Tag Archives: IIJA

NTIA Releases Digital Equity Funding

The NTIA recently announced $811 million in funding for digital equity that is available for States and Territories. This round of funding is part of the $1.44 billion Digital Equity Capacity Grant program of money that will go to States to administer digital equity grant programs. $60 million of this fund was allocated to States in 2022 for planning purposes. The NTIA has taken so long to deploy these funds that these disbursements represent the grant funding allocated for the law for years 2022 through 2024. There will be a few more future years of grant funding.

The total funding for digital equity in the IIJA (Infrastructure, Investment, and Jobs Act) was $2.75 billion. It’s expected that the NTIA will launch the $1.25 billion Digital Equity Competitive Grant Program this summer that will make grants directly available to entities like political subdivisions of states, non-profits, schools, libraries, and others.

States have two months to ask for their share of the funding. In this round of funding, $760 million is available to 50 states, Washington, D.C. and Puerto Rico, $45 million for Native entities, and $8.4 million is allocated for territories. The NTIA established a tentative award amount for each government entity. As expected, the largest amounts of funding goes to the states with the largest populations – California ($70 million), Texas ($55 million), Florida ($41 million), and New York ($37 million). Even states with small populations get a significant amount of funding, like North Dakota ($4.5 million), South Dakota ($5.0 million), and Wyoming ($5.3 million).

The States will use this money to make digital equity grants in each state. These grants are not intended for ISPs, but for non-profits, local governments, and related entities. Expect to hear about grant programs in every state as the summer progresses.

These grants are part of the larger effort of the IIJA to tackle all aspects of the digital divide. BEAD grants are intended to address the deployment and availability of broadband. The soon to be defunct ACP plan was intended to address affordability. It’s unfortunate that the NTIA has finally gotten around to spending money for the digital equity effort just as the affordability component is dying.

These grants are intended to tackle digital equity, with the stated purpose for identifying and solving barriers for people to use digital resources. It seems likely that most of the grants under this program will be used to get broadband devices into people’s hands and teach them how to use broadband. I expect to see a wide range of creative proposals made to States under this wide umbrella of uses.

Most States have been telling the public about these upcoming grants for years, and many of the entities that can use the funding have gotten prepared to file digital equity grants. But I have to imagine that States have varied in the effectiveness of this communication and there may still be non-profits, and others that haven’t heard of these grants.

A lot of communities have taken the approach of trying to consolidate all of the various stakeholders in a community into one grant application – with the reasoning that this might be the best way to be sure a community gets its fair share of funding. That might mean pulling in schools, colleges, libraries, and others to develop digital training classes and curriculums. It might mean pulling in the folks who are equipped to refurbish computers or distribute laptops to the public. Any community that has not considered this consolidated approach still has a little time, although it seems likely that we’re only months away from States announcing grant application cycles.

Removing Broadband Construction Barriers

One of the provisions of the IIJA legislation that created the BEAD grants is a directive that States should take steps to reduce costs and barriers to fiber deployment. The legislation lists specific ways that States can reduce the cost of BEAD grant project: promoting the use of existing infrastructure, adopting dig-once policies, streamlining the permitting processes, providing cost-effective access to poles, conduits, easements, and rights-of-way, and requiring reasonable access requirements.

The IIJA hoped that States would reduce barriers, reduce costs, and shorten timelines for BEAD project. The legislation not only wants States to make these changes for building along State highways but implies that States should ask counties and municipalities to make the same changes. The language also suggests making special exceptions for building BEAD infrastructure and not necessarily for other construction.

Anybody who has ever built fiber would agree on the benefits that come from most of the items on the list. The IIJA was enacted in November 2021, and states have had two years to react to these federal suggestions. I am sure that some States considered these recommendations in the last two years and perhaps even made a few improvements in processes. But I’ve seen very little evidence that most States have taken any action, and for the most part, States seem to have ignored the IIJA directive.

I’ve written many times about these same issues over the years, and I wonder if States have the ability or even interest to tackle these changes.

Use of Existing Infrastructure. I’ve been advocating this for years. There is a huge amount of unused fiber sitting in networks built by state highway departments, school systems, county and city networks, and statewide networks that could be a big benefit for commercial fiber deployment. But there are always reasons cited why governments won’t share fiber. There might be legislative prohibitions or restrictions from the original funding source that built the fiber. Governments might not want to expend the effort and cost to provide access to the fiber. Some governments worry about security.

Dig-once Policies. This is an idea that policymakers seem to love, but the market doesn’t value. There have been some successes with dig-once, particularly when an ISP already wanted access to fiber along a road that is under construction. But mostly, this policy goes nowhere. Road builders don’t want to incur any extra cost or schedule delays to accommodate fiber. Unless an ISP is part of the process, nobody wants to pay for conduit or access points. Even when conduit is built, it often doesn’t have the access points that ISPs want. Dig once builds disjointed stretches of infrastructure that don’t connect to other networks at the endpoints. To get infrastructure everywhere with dig once would probably take a hundred years.

Streamlining the Permitting Processes. This idea is at the top of most ISP’s wish list. While some states have worked to make it easier to build along state highways, in many cases, the state permits are the hardest to obtain. Most States have zero sway over influencing the processes for city and county roads, and trying to intervene or impose rules would set off an intense battle over state versus local rights.

Cost-effective Access to Poles, Conduits, Easements, and Rights-of-way. This is an interesting request in the IIJA because it conflicts with FCC jurisdiction over these issues. About half of the States still follow the FCC rules for these issues. The other half of States have their own rules but are only allowed to differ from the federal rules in relatively minor ways. States certainly can set fees for using State infrastructure but have limited power elsewhere.

One of the most interesting aspects of this legislative directive is that it is aimed mostly at State Broadband Offices. Most of the changes listed above either require legislative change or would mean making changes at embedded bureaucracies like State Highway Departments – two things that are far outside the reach and power of a State Broadband Office.

Defining Broadband Discrimination

One of the provisions of the Infrastructure Investment and Jobs Act (IIJA) is that it requires the FCC to “take steps to ensure that all people of the United States benefit from equal access to broadband internet access within the service area of a provider of such service.” In legalese, the term equal access, in this case, means that consumers should be able to expect to get the same speed, capacity, and latency as other customers buying the same product from the same ISP sold elsewhere. This new mandate has been labeled as a prohibition against digital discrimination.

The FCC is required by the IIJA to make a pronouncement of its interpretation of the discrimination rules in November. The FCC is going to have to define how it will identify digital discrimination and what remedies the FCC might have in mind for anybody who violates the principle. One of the interesting discussions on the topic is who this applies to, since the IIJ language doesn’t specifically mention ISPs. Might this also apply to landlords that own multiple apartment buildings? Might this apply to state or local government policies that promote discrimination?

I think a normal person reading this requirement might assume that Congress didn’t want ISPs to win the upcoming gigantic broadband grants and then discriminate against communities for any reason – but particularly because of a difference in income levels between communities. A number of the big ISPS have been accused over the years of redlining – of offering the best technology and prices to neighborhoods with the highest household incomes.

One of the challenges facing the FCC is to define what constitutes digital discrimination. As you might imagine, ISPs are taking a very different approach to the issue than public interest groups. ISPs think that the FCC should focus on intentional discrimination – against policies and practices by an ISP that are clearly intended to discriminate against the public. If the FCC’s standard is intentional discrimination, then the FCC would have to prove that an ISP is purposefully discriminating before it can take any action. If discrimination rules are based on this interpretation, then it’s hard to imagine many cases where an ISP would be found guilty of discrimination. It would probably require a believable whistleblower from inside an ISP to prove that an ISP was deliberately discriminating.

Public interest groups think that the FCC should instead concentrate on disparate market impacts where ISP actions have resulted in discrimination, regardless of an ISP’s intentions. Under this test, ISPs that always avoid building in low-income neighborhoods or that have different price policies for neighborhoods based on household incomes could be found to have violated digital discrimination. The proof of the discrimination would be found in the market results instead of the ISP’s intentions.

The FCC is required to deliver its digital discrimination policy to Congress and then act on the defined principle in the future. At a minimum, I would bet that ISPs are going to have to periodically certify to the FCC that they don’t discriminate. Beyond that, the agency is going to have to define the process by which it will identify discrimination and take action to remedy violations of the principle.

In practical application, many FCC policies only apply to giant ISPs – but I’m not so sure about this one. Is a small ISP discriminating if it only builds fiber to higher income neighborhoods? We’ll find out in November.

Criticizing BEAD

It’s not hard to make a list of things to dislike about BEAD or any other big-dollar federal program. As anybody who reads this blog knows, I have a laundry list of things I wish BEAD had done differently. Today’s blog looks at a report from the U.S. Senate Committee on Commerce authored by Senator Ted Cruz that highlights some of the problems and issues of the BEAD grant program. It’s interesting to see the issues with BEAD run through a political filter. This is not the first critique of BEAD from Congress, and various groups of Senators have sent letters with criticisms or suggestions to the NTIA.

The first criticism of BEAD in the report is that the NTIA BEAD allocation gives too much funding to places that have good broadband and don’t need the money – like Washington DC and Delaware. The report blames this on the Biden administration, but the allocation of the funding to States was specified in the IIJA legislation. For example, the legislation mandated that each state gets at least $100 million. I think most people would agree with the report that it’s a waste to give money to states that don’t need it, but the blame for this goes squarely to the folks in Congress who wrote the legislation. These are the same folks that created one of my big pet peeves – that the funding must be allocated using the FCC broadband maps.

The next big criticism is that the BEAD allocations did not account for other federal money being spent elsewhere for broadband. This criticism is totally accurate. I think it’s ludicrous that the FCC announced a new round of ACAM funding only a few weeks after the BEAD dollars were allocated. My guess is that the FCC did this on purpose to show that the agency is still relevant in the broadband deployment world. I think the FCC is still stinging from having the BEAD program given to the NTIA and is flexing its broadband muscles. The White House directed the FCC, NTIA, and the RUS to coordinate broadband issues, but obviously that directive is being ignored.

The FCC map used to allocate BEAD dollars was also not kept current for the many state and local grants being made using ARPA or general funds from states. It would have been relatively easy to require states and localities to tell the FCC when broadband grants were awarded.

The next criticism in the document comes in two parts. First, it says that the Biden administration bias in favor of fiber is going to means that there isn’t enough money to go around and that some homes won’t get broadband. The NTIA has clearly stated that it prefers fiber when the numbers make sense. But realistically, this is left up to the States. There are a number of states that have said they will fund wireless as needed to make sure the grant funding stretches far enough. While the NTIA has a stated preference for fiber, it also balances that off with a mandate to States to make sure that all unserved locations get broadband. This will likely result in a big tightrope walk for States, but the mandate to serve everybody is clearly a higher priority than building all fiber.

The second half of this complaint is that BEAD will be used to bring broadband to mansions, beachfront resort communities, and mountain vacation homes – and the report includes examples of a few such locations. This complaint is just silly. The legislation says that every place in the country that is classified as unserved or underserved should get better broadband. By definition, BEAD will cover some of the kinds of locations the report points out, but the vast majority of BEAD funding will go to places like where I live in Appalachia, that are both poor and have no good broadband. This same complaint was lodged against the RDOF program, because any big list of unserved locations is going to include some places owned by the wealthy. If this was a real concern, Congress could have excluded such locations in the legislation, but it didn’t. The NTIA has no legal authority to say that such places can’t be served with the grants – and frankly, these places need broadband like everybody else. Lots of States are struggling about what to do about places like vacation cabins – but if they are shown as unserved on the FCC map, they probably have to be served.

The report doesn’t mention my number one complaint about BEAD, that the grant rules say that anybody can apply for a grant – but the rules clearly favor giant ISPs over smaller ISPs, municipalities, and everybody else. I would not expect this issue to be highlighted in a report from Congress since the biggest ISPs are generous donators to elected officials. But to be fair, the report also doesn’t recommend giving all of the money to the big telcos and cable companies that want to build fiber – if anything, the report is somewhat biased towards wireless broadband.

Finally, Broadband Labels

At the end of August, the FCC gave final approval to the requirement that ISPs must provide broadband labels. The FCC had originally approved the broadband labels in November 2022 but then received three petitions to further modify the rules. The recent order makes a few minor changes to the original order but largely leaves the original broadband label rules intact.

The labels were required as a provision of the Infrastructure Investment and Jobs Act. ISPs with more than 100,000 customers will have to start using the new labels within six months. All other ISPs have a year to implement. I think ISPs with fiber networks ought to issue the new labels quickly – it’s a chance to brag and compare your symmetrical capabilities against other technologies.

The new labels look a lot like the nutrition labels that are on all processed foods. The label requires basic information like the monthly price for standalone broadband, any special pricing that is in place currently and when that special pricing expires, a description of other monthly and one-time fees associated with the broadband, and the typical broadband speeds and latency.

I can’t wait to see how the big ISPs are going to implement the labels. Marketing folks at the big ISPs must be dreading the requirement to disclose the list price of standalone broadband and the requirement to list extra fees like big charges for a WiFi router. It’s been standard practice for years for customers to buy broadband without getting even basic facts such as the price for the broadband after an introductory offer.

The labels are going to be a big challenge for the cable companies that still sell a huge number of product bundles. The cable companies have never told consumers the portion of the bundled price associated with any given product. But my interpretation of the label rules is that they will somehow have to identify the broadband price.

As usual, the FCC let the big ISPs off the hook on one of the major requirements. ISPs are only required to disclose the typical broadband speed and latency. I am willing to bet that the labels are going to look a lot like the marketing speeds that are reported to the FCC maps – and that can be very different than what is delivered. In the many surveys that my consulting firm has done over the years, consumers regularly tell us that they have no idea what speed they are supposed to be getting. From the many bills we’ve collected over the years, many ISPs also don’t disclose the speeds on the monthly bill.

I’m really curious about what ISPs are going to report for upload speeds. We’ve been seeing huge numbers of speed tests for ISPs that don’t deliver 20 Mbps, which has become the new practical standard to be considered as broadband – and which the new 5-Commissioner FCC is likely to soon make official. How many ISPs are going to honestly disclose upload speeds under 20 Mbps, which would be an admission that their product is not broadband?

There are ISPs using a few technologies that are going to really struggle with the label requirement. For example, there are a dozen factors that can influence the speed of DSL, and two adjacent homes can have a significantly different DSL experience. The speeds on all wireless technologies vary to some degree with differing environmental conditions. Speeds on the new FWA cellular broadband are highly dependent on the distance between a customer and the serving tower. Any ISP that has network bottlenecks will deliver different speeds at different times of the day, depending on how busy the network is.

ISPs also face the challenge of somehow balancing what they declare on the broadband label and what they report to the FCC mapping. ISPs know that most of the public likely never sees what they report to the FCC maps, but a lot of people are going to see broadband labels that must be prominently displayed on ISP websites. My guess is that most ISPs will claim the same speeds in both places. I think the whole intent of the labels was to invite public pushback against ISPs that are exaggerating performance.

A New Source of Financing

Buried deep in the Infrastructure Investment and Jobs Act is the opportunity for broadband projects to use a different form of financing. Section 80401 of the new law allows for the use of private activity bond financing for qualified broadband projects.

For those unfamiliar with that terminology, a private activity bond is a bond issued by somebody other than a government entity. Rather than borrowing money from a bank, bonds are sold directly to investors. Most bonds are purchased these days by Wall Street bond funds, although individual investors can also buy bonds.

It’s an interesting new form of financing that has never been easily available to commercial ISPs before. Before talking more about the bond process, I want to discuss what the law means by ‘qualified projects”. This bond funding can only be used for projects that fit the criteria for broadband projects that are covered by the other provisions of the IILJ. Specifically, the bonds can only be used to finance a project that:

A.  Is designed to provide broadband service solely to 1 or more census block groups in which more than 50% of residential households do not have access to fixed, terrestrial broadband service which delivers at least 25 Mbps downstream and at least 3 Mbps upstream, and

B.  Results in internet access to residential locations, commercial locations, or a combination of residential ad commercial locations at speeds not less than 100 Mbps for download and 20 Mbps for uploads, but only if at least 90% of the locations provided such access under the project are locations where, before the project, a broadband provider did not provide service, or did not provide service meeting the minimum speed requirement described in paragraph A.   

This means the projects can only be used for areas that have at least 50% coverage of homes with current broadband of 25/3 or less. That’s likely to mean that this bond funding is going to have a relatively short shelf life – once BEAD grants are done, there may not be a whole lot of the U.S. left that will meet this test. The bond option is clearly aimed at providing the matching funds for the upcoming BEAD grants. But this law would allow bond financing to be used for projects funded by state broadband grants or projects partially funded by ARPA funds.

There is an interesting hoop to jump through. Anybody who wants to use the bonds must query all incumbent providers in the grant area to see if they have plans to build a gigabit-capable network. There is no guidance on what happens if a current ISP says yes. This funding also is not available for incumbents to use in existing service territories.

What are the potential benefits of this funding option for an ISP?

  • It’s easier with bonds to finance projects over a longer time. It should be possible to get 25 or 30-year funding through bond financing.
  • The bonds can provide 100% financing, whereas many other funding sources require at least some equity.
  • Bond financing can also provide a cushion for the first few years by having no debt payments. This is done by deferring principal payments and by pre-borrowing the interest payment for the first few years of a project.
  • It’s possible that bond funding might have a lower interest rate – but that is strictly going to depend on the creditworthiness of the borrower. For instance, a cooperative with a great balance sheet might get a rock bottom interest rate while somebody else might pay a high rate.
  • There generally is less ongoing reporting as long as the borrower is able to make bond payments.
  • Finally, there is a chance that the bonds could be tax-free for bond purchasers, but that would be subject to IRS rules outside of this new law.

There are a few other provisions of the rule worth noting. Getting bond funding requires structuring the bond through a conduit borrower. That means that a state, a county government, or perhaps somebody like a government-based economic development agency would have to agree to sponsor the bonds. The government entity would have no ownership of the bond project, but would instead lend its name to the project to enable a project to qualify for using the bond market.

For those not familiar with the bond process, a borrower would work with a bond agent expert who is familiar with bond financing. You’d create an official statement, which is essentially the offering document that is shown to prospective bond buyers that would describe the project and describe the benefits and risks. This is similar to a document that is created by public companies before selling stocks to the public. The bond agent would circulate the official statement and solicit purchase offers from bond buyers. The bond market can work quickly, and assuming it’s an attractive bond offering that meets industry expectations, the bond sale is generally transacted within a relatively short period of time.

This is something worth considering for somebody who is looking to fund the matching portion of the various grants that are floating around the industry. It’s an interesting alternative to a traditional bank loan. The main reasons to consider it include 100% financing, possibly lower interest rates, a long term for repayment, and a period upfront with no debt payments. For some projects, those items can make a big difference in the willingness to pursue a grant.

Buy American and Federal Grants

Near the bottom of the Infrastructure Investment and Jobs Act, starting on page 2315, is a requirement that any infrastructure funded from federal funds must comply with the Build America, Buy America Act. This applies to the $42.5 billion in broadband infrastructure included in the IIJA, but also applies to all other infrastructure projects that includes federal funding. The IIJA says as of the date of enactment of this Act, domestic content procurement preference policies apply to all Federal Government procurement and to various Federal-aid infrastructure programs.

I think this clearly means that Buy American rules apply to federal infrastructure projects awarded after November 18, 2021, the date the IIJA was published in the Federal Register. This would include RDOF funding, ReConnect grants, the NTIA grants, and anything else awarded after that date. I’ll have to leave this up to the lawyers, but this also could apply to state and local grants awarded before that date but not yet constructed, such as CARES or ARPA projects.

The concept of buying American has been around since 1933, when the original Buy America Act was passed by Congress that applied specifically to federally-funded projects to build roads and railroads. That specific law was aimed at making sure that railroads used American-made iron and steel for rails, train engines, and railcars.

The Buy America concept was first applied to telecom in the 2009 ARRA stimulus grants. Those grants required that a substantial amount of the raw materials used to build broadband networks complied with the Buy America Act. At that time, it was nearly impossible to buy electronics that complied with the Buy America Act, and I recollect that the NTIA issued a blanket pardon from parts of the Buy America rules (but that’s subject to verification).

This new IIJA legislation puts a major emphasis on buying American. One of the intentions of the Act is to provide incentives for manufacturers to bring factories and jobs back to the U.S. Consider the following language from the IIJA:

United States taxpayer dollars invested in public infrastructure should not be used to reward companies that have moved their operations, investment dollars, and jobs to foreign countries or foreign factories, particularly those that do not share or openly flout the commitments of the United States to environmental, worker, and workplace safety protections; in procuring materials for public works projects, entities using taxpayer-financed Federal assistance should give a commonsense procurement preference for the materials and products produced by companies and workers in the United States in accordance with the high ideals embodied in the environmental, worker, workplace safety, and other regulatory requirements of the United States;

The Act lists specific materials and components that should be sourced to American companies, including steel, iron, manufactured products, non-ferrous metals, plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables), glass (including optic glass), lumber, and drywall.

That list covers almost every component of building a fiber network. Fiber optic glass must be American-made, as must be the material used in fiber-optic sheaths. Conduit must be American-made. The definition of ‘manufactured items’ in the Act covers all electronics.

The IIJA goes on to define the specific rules for defining American-made. Construction materials like fiber optic cable and conduit must be 100% made in the U.S. At least 55% of the cost of the components for manufactured goods must be American-made. This last requirement is going to cause consternation for equipment vendors which are going to somehow disclose the source and what they pay for each component of electronics. In today’s complex supply chain this isn’t going to be easy. This gets even more complex for supply houses that buy and assemble various components into ready-to-use electronics assemblies. This will mean more paperwork for the industry – everybody that builds a project that uses federal funding must be ready to prove they comply with the law.

There are ways for federal agencies to get waivers from these rules – but the legislation makes it clear that waivers need to be exceptions and not routinely or easily granted. The intention of this law is to force vendors to change procurement practices and to buy raw materials and components from American sources. Since the law specifically called out the components of fiber optic networks, it’s not going to be easy to get waivers.

This is likely to cause disruptions in the short run as electronics manufacturers scramble to meet the 55% rule. It’s not hard to imagine that these rules might further disrupt the current supply chain problems as vendors scramble to meet these requirements. But in the long run, these rules are great. We need to buy from American companies, support American jobs, and move manufacturing back to the U.S.

Broadband Labels

There is one quiet provision of the Infrastructure Investment and Jobs Act that slipped under the radar. Congress is requiring that the FCC revamp broadband labels that describe the broadband product to customers, similar to the labels for food.

The Act gives the FCC one year to create regulations to require the display of a broadband label similar to the ones created by the FCC in Docket DA 16-357 in 2016. A copy of the FCC’s suggested broadband label from 2016 is at the bottom of this blog. The original FCC docket included a similar label for cellular carriers.

ISPs are going to hate this. It requires full disclosure of prices, including any special or gimmick pricing that will expire. ISPs will have to disclose data caps and also any hidden charges.

As you can see by the label below, it includes other information that big ISPs are not going to want to put into writing, such as the typical download and upload speeds for a broadband product as well as the expected latency and jitter.

To show you how badly big ISPs don’t want to disclose this information, I invite you to search the web for the broadband products and prices for the biggest ISPs. What you are mostly going to find is advertising for special promotions and very little on actual prices and speeds. Even when it’s disclosed it’s in small print buried somewhere deep in an ISP website. And nobody talks about latency and jitter.

What is even harder for ISPs is that they often don’t know the speeds. How does a telco describe DSL speeds when the speed varies by distance from the hub and by the condition of the copper wire on each street. I’ve seen side-by-side houses with different DSL speeds. Cable companies can have a similar dilemma since there seem to be neighborhoods in every city where the network underperforms – most likely due to degradation or damage to the network over time.

The sample label asks for the typical speed. Are ISPs going to take the deceptive path and list marketing speeds, even if they can’t be achieved? If an ISP tells the truth on the labels, shouldn’t it be required to submit the same answers to the FCC on the Form 477 data-gathering process?

I’m sure that big ISPs are already scrambling trying to find some way out of this new requirement, but that’s going to be hard to do since the directive comes from Congress. It’s going to get interesting a year from now, and I can’t wait to see the labels published by the biggest ISPs.

Broadband Adoption Grants

The recently enacted Infrastructure Investment and Jobs Act (IIJA) created two new grant programs to address digital equity and inclusion. This section of the IIJA recognizes that providing broadband access alone will not close the digital divide. There are millions of homes that lack computers and the digital skills needed to use broadband. The grant programs take two different approaches to try to close the digital divide.

The State Digital Equity Capacity Grant Program will give money to States to then distribute through grants. The stated goal of this grant program is to promote the achievement of digital equity, support digital inclusion activities, and build capacity for efforts by States relating to the adoption of broadband. I haven’t heard an acronym for this grant program – it’s likely that each state will come up with a name for the state program.

The Act allocates $1.5 billion to the States for this program – that’s $300 million per year from 2022 through 2026. Before getting any funding, each state must submit a plan to the NTIA on how it plans to use the funding. States will have to name the entity that will operate the program, and interestingly, it doesn’t have to be a branch of government. States could assign the role to a non-profit or other entity.

The amount of funding that will go to each state is formulaic. 50% will be awarded based upon the population of each state according to the 2020 Census. 25% will be awarded based upon the number of homes that have household incomes that are less than 150% of the poverty level, as defined by the U.S. Census. The final 25% will come from the comparative lack of broadband adoption as measured by the FCC 477 process, the American Community Survey conducted by the U.S. Census, and the NTIA Internet Use Survey.

The second new grant program is called the Digital Equity Competitive Grant Program. These are grants that will be administered by the NTIA and awarded directly to grant recipients. The budget for this grant program is $1.25 billion, with $250 million per year to be awarded in 2022 through 2026.

These grants can be awarded to a wide range of entities, including government entities, Indian Tribes, non-profit foundations and corporations, community anchor institutions, education agencies, entities that engage in workforce development, or a partnership between any of the above entities.

This will be a competitive grant program, with the rules to be developed by the NTIA. While the broadband infrastructure grants in the Act include a long list of proscribed rules, Congress is largely letting it up the NTIA to determine how to structure this grant program.

That’s going to make for some interesting choices for entities involved in digital inclusion. They can go after funding through the state or compete for nationwide grants. I doubt that anybody can make that decision until we see the specific grant rules coming out of each program.

I’ve been hearing about digital inclusion at every conference I’ve attended for the last fifteen years. For many years we talked about this as finding ways to solve the digital divide. We’ve known for all these years that there are homes that don’t have broadband because they can’t afford a broadband connection. We’ve known that homes can’t afford computers or other devices. And we’ve known for a long time that a lot of people don’t have the digital skills needed to use broadband.

There have been efforts over the years to address the issues, mostly done at the local level and mostly through non-profits. This is the first time that real funding is being aimed at solving these issues. It’s going to be interesting to see what comes out of this funding. I’m sure there will be some dazzlingly successful programs as well as some that will fizzle – but these grants will provide the grand experiment to find out what works the best. I like that these grants make new awards each year for five years – and I hope Congress pays attention because some of the best programs that get this funding will deserve to be funded when these grants are over.

We are only going to best thrive as a nation when everybody comes along for the ride, and this is the first set of grants that will take a serious shot at bringing broadband to those who are not benefitting from broadband technology.

New Middle-Mile Grants

One of the new programs established by the Infrastructure Investment and Jobs Act (IIJA) is $1 billion in grants to build middle-mile fiber. The grant program will be administered directly by the NTIA. The grant program defines middle-mile as any broadband infrastructure that does not directly connect to an end-user location. Projects that might be considered for the grants include building fiber, leasing of dark fiber, submarine cable, undersea cables, transport to data centers, carrier-neutral internet exchanges, and wireless microwave backhaul.

The amount of funding is disappointingly small. For comparison, the California legislature created a $3.25 billion middle-mile fund just within the state. Rural America is woefully underserved by middle-mile infrastructure. Rural communities can all attest to the pain of losing broadband, cellular coverage, and public safety systems anytime the backbone fiber into a rural area goes out of service.

The stated purpose of the grants is to reduce the cost of connecting unserved and underserved areas to the Internet and to promote resiliency – which is the phrase currently being used as a surrogate for redundancy. Resiliency means bringing a second transport route into an area so that a single fiber or microwave failure won’t strand a community without broadband.

The federal grants will provide up to 70% of the cost of constructing middle-mile connectivity. Priority will be given to projects that:

  • Leverage existing rights-of-way to minimalize regulatory and permitting challenges.
  • Enable the connection of unserved anchor institutions.
  • Facilitate the creation of carrier-neutral interconnection facilities (places where multiple carriers can meet and exchange traffic).
  • Improve the redundancy of existing middle-mile infrastructure.

Grant applicants must demonstrate financial, technical, and operational capability to be eligible. Grant applicants must also satisfy at least two of the following conditions (and more than two would be better):

  • Has a fiscally sustainable middle-mile strategy.
  • Will offer non-discriminatory access to other carriers and entities.
  • Projects which identify specific last-mile networks that will benefit.
  • Projects with identified investments or support that will accelerate the construction and completion of a project.
  • Projects that will benefit national security interests.

The NTIA is directed to prioritize grant applications that:

  • Connect middle-mile infrastructure to last-mile networks that plan to serve unserved areas.
  • Connect non-contiguous trust lands.
  • Offer wholesale broadband service to other carriers and entities.
  • Can complete the buildout in a timely manner.

It’s likely to be until late 2022 until the grant program is taking applications. While not gigantic compared to other parts of the infrastructure bill, this grant would still translate into 20,000 miles of middle-mile fiber at $50,000 per mile. These grants are going to most easily be awarded to solid financial recipients that have assembled a consortium of entities that will pledge to use the new middle-mile routes. I strongly suggest that regional groups start talking now to be ready when these grants when announced. At only $1 billion, it seems likely that there will only be one grant cycle.