COVID-19 and the resulting lockdowns illustrated the importance of the availability of telecommunications infrastructure capable of at least 25 megabits per second (Mbps) download speeds and 3 Mbps upload speeds (25/3) in rural, suburban and urban communities and among all age groups: children attending school virtually, adults working from home, and seniors using telemedicine services to more safely and conveniently access healthcare. The Infrastructure Improvement and Jobs Act (IIJA) includes two federal grant programs providing $43.45 billion for last-mile and middle-mile broadband deployment, and authorizes the issuance of tax-exempt bonds for qualified broadband projects. These programs, detailed below, can be used to construct and acquire broadband capital improvements where none existed before or to improve existing broadband speeds to 100 Mbps download and 20 Mbps upload (100/20) or faster.
Broadband Equity, Access, and Deployment Program
Congress set aside $42.45 billion for Broadband Equity, Access and Deployment (BEAD) Program grants in the IIJA to be administered by the U.S. Department of Commerce’s National Telecommunications and Information Administration (NTIA). Each State, Washington, D.C. and Puerto Rico (the “States”) will receive at least $100 million to distribute to subgrantees, and States may receive additional funding pursuant to a formula still being developed. This formula will account for unserved areas (defined below) and the number of underserved areas in which the cost of building out broadband is higher than average due to factors including remote location, lack of population density, unique topography or high rates of poverty (“High-Cost Areas”) in each of the States.
BEAD Program funds may be used for planning and the acquisition and construction of broadband infrastructure for last-mile networks. They may also be used to provide reduced-cost internet-capable devices and/or reduced cost equipment and internet access to multifamily housing with a substantial share of unserved households or that is located in an area in which the percentage of individuals with household incomes at or below 150% of the poverty line is higher than the national percentage of such individuals. NTIA may authorize additional uses for these funds that further the goals of the BEAD Program as it develops program rules.
Each State is entitled to $5 million of BEAD Program funds that it may use for establishing, expanding and/or operating broadband agencies and planning or outreach purposes after it submits a letter of intent that it will participate in the BEAD Program. Each State is required to submit a five-year funding plan to NTIA for approval before it may access its remaining BEAD Program funds and begin making subgrants. Funding plans are required to prioritize projects establishing 100/20 service in areas where 80% of the locations lack access to reliable 25/3 service (“Unserved Areas”). After sufficient funding for these areas has been set aside, the five-year funding plan must set aside remaining BEAD Program funds for projects that increase broadband speeds to a minimum of 100/20 in areas of the State where at least 80% of locations lack access to reliable 100/20 service (“Underserved Areas”).
After sufficient funding has been set aside for increasing broadband speeds in Underserved Areas, the five-year plan may allocate funding to ensure broadband with minimum speeds of 1 gigabit per second (Gbps) download and upload for schools, libraries and higher educational institutions, health clinics, health centers, hospitals and other medical providers, public safety entities, public housing organizations, or community support organizations that facilitate greater use of broadband by vulnerable populations, including individuals that are low-income, unemployed or aged. Funding plans may not discriminate against providing subgrants to cooperatives, non-profit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments.
Each project receiving BEAD Program funds requires a 25% match unless the project is in a High-Cost Area, in which case no match is required. The necessary match may come from a State, its political subdivisions or non-profit and for-profit organizations, and in-kind contributions such as telephone poles or easements from a utility company are permitted. Funds received pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021 (ARPA) may also be used to satisfy the match requirement.
Each State should decide whether it wishes to receive an initial distribution of $5 million from its $100 million in guaranteed BEAD Program funding to establish, expand and/or operate a broadband agency. If so, the State will need to submit a letter of intent regarding its participation in the BEAD Program. States may use these funds to:
- determine the locations of Unserved Areas and Underserved Areas;
- engage in outreach with local communities to determine broadband needs; and
- develop the State’s five-year funding plan outlining which broadband projects and entities will receive subgrants.
State broadband agencies should collaborate with governmental, non-profit and for-profit broadband providers to determine the location of Unserved Areas and Underserved Areas in their State. This collaboration may prevent future challenges from such entities that a project is ineligible for BEAD Program funds because it is not located in an Unserved Area or Underserved Area. State broadband agencies can begin this process by clicking here and here to review the maps prepared by NTIA and the Federal Communications Commission (FCC” indicating broadband speeds per particular geographies (including counties, census tracts and census blocks).
Updated maps are expected to be released later in 2022 and should not yet be solely relied upon without further communication with NTIA and/or FCC. Local governments, non-profit and for-profit organizations aware of Unserved Areas should begin developing State broadband agency grant proposals regarding proposed uses of BEAD Program subgrants and the source of funding for any required 25% match. Unserved Areas will be the first to be awarded BEAD Program subgrants by States, so it is imperative for organizations to begin preparing funding applications. State broadband agencies may wish to consider waiting until NTIA publishes its Notice of Funding Opportunity for the BEAD Program (the “NOFO”) before working on their five-year funding plans. In May 2022, NITA is expected to publish the NOFO that will likely provide further details about the requirements of five-year funding plans.
Middle Mile Broadband Infrastructure Program
Congress set aside $1 billion for grants made pursuant to the Middle Mile Broadband Infrastructure Program in the IIJA. NTIA may make grants on a technology-neutral, competitive basis to States or political subdivisions thereof, Tribal governments, electric utilities, utility cooperatives or public utility districts, technology companies, telecommunications companies or telecommunications cooperatives, non-profit foundations, corporations, institutions, or associations, regional planning counsels, Native entities, economic development authorities or any partnership of two or more of the foregoing (the “Eligible Entities”) in order to acquire, construct and improve broadband infrastructure that does not connect directly to an end-user location (“Middle Mile Infrastructure”). Each grant requires a minimum 30% match by the Eligible Entity, and unless NTIA provides clarification, it appears that funds received pursuant to the CARES Act, the Consolidated Appropriations Act of 2021 and ARPA cannot be used for the match.
NTIA is required to prioritize grants to Eligible Entities that represent the grant will be used to satisfy at least two of the following conditions:
- adoption of fiscally sustainable middle-mile strategies;
- a commitment to offer non-discriminatory interconnect to terrestrial and wireless last-mile broadband providers and any other party making a bona fide request;
- identification of specific terrestrial and wireless last-mile broadband providers that have:
- expressed written interest in interconnecting with Middle Mile Infrastructure planned to be deployed by the Eligible Entity, and
- demonstrated sustainable business plans or adequate funding sources with respect to the interconnect described in clause;
- identification of supplemental investments or in-kind support (such as waived franchise or permitting fees) that will accelerate the completion of the planned project; and
- demonstration that the Middle Mile Infrastructure will benefit national security interests of the United States and the Department of Defense.
Middle Mile Infrastructure to be acquired, constructed or improved with the NTIA grant must:
- be capable of supporting retail broadband service;
- fill a gap in Middle Mile Infrastructure as indicated by the FCC map the State in which the project will be located or speed and usage surveys indicating that at least 25% of the locations to be served by the project are Unserved Areas; and
- offer interconnection in perpetuity, where technically feasible without exceeding current or reasonably anticipated capacity limitations, on reasonable rates and terms to be negotiated with requesting parties.
Middle Mile Infrastructure funded with a grant are required to be completed no later than five years after receipt of the grant, though an extension may be granted for good cause. Eligible Entities that do not construct Middle Mile Infrastructure quickly enough may be subject to a penalty.
Eligible Entities should use the FCC map, contact the State in which the Middle Mile Infrastructure will be acquired, constructed and improved, or conduct surveys to determine where Middle Mile Infrastructure is required. Eligible Entities should develop projects that will satisfy as many of the five factors above as possible to increase their chance of being awarded a grant.
Qualified Broadband Project Exempt Facility Bonds
Congress created a new category of exempt facility bonds that can be used to finance qualified broadband projects (“Qualified Broadband Project Bonds”). States and their political subdivisions are permitted to issue tax-exempt bonds and use the proceeds of the bonds to provide broadband with speeds of at least 100/20 to residential and/or commercial locations located in census block group(s) where more than 50% of residential locations do not have access to fixed, terrestrial broadband service with speeds of at least 25/3. The issuers of Qualified Broadband Project Bonds may partner with non-profit and for-profit entities to acquire and construct broadband infrastructure and provide these broadband services.
Qualified Broadband Project Bonds cannot be used to acquire or construct broadband infrastructure in order to provide broadband access to locations where more than 10% of the residential or commercial locations already had broadband service with a speed of 25/3. If the project facilities are not owned by a State or political subdivision, Broadband Project Exempt Facility Bonds require a volume cap in an amount equal to 25% of their issue price. Each broadband service provider that provides services in which the qualified broadband project will be located must be given notice of the proposed qualified broadband project and its scope to be financed with Qualified Broadband Project Bonds. It must also notify the potential issuer of its ability to deploy, manage, and maintain a broadband network capable of providing gigabit-capable internet access to residential or commercial locations in the project area within 90 days.
States and their political subdivisions that are interested in issuing Qualified Broadband Project Bonds should review the NTIA broadband coverage map and/or the FCC broadband coverage map (linked to above) to make an initial determination as to which areas of their State may be eligible for construction of qualified broadband projects. Further follow-up with NTIA or FCC will be necessary before any project financing decisions are made based upon these maps. While the broadband industry waits for additional guidance from the Internal Revenue Service, private and public broadband providers working with issuers should consider providing 90-day notices to broadband providers in areas where qualified broadband projects may be constructed and reaching out to State agencies that allocate volume cap to inquire about the possibility of reserving volume cap for Qualified Broadband Project Bonds.
The IIJA gave States and their political subdivisions, and the non-profit and for-profit sectors, several additional tools to build out broadband infrastructure to better meet the changing expectations of the public. Because broadband access is no longer viewed as a luxury, areas without broadband may have difficulty attracting and retaining residents because broadband access is a basic need for many students, employees and seniors. The IIJA tools offer sufficient flexibility for States and political subdivisions to procure broadband infrastructure via public private partnerships.
Frost Brown Todd will continue to keep abreast of federal rulemaking and NOFOs for the BEAD Program, Middle Mile Broadband Infrastructure Program and Qualified Broadband Project Bonds. Frost Brown Todd will also continue working with our clients to fully utilize the additional broadband funding provided to the USDA ReConnect Program and the USDA Rural Broadband Program in the IIJA, as well as American Rescue Plan Act funds and other available State broadband programs.
Public Finance Newsletter
Our monthly public finance newsletter, Matters of Interest, provides project and economic development financial insights geared toward borrowing entities, banks and state, county and local governmental entities.