Legal and Regulatory | Uncategorized

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.

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