Publications

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In a step intended to gain ground on the promise of universal broadband in America, the American Recovery and Reinvestment Act of 2009, H.R. 1, signed by President Barack Obama on February 17, includes up to $7.2 billion in spending to spur broadband deployment and use in the US (collectively, the broadband stimulus programs).

These provisions are the most comprehensive and bold government initiative to make broadband a reality for those currently unable to bridge the digital divide.

This unprecedented infusion of federal broadband funding will be distributed principally through competitive grants issued to eligible entities by the National Telecommunications and Information Administration (NTIA), which receives $4.7 billion (almost two-thirds) of the broadband stimulus funding. However, $2.5 billion will be issued through competitive grants and possibly loans and/or loan guarantees by the Department of Agriculture’s Rural Utilities Service (RUS).

During the 2008 campaign and his Presidential transition, President Obama identified expanding US broadband capacity and adoption – which currently ranks 15th among OECD (Organization for Economic Cooperation and Development) countries – as a “national innovation priority.” The provisions of the broadband stimulus programs are intended not only to produce a near-term economic result (estimated at approximately 15 new, long-term, high-wage jobs created per $1 million spent), but are also intended to close the “broadband gap” by putting broadband service in currently un-served and underserved areas in rural and inner-city America.

NTIA will begin meeting with interested parties starting on March 2 in connection with the broadband grant programs. It is likely that NTIA and RUS will hold joint public meetings with stakeholders later in the month. Entities interested in applying for broadband funding should follow statements by the agencies regarding the programs carefully and tailor their funding applications carefully to increase chances of approval.

Broadband Mapping Initiative

The $4.7 billion NTIA program will be devoted primarily to infrastructure, but also provides up to $350 million to map current broadband deployment. The mapping program will afford the agencies administering the NTIA and RUS programs, grant applicants and investors a clear view of the national broadband footprint and the areas where growth opportunities are the greatest. Once NTIA obtains more complete broadband mapping data (reliable, complete data currently exists only for a small minority of states), funds may be distributed through a more economically efficient mechanism, such as a reverse auction or bounty system for areas shown to be unserved or underserved.

Broadband Adoption and Public Computing Center Upgrades

In addition to broadband mapping, at least $250 million is to be spent on competitive grants to encourage innovative strategies to achieve sustainable adoption of broadband in disadvantaged communities, and at least $200 million is planned for competitive grants to expand computer center capacity at public libraries, community college and other public venues.

• Note -- All NTIA funding must be awarded by the end of FY 2010 (September 2010).

The $2.5 billion RUS program, which is entirely devoted to broadband infrastructure, has no deadline for completing awards, although, given the goal of the stimulus to produce timely job creation, it is likely that RUS will adopt a similar time target for awards of its funds.

NTIA Program: High-Level Features Applicants or Contractors Need to Address in Their Applications

The NTIA broadband deployment program is designed to accelerate broadband deployment in unserved and underserved rural and inner-city areas and to strategic institutions likely to create jobs or provide public benefits – schools, libraries, health-care providers, community colleges and universities, economic development zones and public safety agencies. In considering where to target grant applications or participation in grant applications, applicants should consider the following:

• Nonprofits and educational and government institutions are automatically eligible for NTIA broadband grant funding. Proposals by for-profit business entities will require permission from NTIA to apply with some demonstration of a public policy basis for the application. It is likely that NTIA will set out these criteria in advance in order to encourage private sector participation in buildouts under the program.
• Proposals that serve statutorily designated strategic institutions or further economic development in an area will likely be favored.
• Proposals that serve the largest number of people in surrounding areas and that will result in affordable, high-speed service to those people will likely be favored.

• A major goal will be to fund construction of fiber rings or fiber infrastructure to communities with strategic institutions in areas not served by high-speed broadband.
• Proposals that include wireless mesh or pre-existing copper infrastructure to extend broadband service to surrounding areas fit the statutory criteria for the program and may be favored. (Wireless mesh networks consist of multi-use radios, typically deployed for public safety, industrial, municipal, rapid transit and large enterprise uses.)
• Interconnection and non-discrimination conditions on funding are principally intended to spur additional build-out to the surrounding area using federally funded backhaul capacity.
• Projects should be economically sustainable after the federal broadband grant funding is spent, which will likely favor well-capitalized applicants.

• The NTIA broadband adoption and public computing center competitive grant programs are designed to encourage greater use of broadband by low-income, unemployed, aged and other “vulnerable populations.”

RUS Program: High-Level Features that Applicants Need to Address in Their Applications

The RUS program’s title, “Distance Learning, Telemedicine and Broadband Program,” suggests that it is intended in part to encourage distance learning and telemedicine applications. However, nothing in the operative language specifically favors those applications. The conditions on the RUS program are far more general than those for NTIA, but, at this stage, there are a few statutory criteria that suggest favored strategies in considering where to target grant, loan or loan guarantee applications:

• Programs that provide broadband service to the highest proportion of rural residents without broadband service, that provide service to at least 75 percent rural territory, or that will deliver a choice of more than one service provider.
• Projects that can begin promptly after approval and that are likely to be completed.
  
  
• Applications from previous RUS borrowers – chiefly RLECs (rural local exchange carriers) and rural power companies – are supposed to receive priority and in theory can be funded more quickly. However, given the potential anti-competitive implications of privileging previous RUS borrowers, it remains to be seen whether RUS will give significant weight to it.
• Projects are supposed to offer users the choice of more than one service provider, so may favor build-outs of infrastructure by RLECs to which competitor wireless ISPs may interconnect..

The contours of the RUS program – including detailed funding criteria and conditions – are very general thus far, and are likely to be sketched out in much greater detail by RUS in the coming weeks. It is quite likely that these criteria will be similar to those for NTIA in order to simplify filing grant applications and to create a more uniform national broadband program.

Spending Safeguards

The NTIA program includes significant safeguards to prevent misspending. These include quarterly grantee reporting requirements, and posting on the Internet information regarding grant recipients, their commitments to build-out service, and their progress fulfilling those commitments. This transparency measure was proposed by the Obama transition under the theory that “sunlight is the best disinfectant.” Another provision proposed by the transition authorizes NTIA to revoke funding if grantees have insufficient performance or engage in wasteful or fraudulent spending as defined by NTIA.

Moreover, grants are required to contain at least a 20 percent local match (funded either by the applicant or the contractor(s) who will perform the work), unless waived by NTIA based on a showing of financial need. NTIA is also required to report to the Commerce and Appropriations Committees quarterly regarding the program.

By contrast, the RUS program requires only quarterly reporting to the Appropriations Committee, and no other spending safeguards and no deadline for completing grant awards. Although RUS has awarded loans and loan guarantees for similar purposes in the past, its program has previously been criticized by the GAO for slow and ineffective spending. It is therefore possible that the Obama Administration will implement the program using the same or similar protections against misspending found in the NTIA program and a similar deadline for completing the award of funds.

Who Should Be Interested in Applying for Broadband Funding?

• The NTIA deployment programs may be of most immediate interest and use to nonprofits and institutions in the hospital, educational and governmental arenas. However, great opportunity also exists for investment funds and service providers that are currently invested in the telecommunications sector, particularly in rural and inner-city markets.

• Nonprofit and institutional entities interested in applying should quickly identify qualifying projects under both the NTIA and RUS programs and promptly prepare and submit applications to take advantage of the time pressure on both agencies to identify, approve and fund deserving projects to help stimulate the economy this year.

• RLECs and other service providers in rural areas should quickly evaluate potential projects for RUS broadband funding.

• Interested for-profits and investment funds that support relevant sub-sets of the communications industry should develop and execute strategic plans to provide matching funding to nonprofits and institutional players that are the likely grant recipients and to form joint ventures with them to increase their chances of obtaining the nearly $4 billion in NTIA broadband deployment funding.

• Nonprofit and for-profit institutions that have innovative strategies to encourage broadband adoption in disadvantaged areas should seriously consider applying for some of the $250 million in broadband adoption grant funds.

DLA Piper through its Communications, Federal Affairs and Corporate practice groups is well positioned to support clients in planning and executing qualifying projects and in the preparation and submission of the necessary grant/loan applications for both NTIA and RUS.

If you are interested in learning more about the opportunities created by these fast–moving government broadband grant programs, please contact:

Jim Halpert
William Cook
Bob Allen