Publications

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The National Telecommunications Infrastructure Administration (NTIA) and the Rural Utilities Service (RUS) have issued a long-awaited joint Notice of Funding Availability (NOFA) describing the evaluation criteria and requirements for those seeking first-round broadband deployment funds under the American Recovery and Reinvestment Act of 2009.

The NOFA is a very complex offering that is difficult to navigate unaided. This alert provides a quick review of the rules of the road governing the initial $4 billion in broadband stimulus funding.

Tight Deadline for RUS Funding and First Round of NTIA Funding

The NOFA sets three rounds of federal broadband stimulus funding, the first with a tight August 14 deadline for submitting preliminary applications for the first $4 billion of overall funding. Applications will be accepted as early as July 14, and we suspect that early birds will get the best worms. RUS and NTIA intend to announce awards around November 7, 2009, and expect to distribute grants and loans within 30 days of the award announcement.

Applications will be considered in a two-step process: only those first-round applications scored highly by peer review panels will advance to step two of the application process, which requires submission of highly detailed proposals. The process will likely move ahead on a rolling basis, so that evaluation of first-round applications will still be under way as the filing of second-round applications begins.

Most Rural Funding to Be Distributed in First Round

The $2.4 billion allocated to the Broadband Initiatives Program (BIP) administered by RUS is divided into $400 million in grants for extending service to remote, unserved areas; $800 million in low-cost loans or loan-grant combinations for service to underserved areas; and $800 million for loans or loan-grant combinations for middle-mile backhaul projects. Funded projects must be substantially completed within two years and fully completed within three years of an award of funding.

All applicants for rural broadband deployment projects must submit their applications to RUS for consideration first, before seeking an NTIA grant. Only if RUS rejects a first-round rural proposal can that application be considered by NTIA (where it may be considered damaged goods). RUS will favor the proposals of current or former RUS borrowers. Projects must anticipate cash flow sufficient to service debt, including the RUS debt. Preference will be given to applicants serving the highest proportion of rural residents lacking broadband and giving subscribers a choice of providers. RUS will fund only one project in a given area.

NTIA Begins Rollout of Some Funds Now

The NOFA provides for the distribution of $1.6 billion out of the total of $4.7 billion in Broadband Technology Opportunities Program (BTOP) funding, administered by NTIA. Of this first tranche of BTOP funding, up to $1.2 billion is allocated for broadband infrastructure funding; up to $50 million for public computing center projects; and up to $150 million for sustainable broadband adoption projects. Projects must be substantially complete within two years and entirely complete within three years of grant issuance.

This leaves most of NTIA’s grant money—$3.2 billion—for future funding rounds, when broadband mapping will likely be further advanced. Grant applicants need to consider the overarching priorities of the NTIA BTOP grant program:

• Projects should be viable, sustainable and scalable.
• Projects are more likely to be approved if they offer demonstrable potential for economic growth and job creation or benefits to education, health care or public safety.
• Awards will be technologically neutral, so opportunities for funding exist for fixed and mobile wireless, fiber and satellite projects.
• Projects that include socially and economically disadvantaged small business concerns, as defined in Section 8(a) of the Small Business Act, will receive somewhat greater consideration.
• While the usual matching fund combination for BTOP projects will be 20 percent applicant / 80 percent federal government, it is possible to seek a waiver of the 20 percent requirement.
• Applicants must demonstrate in the application that the project could not be implemented without federal grant assistance.

Eligible Entities

For-profit, nonprofit, governmental and tribal entities may apply directly for RUS and NTIA funding. To make for-profit entities eligible for BTOP funding, NTIA needed to find that this was in the public interest. The NOFA contains this finding, opening the door for businesses to apply for BTOP funds without a non-profit or governmental partner, although the presence of such a partnership will be considered by NTIA.

Interconnection and Nondiscrimination Requirements

Because Congress charged NTIA with spelling out the conditions for interconnection and non-discrimination requirements, these were the most closely watched of the broadband grant conditions. Significantly, these requirements attach to broadband facilities built with NTIA or RUS broadband funds, and apply to these facilities even after the end of these federal programs.

The requirements are:

• Complying with the FCC’s August 2005 Internet Policy Statement and any subsequent FCC “Net Neutrality” policies. Not favoring any lawful Internet content or applications over others;
• Prominently displaying network management policies on its website;
• Providing service that either directly or indirectly connects to the Internet and not providing an entirely closed network (although “managed services” for special uses such as telemedicine, public safety or distance learning are permitted); and,
• Offer interconnection where technically feasible at reasonable terms and conditions.

Reimbursement for Legal and Consulting Costs

Applicants may use up to 5 percent of projected costs to pay legal counsel and other consultants, such as engineers and economists, the cost of preparation of any prevailing application under the broadband program.

Sustainable Broadband Adoption

$150 million of NTIA funding is reserved for Sustainable Broadband Adoption projects to cover any of the following eligible costs (1) acquiring broadband-related equipment, hardware, software and digital network technology for broadband services; (2) developing and providing training, education, support and awareness programs or web-based content; (3) continuing broadband-related public education, outreach, support and awareness campaigns; (4) implementing innovative programs to facilitate greater access to broadband service, devices and equipment; and (5) other projects and services that the Assistant Secretary finds to be consistent with the purposes of the program.

Additional Factors Applicable to Both RUS and NTIA Infrastructure Programs

• Funding must be used for capital expenditures, not operating expenditures, with revenues reinvested
• Applicants must provide detailed reporting about project execution
• While greater speeds are favored, the minimum broadband speed level is a modest 768 kilobits per second (kbps) downstream and 200 kbps upstream.
• A system design and project timeline certified by a professional engineer is required for all proposals for over $1 million.

The minimum service area for a “last mile” applicant must be no less than the service area of one census tract as depicted in the last decennial census. Any deviation from that standard requires the filing of a waiver request.

Because applying for this funding is complex—and, indeed, the parameters may evolve further in the coming days—it is advisable to navigate the process with professional guidance. For more information, please contact:

William Cook

Jim Halpert