The Broadband Stimulus, or How to Spend $7 Billion in 16 Months

Although its formal name is the American Recovery and Reinvestment Act of 2009, most people know it simply as the “Economic Stimulus Bill.” Included among the more than $750 billion in spending plans in the Bill is more than $7 billion for the encouragement and expansion of broadband deployment. How and where to spend this money will be the focus of Washington telecom policymakers for the next several months.

The money is divided into two large portions, each assigned to a separate agency for administration. The Rural Utilities Service, an agency within the Department of Agriculture and formerly known as the Rural Electrification Administration, gets $2.8 billion to distribute. The National Telecommunications and Information Administration, within the U.S. Department of Commerce, is assigned $4.7 billion for its distribution. Both organizations are instructed to assign all the money within their domain by September 30, 2010 and the projects which are funded are to be completed within two years thereafter. Obviously, this is a lot of money to allocate in a short time, especially given that the rules and procedures for the loans and grants must be largely made up at nearly the same time that applications are being considered.

At a public meeting in Washington on March 10, Agriculture Secretary Tom Vilsack said that RUS is “interested in working with the private sector, working with our federal partners as well as local governments to find the most creative and innovative ways to expand” broadband facilities to farms, ranches and rural communities. Secretary Vilsack also said Agriculture is “anxious to leverage the resources beyond the $2.8 billion.”

Speaking for the Commerce Department was Rick Wade, Senior Advisor and Acting Chief of Staff for the Department. He outlined five goals that NTIA will follow in allocating its $4.7 billion. They include “extending high capacity pipes closer to users in rural, remote and underserved communities,” stimulating investment by requiring recipients to invest their own money at the same time, job creation, connection of libraries, hospitals, schools, community centers and job training facilities to high speed connections, and encouragement of demand for broadband.

The RUS funding is narrower in scope as it is limited primarily to rural areas. Funding will be available anywhere in the U.S. so long as at least 75 percent of the service area is “a rural area without sufficient access to high speed broadband service to facilitate rural economic development.” RUS is creating a broadband loan and loan guarantee program that would make Treasury rate loans, four percent loans and provide loan guarantees for broadband deployment. Recipients will be expected to invest a minimum of 20 percent of their own money in the project. Eligible recipients in eligible rural communities include Indian tribes, coops, corporations and LLCs. A second RUS initiative will be the Community Connect Broadband Grant Program. This money will be available to the same type of organizations for unserved rural areas and community facilities, and will require a minimum of 15 percent matching investment. In making decisions on applications for these programs, RUS will give priority to projects that will deliver more than one choice of service provider, projects that can be commenced promptly and completed promptly (and thus are clearly fully funded), and projects that serve the highest proportion of rural residents that do not have access to broadband service.

Most readers of this publication are more likely to be interested in the NTIA program. It has a total of $4.7 billion to spend in this effort. NTIA has been given the task of mapping the U.S. to determine the density of broadband deployment at any given location. It may use up to $350 million for this mapping exercise. This map will help determine areas where assistance is needed in expanding broadband facilities. The remaining $4.35 billion (at least) is to be used for various broadband technology projects, with at least $200 million allocated to expanding public computer center capacity and at least $250 million for “innovative programs to encourage sustainable adoption of broadband service.” In addition, NTIA must award at least one grant in each of the 50 states. NTIA may also transfer funds to the FCC for development of a national broadband plan. (The FCC has otherwise been left out of the Broadband Stimulus effort except for a consultative role developing a “rural broadband strategy” with the Agriculture Department.)

NTIA’s program goals include providing broadband access to consumers in “unserved” and “underserved” areas (presumably as determined by the mapping project), providing broadband education, awareness and training equipment and support to schools, libraries, healthcare providers and other community facilities, providing improved access to public safety agencies, and to stimulate demand for broadband, economic growth and job creation. Recipients will be required to provide at least 20 percent matching funds from non-federal sources.

NTIA has stated that to be eligible for a grant, applicants need to be a state or a political subdivision or territory, an Indian tribe or native Hawaiian organization, a non-profit foundation, corporation or association. In addition, broadband service providers and infrastructure providers may be eligible if NTIA determines it would be “in the public interest”. This is the category for commercial enterprises to use in any effort to obtain grant money. The agency expects to make its grants in three phases. The first set of grants is expected to be considered in the April-June 2009 timeframe, the second round from October-December of 2009, and the third round April-June 2010. Applications will need to include a detailed budget and detailed description of the application of the grant funds, including an explanation of how the project will not be done without grant participation.

This process is a relatively fast-moving work in progress, with quickly evolving rules and standards. By the time you read this, some things may have changed. Anyone hoping to participate should pay close attention and start their effort now. This may truly be a time when the early bird gets the worm, or where you snooze, you lose. IP

Danny E. Adams currently serves as managing partner of Kelley Drye & Warren’s Tysons Corner office and is a member of the firm’s Executive Committee. He is a member of the bar in Virginia, District of Columbia and Arizona. He can be reached at DAdams@KelleyDrye.com.