Communities across the United States got an unexpected gift from the Biden Administration last week in the form of additional flexibility to use Rescue Plan funds for needed broadband investments, particularly those focused on low-income neighborhoods in urban areas. 

When Congress developed and passed the American Rescue Plan Act, it tasked the Treasury Department with writing the rules for some key programs, including the State & Local Fiscal Recovery Funds (SLFRF). That program is distributing $350 billion to local and state governments, which can use it for a variety of purposes that include broadband infrastructure and digital inclusion efforts.

Treasury released an Interim Final Rule in May, 2021, detailing how local governments would be allowed to invest in broadband. I promptly freaked out, at the restrictions and complications that I (and others) feared would result in local governments backing away from needed broadband investments due to fears of being out of compliance with the rule. 

After we worked with numerous local leaders and the National League of Cities to explain the problems we saw in the proposed rule, Treasury released updated guidance in the form of a Q&A document to explain how local governments would be able to build and partner for needed networks. 

Given the many challenges the Biden Administration has had to deal with, we did not expect significant new changes to the Rescue Plan rules around the SLFRF. But after many months of deliberations, the Treasury Department has resolved all of the concerns that we identified as areas of concern in May. 

As we explain below, local governments have wide latitude to use SLFRF funds for a variety of needed broadband infrastructure investments, especially to resolve affordability challenges.

Summary and TL;DR

A new report by the Electronic Frontier Foundation argues that the general lack of fiber network coverage across the United States - with barely a third of homes able to choose a fiber option -  comes in large part from the domination of the broadband marketplace by incumbent providers who both own and operate the infrastructure that provides Internet access to the vast majority of Americans. It’s a classic market failure, authors Benoît Felten and Thomas Langer argue, where there’s a clear profitable business case for the existence of more fiber access that continues to go unaddressed. At its core, the failure is driven by the attitudes of monopoly Internet Service Providers (ISP) which prefer to reap the profits from existing legacy copper and cable infrastructure rather than invest in new build outs. As a result, a larger proportion of Americans than many other nations remain stuck on slower, more expensive connections.

The solution, the report shows, is relatively straightforward and economically viable for as many as 78 percent of all households across the country: the construction of a series of local or regional fiber networks operated on a wholesale basis, whereby any ISP that wants to can join an open, transparent marketplace, creating much more competition than exists in the current arena. 

“Wholesale Fiber is the Key to Broad US FTTP Coverage” offers an economic case for open access fiber in improving access, affordability, and driving competition. Comparing the potential of what it calls a Vertically Integrated Operators deployment (i.e. traditional incumbent broadband providers that build, own, and operate networks for end users) and Wholesale Network Operators deployment (an open access arrangement where the physical infrastructure is owned by one entity that invites providers to operate on the network and connect end users for a fee), the report finds that the Wholesale Network Operator model reduces the risk of capital investment, drives infrastructure expansion, and would lead to future-proof connectivity for hundreds of millions of Americans. 

The U.S. Department of Treasury, tasked with writing the rules on how state and local governments can spend various federal relief funds made available for broadband expansion by the American Rescue Plan, recently released the guidelines [pdf] governing the Capital Projects Fund (CPF) — a $10 billion pot of money available to states, territories, and Tribal governments [pdf] to confront the need for improved Internet connectivity exposed during the pandemic.

Compared to when Treasury released rules governing the State and Local Fiscal Recovery Funds earlier this year, this go ‘round brought cheers instead of jeers from community broadband advocates, as we are seeing federal broadband policy break new ground.

The flexibility the Capital Projects Fund gives state and local governments to decide how to spend the relief funds is what broadband advocates are most excited about. CPF applicants are able to use the money in creative ways to respond to critical needs in their community laid bare by the Covid-19 pandemic, as long as the resulting project directly enables remote work, education, and health monitoring. 

A week from today, the Schools, Health, and Libraries Broadband Coalition (SHLB) is hosting a fireside chat on Tuesday, September 29th at 12-12:30p ET with SHLB Executive Director John Windhausen and Christopher Ali.

Ali is an Associate Professor of Media Studies at the University of Virginia, and recently released a new book through MIT press called Farm Fresh Broadband: The Politics of Rural Connectivity.

From the description:

Before the pandemic-driven surge of public investment in broadband networks, the federal government had subsidized rural broadband by approximately $6 billion a year. So why does the rural-urban digital divide persist? Why are we looking to the new infrastructure bill to solve a problem that should have been solved a decade ago? Author of "Farm Fresh Broadband" Dr. Christopher Ali argues that rural broadband policy is both broken and incomplete, proposing a new national broadband plan. Join SHLB Coalition Executive Director John Windhausen for a virtual fireside chat with Dr. Ali, to pick his brain on where the U.S. is going wrong and how to course correct rural broadband policy moving forward. And of course, they’ll discuss where community anchor institutions fit into it all.

ILSR spoke with Ali on Episode 134 of the Building Local Power podcast, which you can listen to here.

Register for the event here.

Today, the U.S. Treasury Department released an updated FAQ clarifying many of the concerns and questions raised by numerous community broadband advocates and members of Congress about the Interim Final Rules (IFR) on how Coronavirus relief funds in the American Rescue Plan Act (ARPA) could be spent on broadband infrastructure.

The day after the rules were first released in May we wrote about how it appeared the IFR, if finalized as is, would significantly limit local communities’ ability to invest in needed broadband infrastructure as the rules initially suggested communities were expected to focus on areas that do not have 25/3 Megabits per second (Mbps) wireline service “reliably available.” While broadband experts might have felt comfortable with that language, it would almost certainly confuse lawsuit-leery city attorneys that have to sign-off on projects in areas with widespread gigabit cable broadband access.

Clarification to Make Community Broadband Advocates Clap

What does the requirement that infrastructure “be designed to” provide service to unserved or underserved households and businesses mean?

The updated FAQ sticks to the 25/3 benchmark, stating: “Designing infrastructure investments to provide service to unserved or underserved households or businesses means prioritizing deployment of infrastructure that will bring service to households or businesses that are not currently serviced by a wireline connection that reliably delivers at least 25 Mbps download speed and 3 Mbps of upload speed.”

However, the FAQ goes on to say, “to meet this requirement, states and localities should use funds to deploy broadband infrastructure projects whose objective is to provide service to unserved or underserved households or businesses. These unserved or underserved households or businesses do not need to be the only ones in the service area funded by the project (emphasis added).”

The day after the U.S. Treasury published the Interim Final Rules on how Coronavirus relief funds in the American Rescue Plan Act can be spent, we sounded the alarm because it appears the rules, if finalized as is, would significantly limit local communities’ ability to invest in needed broadband infrastructure.

Last week, Sen. Ron Wyden (D-Oregon) and eight other members of Congress joined the growing number of community broadband advocates who share those concerns.

On Tuesday, May 25, Sen. Wyden sent a letter to Treasury Secretary Janet Yellen urging her “to ensure any community with service that falls below (the Treasury’s) own standard of 100 (Megabits per second) Mbps upload and download speeds is eligible for funding.”

Two days later, U.S. Rep. Anna G. Eshoo (D-California) and Sen. Cory Booker (D-New Jersey) penned a similar letter that was also signed by Wyden and six other members of Congress (U.S. Reps. Raúl M. Grijalva, Mike Thompson, Jerry McNerney, Lori Trahan, Peter Welch, and Debbie Dingell). Eshoo and Booker have long led efforts to support local initiatives to expand Internet access with community solutions.

25/3 Not Sufficient  

Even as the Treasury acknowledges that families really need 100/100 Mbps service, as the Interim Rules are currently written it suggests communities are expected to focus on areas that do not have 25/3 Megabits per second (Mbps) wireline service “reliably available.” About 90 percent of Americans have 25/3 “available” to them by flawed federal estimates, although millions lack service because it is unaffordable or effectively unreliable. And there is no standard for reliability that communities can measure against.

The Eshoo/Booker letter is particularly salient on this point: 

Earlier this year in March, the Biden Administration signed the American Rescue Plan Act, which included, among many other things, multiple sources of funds for broadband infrastructure. The U.S. Department of Treasury was tasked with writing the rules of how local governments can spend the various funds. The Interim Rule has been published and it appears to significantly limit local ability to invest in needed networks. 

The rules say that communities are expected to focus on areas that do not have 25/3 Mbps service reliably available. But there is no measure of what “reliably” means (in federal statute or otherwise). More than 90 percent of Americans have 25/3 “available” to them by best estimates. The result is considerable confusion for urban areas across the nation who no longer qualify for broadband investments under a strict reading of the proposed rules. This is not what the Biden Administration had suggested we should expect in its many press communications about its broadband approach. 

This discussion is about Section 602, which details the direct payments to local governments under the Coronavirus State Fiscal Recovery Fund. The aid offered to local governments has numerous authorized expenditures, including broadband infrastructure.

Tonight, at 6:45 ET, we will have a special episode of the Connect This! show with Doug Dawson, Kim McKinley, and Travis Carter to respond to the Interim Rule issued by President Biden's Treasury Department, which basically makes it difficult for most local governments to use the funds for broadband infrastructure. (We have a forthcoming story to explain this in more depth.)

The video will be streamed here live as well as below. It will be available the next day on ConnectThisShow.com.