Final Treasury Rules for ARPA

The U.S. Department of the Treasury released the final rules applicable to using ARPA funding. This was the giant pile of $350 billion that was paid out to local governments, counties, and states to address issues related to the pandemic. These rules take effect on April 1, 2022. As usual, this is not a simple document and is 437 pages long.

There has been a lot of confusion in cities and counties about how they can use these funds. This final rule should answer any open questions about broadband because the final rules are clear about how these funds can be used. Following are the most important provisions of the final rules that relate to building broadband infrastructure.

Broadband Speed Tests. The Interim Treasury rules had included requirements that broadband could only be constructed to areas that were considered as unserved or underserved using the typical definitions of 25/3 Mbps or less to be unserved. The final rules eliminate any consideration of existing broadband speeds. The final rules allow broadband to be constructed to reach households and businesses with an identified need for additional broadband infrastructure investment.

There still must be a justification that the project addresses a problem highlighted by the pandemic. But rather than relying on speed as the justification, localities can consider broadband reliability, affordability, or access to a connection that meets or exceed symmetrical 100 Mbps. Localities can document this need using any available data, including local speed tests, federal or state data, interviews with residents and businesses in the affected areas, and just about any other way that proves there is an existing broadband need.

This is an important clarification because it means local governments don’t have to spend the energy interpreting and fighting incumbent ISPs and the FCC maps.

Matching Funds. As is usual, the rules are written by lawyers and are never crystal clear. Following is the specific language in the order specific to using ARPA as matching for other grants:

Given the final rule’s revised requirements on eligible areas for investment, the final rule also modifies the interim final rule’s requirements around duplication of resources. Since recipients must ensure that the objective of the broadband projects is to serve locations with an identified need for additional broadband investment, the final rule provides that, to the extent recipients are considering deploying broadband to locations where there are existing enforceable federal or state funding commitments for reliable service at speeds of at least 100 Mbps download speed and 20 Mbps upload speed, recipients must ensure that SLFRF funds are designed to address an identified need for additional broadband investment that is not met by existing federal or state funding commitments. Recipients must also ensure that SLFRF funds will not be used for costs that will be reimbursed by the other federal or state funding streams.

I read this to mean that ARPA (SLFRF) can be used for matching, but with some important caveats. There is a two-part test for using ARPA along with another grants. ARPA must address a need not met by the existing federal or state grants, and second, it must not duplicate any payments for the same infrastructure.

The second test is the easy one to make and applies universally to all matching grants. For example, if one grant pays for 50% of an asset, the matching can be used to pay for the remainder – but the two grants together can’t pay more than 100% of the cost of the asset.

But the first test is going to require some legal gymnastics. The obvious justification for using ARPA is that the project won’t work without it. But there are easier ways to make this work that more easily meet the final rules. If ARPA is used for assets not included in the original state or federal grant, there is no duplication. That might mean using ARPA to build to additional households or using the original grant to build last-mile but ARPA to build drops. Folks are going to have to get creative to use ARPA money as matching – and this language lays out how to do so.

Low-Income. The final rules require ARPA-funded ISPs to participate in the Affordable Connectivity Program.

Using ARPA Funding

I’m getting a lot of calls asking about ways that local ARPA (American Rescue Plan Act) funds can be used for broadband. Many of these questions are coming as the result of cities and counties being told they can’t use the funds to build broadband. In some cases, conservative local legal opinions are cautioning against using the money. We’ve heard of examples where big ISPs are telling communities they can’t use this money. In my state of North Carolina, the State Legislature has gone so far as to warn local governments that if they build infrastructure with ARPA that they won’t be eligible for state grant funding.

The reality is that the Department of Treasury has written the rules in such a way that communities have a huge amount of control over how they can use the ARPA funds. The only big overriding rule is that the funding must address some problem created by the pandemic – that’s an incredibly easy hurdle to cross with anything related to broadband. I’m not going to repeat the basic grant rules which are discussed in this earlier blog – but the blog is a good reminder that Treasury worked hard to make the funding easy to use.

I’m starting to hear some interesting stories from cities that want to use the money for broadband. Following are a few of the ideas that I know are being considered:

  • I know cities that are considering using ARPA money to bring broadband to public housing and to low-cost neighborhoods. These cities want to provide free or low-cost broadband to citizens who have not been able to afford broadband. This goes far past using the $30 discount from the Affordable Connectivity Program – $30 off cable company broadband connection is still out of reach for many homes.
  • There are cities using the money to create a wireless system to reach all students at home so that every student is guaranteed a connection for doing homework.
  • There are cities connecting to anchor institutions with fiber to reduce the ongoing cost of paying to connect city buildings.
  • I know cities that are looking to build fiber to business districts that have been devastated during the pandemic. Smaller communities aren’t going to fully recover from the pandemic until local merchants and local jobs are up and running again.
  • If you know of other ideas for using ARPA in cities, I’d love for you to describe them in the comments section of this blog.

Rural counties and small towns are mostly focused on bringing broadband to rural areas that have poor or no broadband. Rural communities are mostly partnering with local ISPs to bring better broadband.

  • I know several counties that are using ARPA money as matching funds for state and local grants. Communities are recognizing that the most powerful use for this money is to use it to attract larger grant funding from elsewhere. Many states are encouraging this. I saw a presentation recently from the Virginia grant office that encourages localities to layer local, state, and federal grants together to bring broadband to high-cost places.
  • I know a few communities that are taking the idea of collaboration to the next level past state and federal grants and are also attracting funding from schools and libraries, rural health care facilities, electric cooperatives to create the funding plan to bring broadband to every stakeholder.
  • I know of counties that plan to use the funding to directly build broadband to places they fear nobody else will serve.
  • I’ve also heard of a few cases of counties that are using the money to build middle-mile fiber with a partnership in place for an ISP to bring the funding to build the last-mile networks.

In all of the above cases, the ARPA money can be used for the engineering and feasibility study work needed to quantify the costs of a project.

My bottom-line advice is to ignore those who are telling you that this funding can’t be used for broadband. I think Treasury made it abundantly clear that communities get to call the shots about how they want to use the funding. Once this funding hits your coffers, it’s your money – as long as you follow a few simple guidelines.