Federal Funding for Broadband Infrastructure

There is a lot of speculation that we might be seeing some money aimed at broadband due to the budget passed by Congress on February 9. That bill contains $20 billion for infrastructure spending spread evenly in fiscal years 2018 and 2019. On a floor speech as part of the vote, Senate Majority Leader Charles Schumer says the money will go towards “existing projects for water and energy infrastructure as well as expanding broadband to rural regions and improving surface transportation”.

Any broadband money that comes out of this funding will have to be spent quickly by the government. The fiscal year 2018 is already almost half over and ends on September 30 of this year. It’s likely that any grants coming out of such money would have to awarded before that September date to count as spending in this fiscal year. In order to move that fast I’m guessing the government is going to have to take shortcuts and use processes already in place. That probably means using the BTOP grant forms and processes again.

The short time frame for any of this funding also likely means that only ‘shovel-ready’ projects will be considered. But that aligns with statements made by the administration last year when talking about infrastructure projects. Anybody hoping to go after such grants better already have an engineered project in mind.

Assuming that funding follows the BTOP funding program, there were a few issues in those grants that ought to be kept in mind:

  • The grants favored areas that had little or no broadband. This is going to be more muddled now since a lot of rural America is seeing, or soon will be seeing broadband upgrades from the CAF II and A-CAM programs funded by the FCC. It’s doubtful that the big telcos are updating the national databases for these upgrades on a timely basis, so expect mismatches and challenges from them if somebody tries to get funding for an area that’s just been upgraded.
  • The BTOP grants required that anybody that wanted funding had to already have the matching funds in place. There were some notable BTOP failures from winners who didn’t actually have the funding ready, and I speculate tighter restrictions this time.
  • There were several requirements that added a lot of cost to BTOP programs – requirement to pay prevailing wages along with environmental and historic preservation reviews. There has been talk in Congress about eliminating some of these requirements, and hopefully that would happen before any funding. But that will take Congressional action soon.
  • The BTOP process surprisingly awarded a number of projects to start-up companies. Some of these start-ups have struggled and a few failed and it will be interesting to see if they make it harder for start-ups. The BTOP process also made it difficult, but not impossible for local governments to get the funding.

If there is going to be any money allocated for broadband, it’s going to have to be announced soon and one would think that deadline to ask for this funding is going to have to come soon – in very early summer at the latest.

The alternative to a federal grant program would be to award the $20 billion as block grants to states. If that happens it might be bad news for rural broadband. There are only a handful of states that have created state broadband grant programs. Any state with an existing program could easily shuttle some of this funding into broadband.

States without existing broadband programs will have a harder time. Most states will need legislative approval to create a broadband grant program and would also have to create the mechanisms for reviewing and approving these grants – a process that we’ve seen take a year in the few states that are already doing this.

It’s almost been two weeks since the budget was passed and I’ve read nothing about how the $20 billion will be used. Regardless of the path chosen, if any of this money is going to go to rural broadband we need to know how it will work soon, or else the opportunity for using the money this year will likely be lost.

 

The Latest on Federal Broadband Infrastructure

There is a lot of talk in DC of working towards a federal infrastructure funding plan this year. So today I’m going discuss some of the latest news about infrastructure, particularly as it affects broadband funding.

Shovel Ready Projects. A few weeks ago the White House said that they only favored funding ‘shovel-ready’ projects. meaning those projects that have already had enough engineering and financial work done to understand the costs and benefits. The President said that he didn’t want to fund projects that would then take ten years to get started, something that is not that unusual for highway projects.

Size of the Funding. US Transportation Secretary Elaine Chao last week said that the administration’s infrastructure plan would be for $1 trillion spread over ten years. That’s the first time we’ve heard any specific numbers and time frame. There is no telling at this point whether the funding would be spread evenly over the years. Secretary Chao said the details of the plan would be released later this year.

Including Broadband? Secretary Chao said that that “the proposal will cover more than transportation infrastructure, it will include energy, water and potentially broadband and veterans hospitals as well.” This certainly tells us that broadband funding is not a sure thing at this point.

Probably Not Outright Grants. Secretary Chao also reiterated what the administration had said earlier that any funding was going to favor public-private partnerships and was not likely to directly fund projects. This has always been expected, but this doesn’t tell us anything about the nature of the support. There was talk during the transition of the infrastructure plan to heavily favor using tax credits, meaning that it would favor and induce large companies to invest in infrastructure.

I suspect the idea of public private partnerships for roads tells us to expect a lot of new tolls roads. Advisers to Trump have said they would rely on federal tax credits and public-private partnerships rather than federal spending to pay for a new infrastructure program. The concept of public-private partnership is a bit puzzling when it comes to broadband in that there are many states where local governments can’t participate in broadband or are severely restricted from doing so.

FCC’s Position. FCC Chairman Ajit Pai said recently that any broadband funding ought to be handled through the Universal Service Fund mechanisms since it already has the processes in place to handle such funding. The Chairman came out heavily in favor of significant broadband funding for rural areas as well as funding what he calls Gigabit Opportunity Zones that would provide tax incentives for serving low income areas.

Bipartisan Support for Broadband. In early February 48 US Senators from both parties sent a letter to the President supporting the idea that any infrastructure plans should include funding for broadband. My guess is that this is due to the complaints that all politicians are hearing these days from those without adequate broadband.

Democratic Alternative. And of course, since this is Washington DC, there is also an alternate infrastructure plan. Senate Democrats unveiled an alternative $1 trillion plan that would more directly fund infrastructure with mostly outright grants. Their plan includes not only roads and bridges, but also broadband networks, hospitals run by the Department of Veterans Affairs, and schools. In general there is a lot of Democratic support for broadband funding and the plan allocated $20 billion for broadband. I guess the trillion dollar question will be if this is a topic that might find some bilateral agreement.

What are the Odds? When it comes to Washington and politics I don’t have any better crystal ball than anybody else. But it does look like there is bipartisan support for doing something with infrastructure and even more bipartisan support to make sure that broadband is included in any funding package. It’s probably a good time for small service providers to make sure that your DC representatives hear from you. And it’s a good time for those without broadband to yell even louder.