The headline of the blog isn’t entirely accurate because of the use of the word lien. However, the government maintains what it calls a property trust relationship in assets constructed with federal grant dollars, which is similar to, but not the same as a bank lien. In the case of BEAD, the government interest in grant assets would be held and managed by each State Broadband Office, under the auspices of the NTIA.

The trust will last through the useful life of the asset, as determined by the government. The useful lives of assets for BEAD are not the same as the depreciation lives of the assets. NTIA has set the longest life for BEAD at 10 years. Normally, per the federal guidelines the lives are fiber (20 years), buildings and large huts (20 years), power equipment (10 years), towers and poles (20 years), general fiber and wireless electronics (7 years), software systems (10 years), vehicles (5 – 10 years). Other assets like customer modems and computers have short lives of 3 – 7 years.

The rules governing the government’s interest in grant-funded assets are described in 2 C.F.R. § 200.316. There are a number of consequence of the government interest:

• A BEAD grant recipient would need to get permission to sell or dispose of a grant-funded asset during its useful life.
• The exception to this rule is that an asset with a remaining useful value under $10,000 can be disposed of without government permission.
• Disposing or selling a grant-funded asset might require getting a certified appraiser. There aren’t many of those in the broadband world, and this can be expensive.
• Anybody disposing of or selling a grant-funded asset might have to return a proportional share of the original grant funding to the government to cover the remaining useful life. This is the part of the government interest that feels like a lien.
• The grant recipient must keep a detailed inventory of the federally-funded assets and must submit the inventory as part of BEAD reporting on an annual basis. A lot of ISPs are sloppy with paperwork concerning assets, and this requirement puts them on notice to create meticulous records.

This is not a new rule and has been applied to other federal grant programs. One of the biggest consequences of these rules is that some lenders are uncomfortable with the government’s interest in the assets, and some lenders will bulk at lending to an ISP when they find out about this. This is old news for companies that have gotten grants for years, and some of the biggest lenders in the industry, like CoBank, are comfortable with the government interest in the assets. It can be a shock to a grant recipient if their lender gets cold feet over the issue.

Another consequence is that these rules add an administrative effort and delay for disposing of a grant-funded asset. I helped an ISP buy a fiber route that was originally funded by BTOP. It took almost a year to get permission from NTIA for the transaction, which included having to get an appraisal of the asset.

This means that there will be at least some BEAD reporting every year for the useful life of the assets.

The issue matters to some ISPs, and I’ve known ISPs who have not pursued federal grants due to this one issue.