Tag Archives: Treasury

A Tale of Two Grant Programs

Pretty much everybody in the industry agrees that the BEAD grant process has taken too long. The IIJA legislation that authorized BEAD was signed into law in November 2021. A few states are now opening a grant portal to accept BEAD grant applications – nearly three years after the legislation was passed.

Not all grant programs have taken this long. An interesting contrast to BEAD is another huge-dollar federal grant program, the Capital Project Fund (CPF). That was a $10 billion broadband grant program that was part of legislation for the American Rescue Plan that was enacted in March 2021. The two grant programs have a few things in common. Both are to build broadband infrastructure in unserved and underserved areas. Both grant programs give federal money to States to choose grant winners. But there is a stark difference in the way the two programs have been operated.

Capital Project Fund Grants. Following are a few key steps in this grant program.

  • This was funded by the American Rescue Plan Act on March 11, 2021.
  • The funding ranged from $106 million for D.C. to $540 million for California.
  • The program was administered by the U.S. Department of Treasury.
  • States had until September 2022 to file a grant plan for using the funds. For states that didn’t have a state broadband office, this meant scrambling to decide who was going to administer and operate the grant program.
  • Some states moved quickly, and on June 7, 2022, Louisiana, New Hampshire, Virginia, and West Virginia were approved to receive funding. The rest of the states were approved throughout the year.
  • States were free to start the grant process as soon as they were awarded the funding.

That’s 15 months from the legislation to the first states being able to launch a grant program. States didn’t need any further approval from Treasury to give funds to grant winners, so there were broadband grants awarded in 2022. States differed in the speed of awarding grants, but the money got in their hands relatively easily with limited strings attached.

BEAD Grants. Following are some of the important steps in the BEAD timeline:

  • Funded by the Infrastructure, Investment and Jobs Act in November 2021.
  • The program is administered by the NTIA.
  • BEAD NOFO (basic rules) issued in May 2022.
  • BEAD planning grants were awarded to each participating state to help cover the cost of launching BEAD.
  • States had to create a five-year broadband action plan. Not to belittle that process, but I imagine very few of those plans will ever again see the light of day.
  • A significant delay came when the NTIA had to bless the FCC broadband map. The early FCC maps clearly had problems, and this added at least six months to the timeline.
  • States had to create a Volume 1 report that defined areas with existing broadband funding and that identified unserved and underserved locations. When NTIA approves the plan, states could start the BEAD map challenge.
  • States had to file a Volume 2 manual that discussed a specific proposal for operating the grant process. Approval of Volume 2 starts a 365-day shot clock, and a state is supposed to choose grant winners within that time.

That means almost three years after the legislation before the first state started to solicit grant applications. But that’s not the end of the process.

  • NTIA recently suggested new rules for states that want to consider using alternate technologies. That’s going to add steps and time to the grant process.
  • States can’t award BEAD grants when they choose grant winners. The state must first find an ISP to serve every eligible location.
  • A State must then write a report to the NTIA about its plans to award grants. States are only free to start awarding grants after this final NTIA approval.

In addition to taking longer, BEAD is far more complicated. The NTIA went so far as to hire employees to act as liaisons to the states to navigate the paperwork process.

I was hopeful when I first read the IIJA legislation and saw that the money would go to states. By that time, it was already clear that the CPF funding process was moving well. However, it quickly became apparent that NTIA was going to implement BEAD one deliberate step at a time. Some of the BEAD timeline delays can be directly attributed to Congress, which legislated that the grant program must use the newly minted FCC broadband maps – but even without that delay, BEAD has been far more ponderous and agonizingly slow compared to CPF.

The biggest difference between the two grant programs is that Treasury fully trusted States to make grant awards within some rule boundaries, while NTIA micromanaged the process from beginning to end.

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.