Federal Agencies Begin Process of Implementing Broadband Stimulus Program

Work in key Washington, D.C., agencies continues toward disbursement of the $7 billion allocated for broadband stimulus programs. As discussed in detail in this advisory, the Department of Commerce's National Telecommunications Information Administration (NTIA) and the Department of Agriculture's Rural Utilities Service (RUS) have initiated meetings and released a request for comments on the scope of these programs. However, for companies interested in seeking funding, two of the most important immediate focal points are outside of Washington, D.C.

First, companies should be formulating detailed business proposals that include “plus factors” that could increase the likelihood their application will be chosen (see the summary below), line up financing to be able to meet the 20 percent contribution requirement, and position themselves to be able to show that they could start work immediately and complete the project rapidly.

Second, companies should also be carefully monitoring activity at the state level, and consider meeting with state and local authorities that will be involved in recommending favored projects. Congress ordered NTIA to consult with the states, and some states have already created task forces or other programs that will consider and recommend projects. We would be happy to assist you in identifying and contacting the key state bodies.

NTIA/RUS request for comments highlights significant issues

On March 9, NTIA and RUS released a joint notice and request for comments (“Notice”), due by April 13, on a series of implementation questions. Several questions highlight important, and potentially contentious, issues that will arise during the administration of this program. To promote and protect your interests, you should consider filing comments on one or more of what we believe are the most significant questions:

• Can for-profit entities participate? The statute requires NTIA to determine “by rule” whether entities other than those listed in the statute should be eligible, and what standard should be applied. Because the statute only identifies governmental and nonprofit entities, the NTIA will have to determine by a specific legal standard to what extent commercial, for-profit ventures may participate.
  
  
• What criteria should be used to evaluate applicants? The Notice asks whether the grants should distinguish among technologies used by participants; how to determine where a funding need exists, and whether private investment would be displaced; what long-term feasibility measurements can be employed; whether the NTIA/RUS should prioritize proposals that will serve unserved or underserved areas; and, whether the agencies should consider the retail prices that grantees plan to charge.
  
  
• What financial contributions will be required of participants? The Notice asks what factors should be used to identify “financial need” for those applicants requesting more than 80 percent funding, and what factors to use to determine when a project should receive less than 80 percent funding. Also, the Notice asks how it should determine whether a project would not have been implemented but for the program (a key test under the statute).
  
  
• How should programs be measured for effectiveness, and completion? The statute imposes strict timelines for awards and funding. To that end, the NTIA/RUS ask what elements (timelines, milestones, letters of agreement with operational partners, etc.) should be included in the application to ensure projects can be completed within two years; and, how to determine when performance is at an “insufficient level” such that funds should be rescinded.
  
  
• How should key terms, including rural, broadband, unserved, and underserved be defined? This critical question includes many subtexts, such as how speeds should be measured (symmetrical, asymmetrical, peak use, etc.), and whether an area is underserved if it has access only to “lower speed” broadband services.
  
  
• How should the nondiscrimination and network interconnection conditions be defined? The Notice asks what “elements of network management techniques” should be described and permitted as a condition; whether network interconnection obligations should be based on existing statutory schemes; whether failure to honor these conditions should lead to “de-obligation” of funds; and, whether the conditions should extend beyond the life of the grant and “attach for the useable life of the infrastructure.”
  
  
• What role should states have in selecting projects? The Notice asks how state priorities should be considered and what the appropriate role of states should be in selecting projects.

Interested parties may submit comments to the NTIA/RUS in response to these questions or any other matter through April 13. The agencies' consideration of these comments will provide the framework for how the NTIA/RUS will administer this program. We therefore urge interested parties to begin preparing comments on these issues immediately.

First NTIA/RUS public meeting raises more questions than it answers

Few new specifics were revealed in the March 10 public meeting. Rick Wade of NTIA summarized NTIA's goals: 1) close the broadband gap across the country; 2) stimulate investment in broadband infrastructure; 3) create jobs; 4) provide broadband access to schools, libraries, and other community anchor organizations; and 5) stimulate broadband demand. In the question-and-answer period, the most common answer was that the agencies would welcome input on the specific rules and procedures that should apply where the statute is not clear. Some new information was announced:

• Parties will be permitted to apply for funding from both programs, even though they are ultimately prohibited from receiving funding from both for the same project.

• NTIA will conduct three separate rounds of grants, roughly scheduled for April through June 2009, October through December 2009, and April through June 2010. The first “Notice of Funding Availability” (NOFA) will be issued some time after the comment deadline of April 13.

• Some portion of the funding likely will be reserved for each round, although we note that many will remind NTIA of the Congressional objective to inject money into the economy as soon as possible.

• RUS expects to issue a NOFA within 60 to 90 days that will explain application requirements, scoring and evaluation criteria, and reporting requirements.

• RUS would strongly consider awarding loans or mixed grant/loan awards as a way of increasing the scope of the program. Previously, there had been speculation that most RUS awards would be grants.

• Applications must, among other things, provide detailed descriptions of the project; budgets; disclosure regarding any other federal or state funding source for the project; and a showing that the project would not be undertaken but for the funding grant. An NTIA official called the last of these "not a mushy but a hard and fast requirement."

• Applicants may need to discuss the retail price at which they would offer service, in order to demonstrate the “affordability” of their service.

NTIA and RUS will hold additional public meetings in Washington, D.C., on March 16, 19, 23 and 24; and on March 17 in both Las Vegas, Nev., and Flagstaff, Ariz. The meetings will provide opportunity for public comment (with 60-second slots for questions or statements), and the agencies may also present additional information in specific pre-announced topics. All of these meetings will be available by webcast.

Separately, the Federal Communications Commission (FCC) has requested comments by March 25 to initiate its plan for a “comprehensive rural broadband strategy” as required by the 2008 Farm Bill. The FCC must issue a report to Congress by May 22. The agency will also use this information as one means of collecting input for a new “comprehensive national broadband plan,” which Congress required it to develop under the Stimulus Act. If you would like to meet with FCC staff, in addition to or instead of filing comments, the FCC has reserved March 26 through 27 for meetings. We urge you to have us request a meeting time as soon as possible.

The FCC's report is to include recommendations to promote interagency coordination, streamline procedures, coordinate existing federal rural initiatives, promote rapid build-out of rural broadband solutions, and identify how specific federal agency programs and resources can best respond to rural broadband requirements and overcome obstacles that currently impede rural broadband deployment.

Key “plus-factor” elements for potential applicants

Following is a summary of key plus-factor elements that may increase the likelihood of successful funding for proposed broadband projects. Applicants should include as many factors as possible in their final proposal/application.

• For the NTIA program, projects that bring broadband access to unserved areas and/or underserved areas. Underserved has not been defined, but may mean that only one broadband provider is currently available, or that none of the available broadband services offer “high-speed” access, such as above 1.5 Mbps.
  
  
• For the RUS program, projects that bring broadband access to areas that are at least 75 percent rural and that are without sufficient access to "high-speed" broadband service to facilitate rural economic development.
  
  
• Projects that are supported by local authorities, and especially by the state agencies that may be submitting "recommended projects" lists to NTIA.
  
  
• Projects that construct or deploy broadband to serve public safety agencies and purposes.
  
  
• Projects extending broadband access (or higher-speed access) to health care providers, clinics, and facilities; schools and libraries; colleges, universities, or other higher education and research institutions; job training and job-creating facilities; community support organizations.
  
  
• Projects that will increase broadband access to (or serve organizations that serve) low-income, unemployed, aged, and other disadvantaged or "vulnerable" populations.
  
  
• Projects that will provide educational or employment opportunities through broadband access/deployment/infrastructure.
  
  
• Projects that will stimulate demand for broadband and economic growth.
  
  
• Projects submitted by (or partnering with) nonprofit organizations.
  
  
• Projects showing strongly that they would not be undertaken but for the grant (mandatory).
  
  
• Projects showing that the applicant will provide at least 20 percent of the funding from non-federal sources (mandatory, unless strongly showing financial need and grant of waiver).
  
  
• Projects that increase affordability of and/or subscribership to broadband to the greatest populations.
  
  
• Projects that offer high broadband speeds.
  
  
• Projects that enhance healthcare, or serve education or children.
  
  
• Projects by economically or socially disadvantaged small businesses as defined in section 8(a) of the Small Business Act.
  
  
• (Possibly) Projects that feature the greatest "open access" to users.