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Regulation - What is it Good For?

ReConnect Grants – Not for Everybody

Yesterday’s blog listed the major rules for eligibility for this year’s ReConnect grant. Today’s blog is going to point out important aspects of the programs that you should be aware of before deciding to apply.

Grant Application is a Bear. These grants require far more effort than any other broadband grant program. The required paperwork for filing is more like a formal loan application than a simple grant application. You cannot casually file for these grants, and if you omit documentation, you will likely quickly fall out of consideration.

Probably Large Awards. Past experience with this program would suggest that the RUS tends to make a small number of larger grants rather than a large number of smaller grants.

Awards Will Likely Include RUS Loans. Awards can be made as 100% grants, 50% grants/50% loans, or 100% loans. Applicants should be aware that 100% grants will be exceedingly difficult to win, so grant applicants should be prepared to accept an RUS loan. While RUS loans are at a good interest rate, many applicants cannot accept RUS loans. RUS loans will likely require a full asset pledge from a borrower, which is often impossible if you have other non-RUS debt. While these grants favor local governments, many local governments are unable to accept RUS loans because they can’t meet the pledge requirements. Standalone entities like government-owned utilities have a better chance. The loans are also made on the same basis as any bank loan, and an applicant must have a solid and solvent balance sheet and financial history.

Grant Scoring Will Eliminate Most Projects. Most potential applicants aren’t going to get out of the gate due to not scoring high on the grant rating scale. An applicant that fails in even a few scoring categories will likely not be considered. Study this scoring list carefully and be honest about your eligibility:

  • Rurality. 25 Points. Grant areas must be at specified distances from existing towns.
  • 25/3 Mbps. 25 Points. The grant allows serving areas that have existing speeds greater than 25/3 Mbps, but you are penalized in this scoring for serving underserved locations.
  • Poverty. 20 points. Points awarded based upon the level of poverty in the grant area as measured by the U.S. Census Small Area Income and Poverty Estimates (SAIPE) program.
  • Affordability. 20 points. Retail broadband rates must be affordable compared to existing area rates. Participants must offer a low-income product and be willing and able to participate in both the FCC Lifeline and Congress’s EBB programs. Note that an ISP must become an Eligible Telecommunications Carrier (ETC) to participate in Lifeline – not everybody is able or willing to do that.
  • Labor Standards. 20 Points. While the grants don’t require paying Davis-Bacon prevailing wages, there is a hefty scoring penalty for not doing so.
  • Tribal Lands. (15 points). Tribal entities or projects that are at least 50% on Tribal land will get the 15 points.
  • Non-Profit Entities. (15 points) Governments, non-profits, and cooperatives get extra scoring points. For public-private partnerships to get these points, the applicant must be one of these entities and be willing to own the assets and take on any RUS loans. You can’t partner with a city in name only.
  • Socially Vulnerable Community. (15 points) 75% of the proposed service area must meet the RUS’s definition of Socially Vulnerable Communities. This is related to poverty but favors communities that are economically stressed for reasons other than poverty.
  • Net Neutrality. (10 points) To get these points the applicant must pledge to accept the definition of net neutrality that the FCC scrapped in 2017.
  • Wholesale Services. (10 points). This is awarded to grant recipients willing to sell wholesale access to the network to other ISPs. This is generally described as open access.

That’s 175 total points to determine the most eligible projects. If you are not a tribe, aren’t partnered with a non-profit entity, or aren’t willing to offer open-access you’d already be 40 points down on the scale. If your project is too close to an existing city or town or includes some homes that have speeds greater than 25/3 Mbps, you could be down 50 more points. If you want to serve farmers instead of poor communities, you could be down 35 more points. These grants are definitely not for everybody. I recommend a realistic assessment of your likely score before you do any work towards chasing this grant. As is usual with federal grants, there will be desperate communities that will spend the time and money to pursue this grant with no chance of winning.

Require Extra Effort. These grants will also require an environmental and historic preservation review.

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Current News

Congress Ignores Rural Broadband

One of the biggest topics in rural America right now is the inability of employees to work from home and students to stay connected to schools from home due to the lack of broadband. Rural homes have struggled with poor broadband for many years, but the Covid-19 pandemic has brought the issue into a focus as rural residents are told to shelter in place, but don’t have the broadband needed to stay employed or to keep up with schoolwork.

I expected Congress to tackle this issue to some significant extent in the stimulus package that was just passed. However, the level of funding for broadband is disappointingly small in terms of finding any meaningful broadband solutions. The Senate bill contains the following:

  • $25 million to the RUS Distance Learning, Telemedicine & Broadband Program for the ‘‘Distance Learning, Telemedicine, and Broadband Program” (page 617).
  • $100 million for the USDA Reconnect program. This is a grant program administered by the USDA that provides grants and loans for bringing broadband to areas where at last 90% of households don’t have access to broadband of at least 10/1 Mbps. The money is to be prioritized to previous recipients of this grant (pages 622/623)
  • $50 million to the Institute of Museum and Library Services to prevent, prepare for, and respond to the coronavirus, including grants to States, territories, and tribes to expand digital network access (page 773).
  • Secretary of Veterans Affairs may enter into short-term agreements with telecommunications companies to provide temporary, fixed or mobile broadband service to provide mental health services to isolated veterans (page 807).

There is no such thing as bad grant money that brings better broadband, and all of the above allocations are welcome. However, none of this money is going to make more than a miniscule dent in the rural broadband issue. The only award that is likely to construct new broadband facilities is the $100 million for the ReConnect grant program. I’ve seen estimates over the years that it will take $100 billion to bring fiber to everybody in rural America. While a $100 million grant program might sound huge, if the need is $100 billion, then Congress just allocated one-tenths of one percent (0.1%) of the money needed to solve the rural broadband issue. It would take 1,000 years of grants at that level to bring fiber broadband to rural America.

Don’t get me wrong – the ReConnect grants have been going to independent telcos, electric cooperatives, and independent ISPs and any ISP that gets this extra money will be glad to get it. But when we map out the areas covered by this extra money you won’t be able to see it on a map of the US.

I think Congress is misreading rural America. My consulting firm does surveys and interviews in rural America and we have continued to do this during the pandemic. Rural America is pissed. They aren’t annoyed, they aren’t just sore – they are fuming mad that the government has been ignoring them for a decade by not bringing them broadband. They are mad at everybody – local politicians, state politicians, and federal politicians. Broadband isn’t a partisan issue, and I’m getting the sense that folks without broadband are ready to vote out anybody who is not bringing them a broadband solution, regardless of party.

You can’t blame them for being mad. One of the counties I’m working with right now is typical of much of rural America. We’ve done speed tests across the county and found almost nobody getting speeds faster than 5 Mbps, with many getting only a fraction of that. These homes mostly have DSL or fixed wireless broadband. These slow speeds are for the homes that can get at least some broadband – many homes have nothing. A large percentage of residents have tried satellite broadband and found it to be worthless. That’s understandable since we’re seeing latency of 700 to 900 milliseconds for satellite households – too much latency to connect to a corporate server or to connect to a school for remote classes or to do homework.

Almost every home we talk to has a story about how a lack of broadband costs them money when they have to drive 30 minutes each way to sit outside for a WiFi connection so their kids can complete their homework. Residents tell us of the inability to work from home or to start a home-based business. These folks are frantic and angry now that they are cut off from their jobs and schools.

It’s impossible not to sympathize with these rural residents. I am sitting in an office with good broadband. Sheltering in place is, at worst, a hassle for my wife and me. We’re able to work all day and we’re able to spend as much time on the Internet as we want when we’re not working. But what about people who have lost their paycheck because they are unable to work from home? What about students who feel they are losing a school year and are fearful they’ll have to repeat a grade? I find it impossible to believe that members of Congress aren’t hearing these same stories and I can’t understand how Congress ignored the millions of Americans without broadband in the stimulus plan.