It’s easy to think of grants as free money, but nothing is ever really free. I know ISPs that have won grants and then decided to return the grant funding once they fully understood all of the costs and requirements that come along with the grant funds. The following are a few of the issues that ISPs might not like about grants.
- Filing for grants can be expensive, particularly if the grant requires undertaking engineering studies or market studies that the ISP might have otherwise not taken on. There is, of course, no guarantee of winning a grant after going through the cost of grant preparation.
- Environmental studies can add a lot of cost to a grant. Environmental studies seem unnecessary for networks that will be built entirely in existing utility rights-of-ways that already contain other utilities – particularly when putting fiber on poles. Environmental studies can be expensive in some circumstances. I helped a client that wanted to replace abandoned cell sites on national parkland where the environmental study for a $2 million project cost over $250,000.
- Archaeological studies can also be expensive and can again seem unneeded when a project will be using existing rights-of-ways and previously disturbed soil.
- Some grants require historic preservation studies which seem unneeded when the entire network is being built outside and not in or near to historic buildings.
- Prevailing wages can add a lot of cost to fiber construction – particularly if engineering estimates didn’t anticipate paying higher wages.
- I’ve seen all of these extra costs add as much as 20% to the cost of a project. It’s easy to think that’s okay as long as the grants cover the extra costs – but these extra costs also add to the needed matching funds which might change the attractiveness of the grant.
- Grants can require significant paperwork to show compliance with all of the grant rules. Sometimes paperwork is needed annually for many years after the end of grant construction.
- Grants can require the grantee to provide free broadband to anchor institutions or others for long periods.
- There have been grants that put restrictions on the grantee selling the grant property far into the future.
ISPs have sometimes found lenders unwilling to lend to a grant-funded project because of the restrictions. For example, a prohibition against selling a grant-funded asset for a decade might make an asset worthless as collateral for a bank loan. You can’t assume that a commercial bank will accept all of the requirements of a grant.
There are obviously many ISPs willing to accept these various provisions when grants provide enough dollars to make it worthwhile. But these various restrictions can be a lot more problematic when taking grant money to fund only a small portion of a larger project – because the restrictions come whether the grant is funding 90% or only 10% of a project.
It can be even more problematic when accepting multiple grants for a single project since each grant likely comes with different rules. It’s sometimes a Gordian knot to reconcile multiple grants with external financing.
The bottom line is that anybody accepting a grant needs to read the fine print and be aware of the restrictions that might come with the grant. Many rural projects are not viable without substantial grants – but as the above list shows, grants are not free.