federal money to construct the infrastructure needed to close Missouri’s digital divide. However, this will require continued support from the General Assembly to appropriate the federal money. ARPA money left unspent by the end of 2026 must be returned to the United States Treasury. IIJA funding will be allotted to states based on need and funded only after submission and approval of a five-year plan designed to provide access to all unserved locations in the state. Thankfully, in this session the General Assembly began this process by appropriating money to DED this session from ARPA funds to develop this five-year plan, so that Missouri can fully participate in the IIJA funding programs both for access and adoption over the next several years.    

  • Second, the General Assembly’s decision to “zero-out” the Governor’s proposed appropriation for internet adoption is somewhat puzzling. One could make the case that $30 million was not the right amount – that it was too much – or that the need for adoption programs could be deferred to a later date and paid for out of future IIJA grants, and did not need to be included in this year’s appropriations. 

It may be simply that the proposal suffered from “misbranding”– the decision to call it “Digital Literacy.”  One would think most folks don’t like being referred to as “illiterate” – even if it’s “digitally” illiterate, and that term doesn’t really do a very good job of describing what the money was intended to pay for – or why it was needed in the first place.

Likely what was lost in the debate was an appreciation that the public benefit of broadband access, what justifies the investment of hundreds of millions of public dollars for broadband infrastructure, comes only when all individuals throughout the state can actually use that resource in ways that make a positive impact on public health, education and economic opportunity. This would include visiting their doctor online (telehealth); starting an in-home, internet-based business; reversing population declines in rural communities and saving commuting time and expense through telecommuting; obtaining an advanced degree or skill online from a university or junior college; monitoring crops in the field, reducing fertilizer and production input costs through precision agriculture; accessing online federal, state and local government services; and otherwise using high-speed internet in ways that make business, government and other institutions more efficient and effective.

In short, to fully realize the public benefit of broadband that justifies the unprecedented public investment in broadband infrastructure, there is a need to move beyond smart phones and recreation-centered internet-based applications (things like texting, social media, YouTube videos, online gaming etc.) and to provide everyone – not just the “tech-savvy” with the training and skills needed to effectively use this new resource. While certainly most everyone believes these goals and programs are worthwhile and necessary, the private sector has limited motivation (and expertise) to provide them. This was the rationale of an internet adoption program that would use nonprofit, local government, and educational organizations to develop the skills-based resources designed to further these objectives. Hopefully, as the need for these resources becomes more evident, funding for adoption programs will be included in future appropriations so that communities receiving public funding for internet  access will have the means to fully realize the benefit of this new resource.

Senate Bill 820   

Aside from the appropriations bills, significant – but more incremental progress was made through passage of  Senate Bill 820. This legislation incorporated several of the proposals from the work of the House Special Interim Committee on Broadband Development chaired by Representative Louis Riggs.

Among the changes, was a proposal supported by the DED, that incorporated a badly needed update to the definition of areas that lack access to adequate broadband service (underserved areas). This definition is important because it is used to identify broadband infrastructure projects that can be financed by Community Development Districts, Neighborhood Improvement Districts, and Broadband Infrastructure Improvement Districts, as well as describing locations that can qualify for direct grant funding administered by DED.

Assuming SB 820 is signed by the Governor later this summer and becomes law, underserved areas will be defined to include areas lacking fixed wired or wireless service equal to  100 Mbps download and 20 Mbps – a substantial increase from the old standard (25/3 Mbps).  This new standard is the same as that contained in the Infrastructure Investment and Jobs Act (the IIJA). SB 820 also permanently ties the definition to future increases in the speeds necessary to qualify internet service as “broadband” as changed by Federal Communications Commission – the  FCC – from time to time. By raising the standard used today, many more projects will qualify for funding and can use existing financing district legislation today, and by tying the definition to future increases implemented by the FCC, the statute will continue to be a useful tool in the future as new technologies such as virtual reality and artificial intelligence require even faster internet connections.

SB 820 also includes a new Vertical Real Estate Act (new §8.475) to expressly authorize any political subdivision to erect wireless telecommunication towers and related ground-based equipment and to enter into public private partnerships for the same purpose.  Finally, the new law adds several provisions designed to enable DED to better enforce and administer state broadband infrastructure grants in the cases where the recipient has failed to construct the promised infrastructure.

Seven “Characteristics” of Successful Broadband Public-Private Partnerships

posted in: Funding, Planning | 0

We are at the beginning of  the Great Broadband Infrastructure Funding Boom. New federal funding for broadband started with the CARES Act and picked up steam with the American Rescue Plan Act (ARPA) but the amounts involved are dwarfed by over $65 billion that will be distributed by the federal government over the next few years as part of the bipartisan Infrastructure Investment and Jobs Act (IIJA).  Meanwhile, in the near term we expect over $400 million of the state’s ARPA funding to be appropriated by the General Assembly this spring, with actual awards and funding to begin by late this calendar year.

While this funding potentially could be distributed directly to local government, in many cases the federal and state enabling legislation contemplates that private for-profit internet service providers, nonprofits and government entities will work together to implement broadband access and internet adoption projects. These public-private arrangements are called public-private partnerships or – P3s.

P3s seldom are actually documented as partnerships and the arrangement  may not even be referred to as a “P3.” However, they all do involve an ongoing legal agreement among one or more federal, state or local governments (public partners) and at least one for-profit or nonprofit entity (private partners), with the goal of constructing and operating a new development or enterprise.  P3s have been used for many decades to construct and operate all sorts of public improvements, everything from arenas and stadiums to water systems and power plants, to toll roads and bridges – even a few high-speed internet networks. They also have been instrumental in bringing major retail or business expansion projects to depressed or underdeveloped communities.      

I believe P3s likely will be used extensively for new broadband projects in underserved communities because much of the funding from the federal government comes with conditions that focus on outcomes over the long-term.  For example, any broadband infrastructure project funded with an IIJA grant will have to achieve minimum levels of performance (download, upload and latency), offer service to all or nearly all of the locations in the project area, meet certain service affordability standards, and once operating, satisfy specified “quality of service” parameters.  The exact requirements remain to be seen, but it seems likely that if federal funding is used, recipients will be required to show not only that project was built as designed, but also that when completed it operates at the performance levels promised, and that the service offered is reliable and affordable. This focus both on construction and the ongoing operation of the project will be difficult for a single entity (government or business) to meet on their own and many will move to seek to share both the risks and rewards of project construction and operation using a public-private partnership. In fact, Missouri’s most recent award of federal funding required that the new projects be completed using a public-private partnership.

Using a P3 won’t necessarily eliminate risk or ensure the project will be a success. My work with communities, negotiating and documenting P3s over several decades, has yielded decidedly mixed outcomes. Many P3s have been unqualified successes, delivering state-of-the-art infrastructure improvements on time, at or under budget. However, others have been financial and operational disasters. There have even been a few situations where initially the P3 failed, but later it was resurrected, modified, and ultimately succeeded. As communities and businesses across Missouri and the United States consider using P3s for broadband, it seemed a good time to share a list of characteristics that I’ve found most successful P3s have in common.

My list is anecdotal; it’s based entirely on my own observations. I compiled it after reflecting on my experience working on many projects over the years. Admittedly my list wasn’t derived primarily from experience working on P3s that were formed to construct and operate broadband networks, but I think the fact that the projects I worked on were so varied (everything from ethanol and bio-gas plants to football stadiums) shows that what is being built or operated is not all that relevant, and at least a couple of the characteristics described actually were illustrated by broadband P3s.

With that as an introduction, my list follows —         

Characteristic 1 — The Partners Think Long-Term

Partners in successful P3s typically organize their arrangement to achieve long-term objectives over many years or even decades. All critical partners share an understanding of the ultimate objective, and each tends to see their individual responsibility to the enterprise through that perspective. For example, if a P3 is used to build and operate a toll road, the construction contractor understands that delivering the road on time and under budget in accordance with the design specifications, means very little if she knows the road hasn’t been properly designed to handle projected traffic volume, or that the material specified in that contract will not stand up to weather conditions and last for the project’s intended useful life. Neither of these concerns are the contractor’s primary responsibility, and if the arrangement was viewed only as a construction contract, the contractor would measure success only by looking at whether the road was completed, on time, within budget, in accordance with design specifications.

However, the true objective for the P3 is to provide a toll road that will improve travel for many years. Certainly, a critical step in reaching that goal is to get the road built and open for operation, but that short-term objective is only part of a much larger long-range goal. If the contractor partner takes this long-view into account, she will raise her concerns, and all parties will consider and address them before proceeding. It may take a bit longer to get the road built, and it might cost more, but it will be much more likely that the project will satisfy the P3’s long-term objective.

This mindset may not come naturally, but it does seem to lead to a better overall outcome – over the long term.  It doesn’t take much imagination to see how thinking long-term thinking could benefit communities building a new broadband network. If the long-term objective is to provide the community access to high-speed internet that is affordable and capable of handling the community’s needs over the next 10 to 20 years, the partners in the P3 wouldn’t automatically choose the broadband infrastructure option that could be constructed for the lowest cost.

Instead, before selecting that option, the partners also would consider how much it will cost to operate and maintain the network, and whether the network can be easily upgraded so that it can efficiently operate new internet applications that become available, compared to other infrastructure technologies that are more expensive to install. Looking “long-term” the savings associated with lower operating expenses and avoiding the cost of installing a replacement network in just a few years, may far outweigh the limited benefit of a lower initial installation expense today.   

Characteristic 2 — The P3 Has “Good Partners”

Successful P3s have “good partners” – partners that have three characteristics:  a proven track record, financial wherewithal to weather economic problems, and finally, a “cooperative spirit.” The first two of these seem obvious. Of course, a local government (public partner) would want to find a private internet service provider, contractor, or network operator with a great track record, that was highly capitalized and able to cover unexpected cost overruns and delays. Likewise, a private company (the private partner) would search out a city or county with a team of elected officials and staff that had successfully worked with private businesses on significant P3 projects in the past and that have a reputation for following through on financial and other commitments.

However, identifying and recruiting good partners is not easy. After all, if government or business, acting alone were able to provide affordable access to high-speed internet in the community, that already would have happened. There likely are engineering problems, lack of access to easements and right of way, insufficient access to capital, low population density and demand for service, and many other issues to overcome to successfully construct and operate an economically viable network. The best “partner” candidates often have many options in communities that present fewer challenges and that are less risky. This does not mean recruiting good, –qualified partners — is impossible, but it does underscore the need to carefully evaluate and select the best candidates, and to pay particular attention to each candidate’s experience and financial condition.

Communities need to be especially cautious of firms that offer untested technologies to achieve the P3’s goals. Although it’s possible an entrepreneur may have discovered a great solution, often unexpected problems arise when a new technology is deployed in a real-world setting, and invariably firms promoting these technologies are undercapitalized and find it difficult to weather these setbacks. Certainly, a carefully crafted request for qualifications or request for proposals solicitation process should be followed to identify all available candidates and options. For public partners, this usually will require the help of a financial advisor and perhaps an engineering consultant to assist in evaluating prospective partner candidates and P3 proposals.

A third, less obvious, characteristic of a “good partner” is a cooperative spirit. For the reasons already discussed, a P3 that seeks to provide internet access to underserved communities and improve adoption of internet applications, likely will encounter difficulties and setbacks along the way. In successful P3s, each partner, public and private, understands this, is willing to stay the course and, if necessary, alter their approach to the extent necessary to achieve the P3’s long-term objectives.      

Characteristic 3 — Each Partner Has the Support of its Constituency

Public and private partners have constituencies. Public partners (elected and appointed government officials) must answer to voters, public utility customers, parents of school age children, local business and civic community leaders, and many other groups. Private partners typically answer to their board of directors, investors and, in the case of nonprofits, donors. To achieve success, partners in successful P3s will have taken steps to obtain and maintain the support of their constituencies.

This characteristic is particularly important for public partners. It can be easy for a well-meaning government official or governing body to get ahead of the voters. Even if the P3 contracts are eventually approved over public objections, a future city council or county commission may work to undue the efforts of its predecessor and terminate the arrangement. In successful P3s, written agreements among the partners reflect and evidence the commitment of the community, not just the current government leadership. Of course, no P3 has unanimous public support. There always will be dissenters, but when reflecting on unsuccessful P3s, one often finds it had a critical public partner that entered into the agreement even when faced with widespread sustained opposition from a substantial portion of the community.

In successful P3s, prior to entering into the arrangement, public partners spend time and effort engaged in learning sessions where they carefully explain both the benefits and the risks associated with the P3, and work to address concerns voiced by constituencies. This effort continues throughout project construction and commencement of operations. The public is kept informed of the project milestones as well as challenges encountered along the way that require modifications to the initial plan.   

Characteristic 4  — Expectations Are Kept in Check

Successful P3s have partners with realistic expectations of what can be achieved. Public partner leaders and decision makers understand that calling the arrangement a  “P3” does not somehow guarantee the successful completion and operation of the enterprise, nor eliminate financial risk. Private partners understand that public institutions operate by consensus rather that edict, and they accept and adapt to a decision-making process that takes more time.

Characteristic 5 — The Objectives of All Partners are Well Defined and Understood

Partners in successful P3s take the time to fully understand their shared objectives, and to compromise individual objectives that could otherwise lead to future conflict. In contrast, partners that assume their objectives are fully understood and shared – or worse – conceal their true motivations to achieve a strategic advantage in negotiations, eventually face difficulties. Some underlying problem eventually will expose the problem under circumstances when it will be much harder to achieve an acceptable resolution.

Defining and understanding objectives often does not receive enough attention because it is inconsistent with traditional contract negotiation strategy. For example, if I want to buy a house, my goal – my objective – is to get one that best suits my needs at the lowest possible price. In contrast, your goal, as seller, is transfer the house for cash, free of any future responsibility at the highest possible price. Most would agree that in a traditional negotiation, the seller should emphasize the positive aspects of the house, while avoiding (to the extent the law allows) pointing out any defects that might depress its price. On the other hand, as the buyer, I would do everything possible to emphasize the structure’s defects and shortcomings and initially would offer less than the  amount was willing to pay in the hope of getting the best bargain. Eventually, through a series of offers and counteroffers we would either arrive at the selling price or abandon the effort.

Partnership arrangements involve a much different set of expectations and dynamics. Most are designed to remain in effect for an extended period, and in successful P3s, the parties recognize this, and tend to spend a substantial amount of time at the outset working to understand and clearly define each other’s objectives. It is true that, just as in the buyer-seller example, the parties likely will have some objectives that are incompatible, but if the P3 structure is a viable option, they will also identify some important common or shared objectives.

For instance, a for-profit ISP may be looking to maximize profits by expanding its internet network to homes in an underserved community. At the same time, the public partner may be looking to provide online learning opportunities for residents, or it may want to add residence-based internet sensors and controls for public water, sewer or electric utilities. The common, or shared objective in this case is to expand internet service to every home in the community. While the motivation behind the objective may be much different (profit for the private partner ISP and better delivery of community services for the public partner) the potential exists to create a successful P3 that will enable them to reach this shared objective. For example, the public partner might agree to purchase permanent capacity on the new network capacity to meet its goals, in exchange for the ISP’s agreement to build out service to each home in the community, including those that it otherwise would have by-passed because the lack of customer density created profitability concerns.

Of course, there also likely are some inconsistent objectives as well. The ISP might want to exclude some homes in the community because they could not be served profitably, or the public partner might want the ISP to offer service to low-income households at a reduced rate to encourage adoption of its new public internet-based government services. But even here, if these objectives are identified and understood, a solution probably can be found. For example, perhaps the parties would agree that the ISP could install infrastructure that is slightly less capable, but much less costly to install and operate in marginal areas of the community. To meet its goal of reaching all of the households in the community, the public partner might agree to offer subsidies to low-income subscribers, so that they could afford to pay a market rate for internet service.    

However, before any of these ideas can be explored and developed, the partners must be willing to reveal their underlying motivations and objectives. Stated another way, it’s impossible to find common ground unless you know where you and your potential partners “stand” right now. This can be a difficult shift, particularly for legal advisors and business advisors more familiar with traditional negotiation strategies. It requires a significant investment of time and the development of a negotiating environment designed to encourage free exchange of information and ideas.

Characteristic 6 – The Partners and the P3 Speak with One Voice

This characteristic applies primarily to public partners, and it applies both during the course of negotiations leading to the formation of the P3, as well as after the project commences. Nothing tends to undermine trust and sidetrack negotiations quite like a public partner with multiple spokespersons. Public entities, by their nature, tend to be somewhat decentralized and populated with folks who are eager to take the limelight. Private partners cannot effectively react to multiple inconsistent positions voiced on behalf of a single government, and if the situation is not properly managed, the private partner may eventually decide to abandon negotiations. Successful P3s tend to have public partners that understand this risk. They establish clear lines of negotiation and communication through a single individual, and demand that all parties respect this process.  

What is true for individual partners, is also true for the P3. Most P3s need to contract with others for financial and other resources. When approaching third parties such as a bank or underwriter, or a federal regulator, successful P3s designate a single individual to conduct negotiations.    

Characteristic 7 — The Parties Think “Win-Win”

This final characteristic I borrowed from Stephen Covey’s  “The Seven Habits of Highly Effective People.” It may seem altruistic and somewhat naïve, but it reflects a practical difference that underlies all of the six characteristics previously described. Effective partnerships of any kind exist because they can achieve an objective that the individual partners, working alone, could never reach.  From this perspective, if the partnership succeeds, everyone should feel like a winner – because all fared better than they would have had they undertaken the project on their own.

Identifying a path that achieves the community’s core objectives, that provides private partners a fair economic return, and that fairly allocates risks and offers rewards commensurate with each partner’s investment of time and resources is seldom easy. In many cases attempts to establish a P3 fail because there are too few shared objectives or because one or more of the partners was unwilling or unable to engage and negotiate an arrangement that required a long-term investment of time and capital.  In some instances, the P3’s objectives, were only partially achieved, and of course there are some where the P3 failed completely. However, there are many others where the effort proved successful.

That’s the reason public-partnerships continue to be popular and used in a wide variety of situations. It’s not because they ensure success or eliminate risk, but instead it’s because parties know that without them there would be no possibility of successfully completing the project and achieving their shared goals.   

Missouri House Special Interim Committee on Broadband Development Issues Its Final Report

The Missouri House Special Interim Committee on Broadband Development has issued its final report and recommendations for improving access to broadband and broadband applications. The Committee was appointed last year by House Speaker Rob Vescovo, and included Representatives Louis Riggs (Chair), Cyndi Buchheit-Courtway, Bishop Davidson, Travis Fitzwater, Jay Mosely, Wes Rogers, and Travis Smith.

The Report summarizes findings from at least 11 public meetings and testimony from over 40 witnesses; together with appendices and transcripts, it is more than 500 pages in length. The Report addresses issues of internet access, connection speed, and affordability, as well as the need for progress to improve adoption of internet-based applications for online education, telehealth, precision agriculture, workforce development, and entrepreneurship.

While acknowledging that the state has made some progress over the past several years – moving up from 41st to 32nd in the FCC state ranking for broadband access, the Committee concluded that “there is still a tremendous amount of work to do in order to move Missouri from below the middle of the pack into the Top 10 states in the country.” To illustrate the point, the Report noted that Missouri ranks 44 out of 50 states in home use of fixed broadband and 15th in the nation for households with no internet access at all.

Several recommendations were made to improve on these statistics, including the creation of legislative committees in the Missouri House and Senate dedicated exclusively to broadband expansion and oversight, along with a “Broadband Development Council” to enhance stakeholder engagement, ensure accountability and provide meaningful public oversight. As part of this effort the Committee called for a publicly accessible internet testing and mapping resource that would show actual internet connection speeds in real-time.

More funding for the Missouri Broadband Office within the Department of Economic Development was recommended to increase amounts available through the state’s broadband infrastructure matching grant program over the next three years and to provide additional staff to improve oversight of internet providers that participate in this program. The Committee recommended increasing connectivity speeds in the state’s definition of broadband, so that public funding would be available in areas lacking connectivity at speeds of at least 100 Mbps download and 20 Mbps upload and modifying the definition so that those standards automatically adjust in conjunction with future increases in the federal standard. At the same time, the Committee acknowledged that some public funding support should be available for connection speeds at lower levels for extremely remote last-mile locations, until technological advances permit these to be phased out.

Finally, the Report recommended legislation to encourage and streamline deployment of broadband, including the use of government-owned structures and broadband assets to expand service to homes and businesses through participation in public-private partnerships. Specific recommendations included overhaul of right-of-way access, streamlining resolution of utility make-ready and pole attachment cost disputes, and the institution of “Dig Once” policies to require more efficient and cost-effective installation of broadband infrastructure.

Several of these recommendations appear to be included in legislation proposed in  the Missouri General Assembly this session. For example, Senate Bill 981 changes the definition of broadband and Senate Bill 990 addresses part of the make ready and pole replacement cost issue.

Are Low Earth Orbit (LEO) Satellites the Answer to Missouri’s High-Speed Internet Access Problem?

posted in: Technologies | 0

(De-mystifying Some of the Technology Behind Your Internet Connection)

By Marc McCarty

When I talk to people around the state about bringing high-speed internet access to underserved communities, invariably someone mentions  “the SpaceX Starlink thing that Elon Musk is building.” Musk is not the only person interested in building low-earth orbit satellite (LEO Satellite) networks. Amazon (Project Kuiper), OneWeb, and TeleSat (Lightspeed) all have LEO Satellite projects planned and in some cases in limited operation.  But like electric cars and passenger-capable spacecraft, SpaceX’s “Starlink” product seems to be ahead of the competition, and it’s difficult to match Elon Musk for the “cool factor.” After all, who else has the moxie to launch a cherry-red electric roadster past the orbit of Mars, just to prove he can do it.

So, Is Starlink, or some other similar satellite technology that delivers high speed internet from outer space, the answer to the high-speed internet access problem in Missouri and other states?

It’s certainly worth asking the question, because over the next several years the federal government, along with states and localities, are likely to provide private and public internet service providers (ISPs) more than $60 billion to help fund the deployment of various types of broadband internet infrastructure; all in an effort to finally bring high-speed internet access to every location in America that could reasonably need one. With that much money at stake, getting the best value for the public’s investment will be critical. Past experience has taught valuable lessons on the need to wisely deploy public funds for internet infrastructure investments.

While fiber-optic cable seems to be the one infrastructure technology most capable of supplying high-speed internet service that can expand to meet future consumer and business needs, it is not without drawbacks. The cost of installing fiber to each residence and business can be more than $20,000 per mile even in rural areas with few obstructions, and most recently, wait times for delivery of fiber-optic cable and equipment can be well in excess of a year! The promise of connecting to the internet today – or within a few months – at speeds well in excess of the FCC’s current definition of “broadband” using a small antenna and some electronics that costs about $500, is very appealing, even if the monthly cost for the service is a bit more than fiber-optic cable or other wired internet options.

But what is LEO Satellite Internet? How does it work? What are the prospects that it might actually be the key component in efforts over the next few years to bridge the digital divide?

A Short Primer on Satellite Internet

At the outset, it’s important to distinguish LEO Satellite Internet from geocentric earth orbit (“GEO Satellite Internet”). Both technologies are “fixed” wireless internet, because they both access the internet by transmitting a signal through the air (and outer space) to a “fixed” antenna located at or near the customer’s premises.

However, this is where the differences begin. GEO Satellites orbit the earth at 22,236 miles above the equator.  This altitude, and the fact that the orbit is directly above the earth’s equator mean that it takes 24 hours (one day) for a GEO Satellite to complete a single orbit, and because the satellite’s orbit is above the equator, to a ground observer the satellite appears to remain “fixed” at a single point in the sky.

In Missouri, most folks with a clear view of the southern sky can subscribe for GEO satellite internet from ViaSat or HughesNet. These companies provide internet service using three or four large satellites positioned over the equator with line-of-sight view of North America. On the ground, a subscriber with a small antenna and a clear view of the southern sky can focus on one or more of these satellites to transmit data to and this location up to the satellite, and from there back down to an earth-based antenna connected to a traditional earth-based internet connection operated by the satellite internet service provider.

LEO Satellite Internet also transmits internet signals to and from a fixed antenna located at the customer’s residence, but LEO Satellites orbit much lower to the earth. These orbits vary, but generally are around 150 – 600 miles above the earth. At this altitude, to a ground-based observer the satellite appears to cross the sky from horizon to horizon in just a few minutes. Once the satellite passes below the horizon or some other obstruction, the signal carrying the internet data is lost. For this reason, LEO Satellite Internet requires a “fleet” of satellites orbiting the earth in predetermined orbits trailing one another.  In this way at least one satellite is always within line of site of the antenna at the customer’s home or business. As the connection with one satellite is lost, another comes within range and takes over the communication.

While GEO Satellite Internet is widely available and may seem ideal for many areas, particularly isolated rural areas with a good view of the southern sky, in practice it hasn’t been all that popular.  Complaints include limits on the download speed once certain monthly data transfer limits are exceeded, reliability of the signal in bad weather (snow and/or heavy rain), and high monthly subscription costs. For the most part, these shortcomings are a direct result of limitations imposed by physical laws governing the transmission of data, as well as the capacity of the satellite to handle subscriber demand for the service needed to run new internet applications. One of the reasons LEO Satellite Internet has received so much attention is that it may be able to work around some, but probably not all, of these limitations.

 A Little Science  

Understanding the physical laws that apply to the internet and working to minimize those limitations is the domain of scientists and engineers. Trying to talk their language to provide even  a high-level overview of the challenges they face can quickly result in a bunch of “technical gobble-de-goop.” However, others have developed some analogies that can be help illustrate these basic concepts, and even nontechnically trained folks like me usually can follow  them. Analogies like these do not provide answers on how best to “close the digital divide.” However, they can help in understanding the issues and challenges associated with different types of internet infrastructure, and they may help all of us, and especially our public officials, to make more informed choices of the technologies most appropriate for public-funded investment.

How Big is the Pipe?

The role of all internet infrastructure is to transport “data” from one physical location to another. Data is a series of 1’s and 0’s arranged in a specific sequence. An internet-connected device can decode this sequence and convert it into usable information. Things like email, texts, video calls or movies, audio recordings, large computer files (even this article) all can be converted into data, transmitted through the internet to another location, and then converted back into a usable format. Those wanting to learn a little more about how the internet works, and how it came into existence might enjoy this narrated presentation.

For purposes of understanding how different types of internet infrastructure work, it is useful to think of data moving through internet infrastructure as similar to water flowing through a pipe or a tube at a constant speed. Just as the amount of water that theoretically can move through a pipe in a given period of time will increase or decrease in relation to the diameter of the pipe that carries it, the amount of data that can be transferred through internet infrastructure will vary depending on the type of infrastructure used.

In other words, in a given period of time, a pipe that is 6 inches in diameter won’t  transport as much water as a pipe that is 12 inches in diameter. The same concept holds true for data moving through the internet. Certain technologies can be engineered to carry more data (more information) each second than others. This theoretical capacity to transfer data is called “bandwidth.” When we talk about internet service with download speeds of up to 25 Megabits per second, we really are saying that theoretically the technology being used to connect to the internet has the bandwidth – the capacity to move – 25 million “bits” of data (a megabit) through the internet each second. Different technologies (both wired and wireless) have different theoretical capacities to move data – different “bandwidths.”

Which technology has the highest theoretical bandwidth (the pipe with the greatest diameter)? Currently, first prize goes to fiber-optic cable. Paired with the right equipment fiber-optic cable now carries data at rates measured in the trillions of bits of data (Terabits) each second. To put that in perspective, a “trillion” is equal to a million-millions!

Wireless internet infrastructure technologies such as satellite internet move data by transmitting an electromagnetic signal (similar to that used for TV or radio signals) through the air (or through outer space). Wireless internet can achieve a very high “bandwidth” as well, measured in the billions of bits (or Gigabits) per second (a thousand-million bits per second).

Of course, wireless signals do not use a physical wire or cable of any type. But the “pipe” analogy can still apply if you understand that signals having a different frequency have a different “theoretical bandwidth.” The capacity of the signal to carry data from one point to another each second (its bandwidth) varies depending on the frequency of the signal. In general, the higher the frequency of the signal, the more information can be transmitted – the higher the theoretical bandwidth – the wider the diameter of the pipe.

If the transmitted signal has a high enough signal frequency, if the sender and receiver are within range and have a large enough antenna, and if there is an unobstructed line-of-site between sender and receiver, wireless internet technologies – theoretically – can transfer more than enough data to meet the requirements of current household internet applications. This is important, because it usually is much cheaper at least initially to install wireless internet networks that transmit data through the air than it is to bury or hang fiber-optic cable or other types of wired internet infrastructure.     

Theoretical Capacity and Practical Capacity

Leaky Pipes

You may be wondering why I continue to refer to the “theoretical” capacity of a wired or wireless internet to transfer data. The pipe analogy can help here as well. It may not have occurred to you, but the diameter of the pipe may not be the only thing that determines how much water a pipe can carry. Why? Well, the pipe might have a leak or two, and if the holes are large enough, or there are too many of them, you could end up losing quite a bit of the water.

Much the same holds true for the internet infrastructure. It turns out that if you are moving data through the air (or outer space) wirelessly, as you attempt to “increase the diameter of the pipe” (by increasing signal frequency) your “pipe” tends to get “much leakier.” You tend to lose more and more data the higher the frequency used to transmit the signal carrying the data. Of course, there is no pipe to leak. But data is lost because when signal frequency is raised to levels needed to transmit at bandwidth measured in the billions of bits per second, the signal cannot penetrate solid objects, and even snow or heavy rain will disrupt and, in some cases, interrupt the signal.

Scientists and engineers have found many ways to compensate for this “leaky pipe” problem, such as increasing the size and efficiency of the antenna or by using special techniques to improve the efficiency of data transmission, but it is not possible for GEO Satellite Internet, LEO Satellite Internet (or any other earth-based wireless technologies) to entirely overcome the issue. Building walls, tree leaves, heavy snow and strong rains, all will either disrupt the signal entirely or degrade and reduce the actual amount of information (data) transferred and received each second.

This same “data leaking” issue exists for “wired” internet infrastructure. For example, copper Ethernet cables can potentially carry up to 10 Gigabits of data per second, but only over a distance of 200 feet or less. After that, much of the data is lost (bandwidth is reduced) and eventually the connection is disrupted entirely. Coaxial cable can move data further without significant “leakage.” Again, however, the technology that has the least amount of “leakage” of data over longer distances is fiber-optic cable. It can transmit data without significant signal loss for distances up to 50 miles without refreshing and retransmission.      

GEO Satellite Internet — Too Long of a Run of Pipe …   

Taking the pipe example one step further, there are other physical laws that particularly impact the usefulness of GEO Satellite Internet. If water is flowing through a pipe, it’s obviously going to take some time to get from one end to the other and, of course, the longer the run of pipe, the longer it will take. The same principle applies for data moving through the internet but it’s not noticeable most of the time because unlike water making its way through your garden hose, bits of data move through copper wire, fiber-optic cable, the air and outer space  much faster– up to 186,000 miles each second, the speed of light.

Nevertheless, it does take some time. This delay is measured in intervals of one-thousandth of a second (milliseconds or “ms”), and the technical term used to describe the interval is “latency.” Latency normally is tested by sending data from one computer to the network remote server and back again through the internet network. This is sometimes called “pinging a server,” and the resulting “ping” is the recorded interval for data to complete the round trip. If you’d like an example to try this, the Missouri Broadband Resource Rail has an internet speed test you can use to test your connection’s bandwidth (uploading and downloading data measured in “Mbps”) and signal latency (measured in “ms”).    

High latency time isn’t that big a deal if you are sending or receiving email, watching a movie over the internet – or otherwise doing something that doesn’t require real-time two-way communication, but if you are playing an interactive video game, conducting a video conference call, or managing internet connected devices remotely, lower latency time becomes much more important. Most recently, Congress has limited grant funding for internet infrastructure to only those technologies capable of latency below 100 milliseconds (1/10th of a second).

Significant latency time has been a major drawback for GEO Satellite Internet, and it’s one that simply cannot be overcome through engineering. Moving data from a computer in Moberly, Missouri to St. Louis and back again, using GEO Satellite Internet is going to take a minimum of 480 milliseconds (approximately half a second) because of the distance involved (at least 22,236 miles 4 times). Of course, latency will be longer than this, because in practice the signal will not travel a direct route between two computers up to outer space and back, but instead will be routed thorough earth-based network infrastructure, and it will take additional time to navigate these switches and relays on earth.

Latency is not nearly as much of a concern with LEO Satellite Internet, simply because the signal need only travel a few hundred miles, up to the satellite and back. Of course, that will result in some signal delay, but early reports from SpaceX’s Starlink show that LEO Satellite can achieve latency well below 100 milliseconds.   

How Well Does LEO Satellite Internet Work?

To date, SpaceX’s Starlink has the only operational LEO Satellite Internet designed and available even on a limited basis to individual household users. This service is limited to certain specific locations with adequate satellite coverage, but more are being added and it is already available in some areas of Missouri.  The latest speed and performance tests for early adopters of Starlink’s better-than-nothing “beta” service have been positive.  The latest test data compiled by Speedtest confirms that the connection is far better than GEO Satellite Internet, but it also seems to illustrate the challenges that must be overcome if LEO Satellite Internet’s is to play more than a limited role in closing the digital divide.

The Speedtest results from July-September 2021 showed that on average connection speeds for LEO Satellite Internet were  more than 4 times faster than that achieved by GEO Satellite Internet and over 3 times faster than the minimum standard for broadband service set by the FCC in 2015 (25 Mbps download).  However, the service was still 35% slower than the average for other fixed wired connections tested and, potentially more troubling, the average connection speed declined by nearly 10 Mbps (from 97 Mbps to 87 Mbps) from the results reported by subscribers earlier in 2021.

In rural communities that currently lack any internet access other than GEO Satellite Internet or a first generation DSL connection, the “better than nothing” service offered by Starlink is much faster than other options, but based on the latest tests, it’s below the required levels set by Congress to qualify for grant funding. The Speedtest article speculates that the decline in service experience over the course of 2021 may be the result of an increase in the number of Starlink subscribers – too many subscribers all trying to access the satellite network at the same time.

Why would more customers result in a slower connection? Resorting once again to the “water flowing through a pipe” example, just as a pipe can handle only a finite amount of water passing through it each second, internet infrastructure can transfer only a limited amount of data each second.  When too many internet-connected devices in too many homes, schools, and businesses are all trying to access the internet at the same time, there are two choices – either the network stops working (it crashes), or the individual users – on average — see a decline in bandwidth and/or increased latency for their connection.

To prevent inadequate capacity from becoming a problem as the number of subscribers expand or their average use of the internet increases, an LEO Satellite Internet provider will need to reduce or limit the number of subscribers it serves, launch more satellites, upgrade and replace its satellites with models that can transfer more data (have a higher bandwidth) – or perhaps a combination of all three of these approaches. How many satellites might be needed to complete an LEO Satellite network that can serve consumers in all parts of the United States?  As of late 2021, Starlink currently had less than 2,000 satellites operating in orbit. As of November 2021, it reported that it has 140,000 customers in 20 countries around the world. The FCC has granted SpaceX a license to operate up to 4808 satellites. However, SpaceX recently said that to reach its desired network capacity – to serve customers across the United States and around the world with a network designed to provide capacity of 1 to up to 10 Gigabits per second, it needed a license from the FCC to operate nearly 30,000 satellites (more than 15 times the number it currently has on station). The fate of that request is uncertain, as questions and objections have been raised both to the location of satellite orbits, and to the risk posed from interference with other wireless communications.

Additionally, LEO satellites cannot operate indefinitely. Each satellite is estimated to have a useful life of approximately 7-10 years. This would seem to suggest that even after getting the full fleet of satellites in orbit, SpaceX would need to continue to launch more than 3,000 satellites a year just to maintain that network. Those costs presumably would need to be covered through monthly subscription fees or by permanent government operating subsidies (or both) in order for the company to earn a reasonable profit.

If 30,000 satellites were launched and operating, could LEO Satellite Internet serve at least 19 million Americans estimated by the FCC to be without adequate high-speed internet?  In late 2020, SpaceX received a preliminary grant award from the FCC of over $900 million in exchange for the company’s commitment to make internet service available to at least  643,000 locations in census tracts located in 35 states. The award required reliable delivery of at least 100 Mbps of bandwidth to each location. Competitors and others were skeptical of SpaceX’s ability to meet these requirements within 6 years as required by the terms of the grant, and provided the FCC with a study estimating that even with 12,000 satellites in orbit (the number then planned) the network could not serve this many locations at the required bandwidth level. However, the concern voiced about the specific grant may be academic, as the FCC has questioned whether many of the service locations SpaceX initially was awarded actually qualify for grant funding at all.  

A research report commissioned by Congress from last year catalogued many of these concerns and others, and concluded: “it is unclear—due to unknown factors such as the ability to reach fiber-like speeds, what the competition landscape may look like, or if LEO satellite broadband service will be affordable—whether the inclusion of LEO satellite broadband providers would help address the digital divide through their participation in federal broadband [grant funding] programs.”

No “One Size Fits All” Solution”

So, is LEO Satellite the answer?

No, it isn’t. But in some sense the same really is true of fiber-optic cable, coaxial cable, twisted copper, fixed wireless and all other infrastructure available to deliver internet service today.  There really is no “one size fits all” solution to the high-speed internet access problem, here in Missouri or in any other state. Different technologies or different “mixes” of technologies, likely will be needed to bridge the digital divide over the next several years. Different technologies have strengths and weaknesses that make them most appropriate for some installations and applications but not others.  In addition to theoretical and practical capacity (bandwidth) and the latency of the technology, other important characteristics include engineering difficulties, the cost of installation, ongoing maintenance and operating costs, and the time needed to plan, design and install the network.

Future-proofing the Internet Infrastructure

Yet perhaps among the more important considerations is the ability to increase network capacity to adapt to future increases in the demand for high-speed internet service. The electrification of rural America nearly a hundred years ago provides a useful analogy here. Electrical service installed in homes by the Rural Electrification Administration would be woefully inadequate to meet the requirements of modern homes and businesses. In most cases the service initially installed did not have the capacity to power one wall outlet in each room of the home. However, the service was adequate for the times. Modern electrical appliances we now use were not widely available; most had not even been invented. However, the electric power infrastructure that connected the homes and businesses anticipated these future needs, and could be upgraded over time to adapt to the increased demand for electric power.

We’ve seen the same pattern of ever-increasing demand today with the development of new internet applications and the proliferation of new internet-connected devices for homes and businesses. Together, these are feeding consumer demand for internet networks capable of delivering higher bandwidth and lower latency. This is reflected in the criteria used by the Federal Communication Commission and other federal funding programs. An internet connection capable of transmitting 1/5 of 1 Megabit of data per second (0.2 Mbps) was considered to be a “broadband connection” before 2010, when the standard was increased to 4 Mbps (a 20-fold increase), and yet again to 25 Mbps in 2015. Today, even that standard is widely viewed to be far too low. Last year Congress set the standard for federal grants to include only those networks offering service of at least 100 Mbps, 500 times what was deemed sufficient only 12 years ago!

The point here is that if the public is going to help fund broadband infrastructure, that infrastructure not only should be able to meet the needs of households and business over the 3-4 years that it will realistically take to plan, engineer, fund and deploy them, it also needs to be able to expand to meet future demand over the next few decades. Certain technologies (fiber-optic cable being the most obvious) clearly already has a proven capacity to expand far beyond the needs of any applications now contemplated. Others, such as standard copper telephone lines used to deliver digital subscriber line (DSL) connections, or GEO Satellite Internet, seem to have hit the limit of our ability to engineer ways around constraints imposed by their physical properties. While these internet technologies might still work for some applications, they seem clearly unsuited for a long-term, publicly funded investment that needs to have lasting value over several decades. Still others, like LEO Satellite Internet present closer questions. While the technology seems to hold some promise, the engineering behind wide scale deployment seems problematic.   

However, even taking the concerns and issues associated with LEO Satellite Internet into account, it would be a mistake to count it out as a useful technology. That should be evident by the substantial continued private investment being made by SpaceX, Amazon, OneWeb, and Telesat. Those companies could not raise substantial capital from private investors if there was no realistic market for LEO Satellite Internet service. The technology available and in use today for LEO Satellite Internet (both hardware and software) will continue to improve, and this likely will result in efficiencies and improved performance for earth-based antennas, the LEO satellites, and the rockets used to launch them. LEO Satellite Internet networks may play an important role in expanding earth-based 5G mobile phone and internet service, be a means of establishing temporary high-speed internet service in extremely remote locations, provide high-speed internet connections for container ships and cruise ships at sea, and keep international commercial airline passengers “connected.” Since the market will be world-wide, it’s likely LEO Satellite Internet will be an appropriate technology for some individual consumers in remote parts of the world as well.

That said, wired based technologies such as fiber-optic cable also continue to improve, and even though initial installation costs may be high, the cost and complexity to expand service to meet future demand likely will be far lower,  as will be the the potential for lower long-term operating costs.  The point here is that simply because LEO Satellite might be an appropriate solution for some consumers and applications, that doesn’t make it appropriate to minimize the obvious technological constraints that seem to make it inappropriate for wide-scale deployment in communities that need access now, particularly when other existing technologies can deliver superior levels of service today – and in the future.

Broadband and the 2022 Missouri Legislative Session

By Marc McCarty

The regular session of the 2022 Missouri General Assembly is getting underway, and in terms of broadband legislation, it promises to be historic both in scope and in the amount of the public investment.

Governor Parson’s Proposal

A major part of the work this Session will be addressing Governor Parson’s spending priorities, and among those will be the $400 million proposed appropriation for broadband from the State’s share of American Rescue Plan Act (ARPA) funds.

I’ve written here and here about how ARPA funds provided directly to counties and municipalities can be used for broadband planning and infrastructure projects. Last Friday, the United States Treasury confirmed its earlier guidance on the use of these funds for broadband in a set of final regulations. The state received a separate distribution of money from the Federal government under ARPA as well.  The state’s share is $2.6 billion. The first $1.3 billion was distributed last fall, the balance will be available to the state later this calendar year.

How the $400 million is to be allocated will be outlined in greater detail in the Governor’s State of the State address on January 19th, but it is expected to be heavily weighted to broadband infrastructure grants (both last mile and middle mile broadband infrastructure) with lesser amounts provided for adoption and technical assistance. Officials with the Missouri Department of Economic Development have stated that they hope to have grant program documents in draft form by late spring, so that applications can be submitted around the beginning of the new fiscal year (July 1), assuming funding has been approved by the General Assembly.

There also are several bills related to broadband pre-filed last December, that will be considered during this Session.

Senate Bill 981

While it’s relatively short and simple, SB 981 might be the most consequential broadband bill this session, not so much because it creates a new program for funding broadband, but simply because it makes existing legislation potentially far more useful. The bill changes the definition of what it means to be without adequate fixed wired or wireless internet service by changing the definition of an “unserved” or  “underserved” location. This is important because state funding for broadband and several special financing tools for broadband infrastructure investment are available only for unserved or underserved locations.   

Currently, areas lacking service at data transfer rates (speeds) of at least 10 megabits per second (Mbps) download, and 1 Mbps upload are (10/1 Mbps) are considered to be “unserved.” Locations with fixed wired and wireless service of at least 25 Mbps download and 3 Mbps upload (25/3 Mbps) are considered “underserved.”

SB 981 increases the “unserved” definition to 25/3 Mbps (25 Mbps download and 3 Mbps upload) and the underserved  definition to 100/20 Mbps (100 Mbps download and 3 Mbps upload).   These new standards are the same as those incorporated in the Infrastructure Investment and Jobs Act (the IIJA). SB 981 also ties the unserved/underserved definition to future increases in the definition of broadband used by the Federal Communications Commission – the  FCC.

Why does this matter?  Many folks discovered during the pandemic that internet service which technically qualified as “broadband” (currently 25/3 Mbps) was not sufficient to perform critical tasks like telecommuting, online learning, and high-definition video, particularly if two or more folks were attempting to access the internet from the location at the same time. So, raising the standard to a level more able to serve household needs today, and making further increases dependent on FCC guidance as internet-based technologies require even higher service levels in the future, should dramatically increase the number of locations in the state that are eligible for financial assistance or special funding options today, and make the statutory definition capable of adapting existing programs to meet future needs.

The definition of unserved and underserved applied originally only to the Department of Economic Development’s broadband grant program. However, those same definitions now are cross-referenced in legislation that specifically permits certain broadband infrastructure projects to be financed by Community Improvement District, Neighborhood Improvement Districts (2020) and Broadband Infrastructure Improvement Districts (2021). Hopefully, if this legislation passes, the Department of Economic Development will quickly move to adopt procedures specifying how projects authorized under these laws can obtain confirmation that they are in an “unserved” or “underserved” area, so this legislation can be used effectively.

House Bill 2016     

Speaking of Broadband Infrastructure Improvement Districts, there’s legislation to make some changes here as well. The changes would allow any political subdivision of the state (not just municipalities) to form a Broadband Infrastructure Improvement District and allow for admission of rural cooperatives and investor-owned utilities as “partners” in the District.

Senate Bill 990

This Bill seeks to address the issue of charges for attaching fiber or other types of internet cable to existing utility poles that are owned by municipal utilities and rural electric cooperatives. Internet service providers (ISPs) often wish to attach their wires or cable to these poles in order to connect to homes and businesses. The problem is that the added weight or the need to separate data and power lines on the pole, often means the poles need to be replaced or “made ready” before the attachment can be made. Some internet service providers have complained that they are being charged too much for this and, of course, municipal utilities and rural cooperatives have a different perspective.

SB 990 seeks to address this by barring municipalities and rural electric cooperatives from charging an ISP for pole replacements in situations where the pole needed to be replaced for safety or other reasons (unrelated to the ISP’s need to connect) or where the pole was scheduled for replacement within two years of the proposed attachment. To address the concerns of municipal utilities and rural electric cooperatives, the bill would create a new fund to be administered by the Missouri Department of Economic Development that could cover up to 50% of the cost of pole replacements. Money for the new fund would need to be separately appropriated by the General Assembly or funded through federal grants or other contributions.

House Bill 2052

House Bill 2052 would establish a new “21st-Century Missouri Broadband Deployment Task Force” composed of representatives from government, trade associations telecoms, MU Extension and other ISPs. This task force would evaluate the status of broadband deployment, the process used to finance deployment, and make recommendations for improvement to the General Assembly annually over the next several years.

There also are several bills making “return appearances” this session – having failed to gain passage in prior sessions.

House Bill 1518

Not every broadband bill relates to investing public money to fund and expand broadband infrastructure. House Bill 1518 addresses the politically-charged issue of “net neutrality.” Similar legislation has been proposed  for the past several sessions and the issue has been debated at the FCC for the past ten years or more. The issue is whether and when, ISPs should be permitted to prioritize the transmission of certain types of data through the internet over that of others. Prioritization can become an issue when a large number of users are attempting to access the ISP’s network at the same time, and in some cases, prioritization could degrade the quality of service enjoyed by customers whose data was not given transmission priority.     

Democrats and a number of public advocacy groups generally favor laws and/or regulations mandating “net neutrality” (no prioritization of data), and most Republicans, along with the ISP industry, believe ISPs should be permitted to offer certain users or data priority over that of others. Laws similar to House Bill 1518 have been passed in a number of states but the ultimate resolution may lie with the federal government, because arguably Congress – and not the individual state legislatures — should decide the issue for the nation as a whole.

House Bill 2015 & Senate Bill 848

These identical Bills seek to authorize investor-owned regulated public electric utilities to offer broadband internet service.  If enacted, the “Electrical Corporation Broadband Authorization Act” would permit investor-owned electric utilities to use their existing internet assets (primarily fiber optic cable currently used to manage the power grid) to provide broadband internet service to others in certain situations. Passage of the legislation has been hampered in the past by the complexity of determining what role the Public Service Commission should play in contracting, customer rate setting, and accounting for shared expenses.

Background – Implementation of Federal Legislation — IIJA

The work of the General Assembly takes place in the background of work by federal government agencies – primarily the National Telecommunications and Information Agency (NTIA) and the FCC to implement distribution of the $65 billion appropriated for broadband under the Infrastructure Investment and Jobs Act. As discussed previously, the IIJA will rely in large part on individual states to develop plans to distribute funds for broadband access and to encourage broadband adoption.  For this reason, efforts to develop the infrastructure within state government and their partners to efficiently work to expand broadband access and adoption this legislative session, likely will be a critical first step, and a model for applying much larger distributions of funds from the federal government in the future.     

The Broadband DATA Act, RDOF, BEAD, The Long Slog Toward Broadband Access

posted in: Funding, Planning | 0

By Marc McCarty

Happy New Year!

As 2022 begins, it seemed an appropriate time to take stock of progress we’ve made in funding broadband access. This blog checks in on some federal government programs that have gotten quite a few headlines over the past year or two, to see how implementation is going.

The Broadband DATA Act

The Broadband Deployment Accuracy and Technological Availability Act (thankfully shortened to the “Broadband DATA Act”), doesn’t directly provide any money to build broadband infrastructure, but implementing it may be the key to actually spending the billions of dollars already appropriated by Congress for broadband buildout, and that’s part of the reason why the results to date have been a little disheartening.

The Broadband DATA Act became law March 23, 2020. One of its primary objectives is to once and for all identify – with a high degree of confidence – all areas in the United States where a broadband connection can be installed (a “Serviceable Location”).  Serviceable locations include those in urban as well as rural areas, and arguably should include businesses and institutions, as well as residences. A key provision of the Broadband DATA Act requires the FCC to define what a “Serviceable Location” is and to produce a “data set” that would enable folks to accurately locate all of them on a map. This is called the “FABRIC.” Internet providers and the public would then report whether fixed wired or wireless broadband service is (or could be) offered to each of these Serviceable Locations with existing infrastructure.  

Knowing all this is critical of course, because federal funding to assist in building internet infrastructure needs to be targeted to locations that currently do not have service available. Folks just “tuning into” this issue usually are shocked to learn that many billions of federal government dollars have already been directed to build out broadband infrastructure based on maps that everyone acknowledges are not very good. In fact, Missouri was one of two states where this was illustrated in a pilot project commissioned in 2019 by the broadband industry. This project was undertaken to determine the feasibility of creating the FABRIC, and to see how much it differed from the broadband access data that the FCC and others were using to award federal grants and loans.  The results were sobering: In Missouri, 36% of the rural Serviceable Locations identified using the FABRIC were not being reported at all (either as served or unserved) in the existing FCC data.

However, even though the need is obvious, progress in creating the FABRIC has been slow, even as the need for it has become even more critical. After the Act became law, the FCC reported that it could not begin work because it did not have the funds necessary to achieve the objectives of  the Broadband DATA Act. This was finally rectified in December 2020, when an additional $65 million was appropriated to the FCC by Congress.

So, where is the FABRIC? Well, that’s what Indiana Congresswoman Victoria Spartz wondered. So, in late September she sent a letter to FCC Chair Jessica Rosenworcel, asking for a target date for completion of the FABRIC and related objectives of the Broadband DATA Act. It seemed a logical question, as the Commissioner was reported to have testified before Congress in March 2020 that the improved map could be produced in 3-6 months.

Commissioner Rosenworcel responded in early December. She did not provide a date for delivery of the FABRIC but did provide some reasons for delays in 2021. The FCC elected to contract out work to produce the FABRIC to a private company. After a series of false starts, the bid request was finalized in mid-August and the contract to build the FABRIC was awarded in early November. However, before work could start an unsuccessful bidder filed a protest with the General Accounting Office (GAO) and this has delayed any further work until February 2022 while the bidder’s protest is evaluated. Assuming the GAO does confirm the original award, once work commences it will be another four months before a preliminary version of the FABRIC is delivered.

Of course, that’s just the preliminary version of the FABRIC. There are also important policy questions that remain unresolved. For example, should Serviceable Locations identified as part of the FABRIC be limited to residences only, or should some or all all businesses and institutions be included as well. And of course, the preliminary version of the FABRIC will need to be vetted and updated, internet providers will need to report whether they can (or do) offer service at those locations, and this information will need to be verified by the FCC and the public, as required by the Act.

The Rural Digital Opportunity Fund (RDOF) Auction

There are “real world” consequences to delays in implementing the Broadband DATA Act. On December 7, 2020, the FCC announced that $9.2 billion had been awarded on a “preliminary” basis to hundreds of private and public internet service providers to help fund the build out high-speed internet in unserved areas (census blocks) throughout the United States. While the announcement of this award was welcome, in an earlier blog I cautioned not to expect too much too soon because the awards were preliminary, recipients would have to go through a vetting process, and when the grant was finalized they would have six years to satisfy their commitment to build out service in the unserved areas.

However, these observations proved to be far too optimistic. Earlier this month, in response to a written inquiry signed by 19 members of Congress, Commissioner Rosenworcel detailed the challenges that have delayed the FCC in finalizing the awards. At that time, more than a year after the initial announcement, less than 20% of the preliminary award had been finalized and committed.

Because eligibility for grants was based on the FCC’s maps, the Commission determined that over 5000 census blocks that were announced as receiving awards last December needed to be removed because they clearly either had broadband service – or they never should have been included in the first place. Parking lots and international airports were among those receiving preliminary awards of funds in 2020.

While 5,000 census blocks is a big number, there were well over 60,000 census blocks that received an initial award, so there were still plenty of locations remaining. According to the Commissioner, the FCC continues to press on, reviewing details provided by winning bidders, and it will periodically continue to announce more locations and winning bidders that have successfully navigated the review process. Most recently, on December 16th, the FCC announced it would begin to fund an additional $1 billion (over 10 years) of the original $9.2 billion announced last December. That said, it is sobering that distribution of approximately 2/3 of the promised money has yet to begin, particularly in light of the 6-year period the awardees have to complete the required internet service connections.

The IIJA

Of course, by far the most newsworthy new federal funding program this year was the mammoth Infrastructure, Investment and Jobs Act (the IIJA). This law appropriates $42.4 billion to the new Broadband Equity, Access, and Deployment (or “BEAD”) Program. As noted in an earlier Blog, rather than the FCC, the agency primarily responsible for administering the BEAD Program is the National Telecommunication and Information Agency (NTIA). In addition, instead of direct federal grants to internet service providers, the BEAD Program contemplates that each state will establish its own program for broadband deployment, (subject to NTIA’s approval) and that NTIA will allocate each state a share of BEAD Program funds based primarily on how many underserved locations are present within the state as compared to the rest of the country. All this is supposed to commence with the publication of a “Notice of Funding Opportunity (or “NOFO”) to all states by May 14, 2022.

“How will NTIA figure what locations are served and unserved” you ask? Well, that will be based on the FABRIC and full implementation of the Broadband DATA Act. And of course, as noted earlier, delivery of the FABRIC and full implementation of the Broadband DATA Act is in the hands of the FCC.

What Comes Next?

A “slog” is a particularly tiring task that requires a lot of effort. A “long slog” describes situations where that effort is required for an extended time. The events of the last year certainly make it clear that this description is going to be appropriate for the process of getting the promised federal dollars necessary to build and deploy broadband into the hands of states, and ultimately to public and private internet service providers.

To some extent, local government, business, and institutions are at the mercy of the federal agencies charged with implementing the RDOF, the BEAD Program, and many other similar grant and loan fund programs; and those agencies must follow procedures mandated by law to account for the proper expenditure of those funds. However, that doesn’t mean it is appropriate to ignore situations where the bureaucracy appears to have run amok. If nothing else, keeping the lack of progress or inordinately slow progress front and center in the public’s mind may ultimately lead to procedural reforms within these agencies and perhaps within Congress as well.

It also seems apparent that it would be a mistake for state and local governments to wait for the FCC to compete the FABRIC. For one thing, it seems apparent that delivery of the final product will extend well into 2022 (and perhaps beyond). But at a more fundamental level, each state needs independent engineering and technical evidence to verify that the data the FCC and NTIA propose to use to distribute federal grants is accurate and complete. Thankfully, Missouri is moving in that direction, and in November awarded a contract for a detailed assessment of fixed and wireless broadband deployment needs, and estimates of the cost to make fixed wired and wireless broadband service available throughout each county in the state. That work should be completed this spring, well in advance of the completion of even the preliminary FABRIC.

Likewise, state and local governments already have funds available through the American Rescue Plan Act to assess community needs and resources available to improve broadband service, with a view and to beginning the process of deploying broadband in their communities. While there are many priorities that arguably need to be addressed with this money, broadband certainly is one of them, and the Governor’s proposal to commit $400 million of the state’s share of those funds to broadband deployment, should serve as an example for counties and cities as they decide how to spend their American Rescue Plan Act funds.

Broadband and the Infrastructure Investment and Jobs Act

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.

Closing the Digital Divide: Houston, Missouri Finds a Solution

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.

Missouri Legislature Broadband Update

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.