Funding | Legal and Regulatory

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.

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