American Recovery And Reinvestment Act (arra).

1050 K Street, Suite 400 Washington, D.C. 20001 Tel 202.312.7400 Fax 202.312.7461 www.bakerdconsulting.com

FROM:

B&D Consulting

DATE:

March 19, 2009; Updated May 15, 2009

RE:

American Recovery and Reinvestment Act (ARRA) of 2009 - Broadband Provisions

The American Reinvestment and Recovery Act, which was signed into law in February, includes a total of $7.2 billion in stimulus funds for broadband, including $4.7 billion for the U.S. Department of Commerce (Commerce) National Telecommunication and Information Administration (NTIA)’s Broadband Technology Opportunities Program (BTOP), and $2.5 billion for the U.S. Department of Agriculture (USDA) Rural Utilities Service (RUS). NTIA – BTOP NTIA must distribute $4.7 billion in grants through a new Broadband Technology Opportunities Program. The BTOP funding process must commence “as quickly as possible consistent with prudent management,” and all awards must be made by September 30, 2010. Up to $350 million may be expended pursuant to the Broadband Data Improvement Act (Public Law 110-385) and for developing a comprehensive nationwide inventory map depicting broadband availability in each State. The new BTOP is similar to NTIA’s Technology Opportunities Program that ended in 2004; however, eligibility was limited to governmental entities and non-profit interests. Under the new BTOP, eligibility is also extended to “any other entity, including a broadband service or infrastructure provider, that the Assistant Secretary finds by rule to be in the public interest." The new BTOP will issue grants through a competitive process. Projects eligible for BTOP grants include the following: • • •

Infrastructure Grants – The BTOP funds will support among other things competitive grants for broadband deployment in "unserved" and "underserved" areas, and for strategic community institutions and public safety agencies; Public Computer Center Grants (at least $200 million) – Competitive grants to boost computing capacity at public computer centers, such as in community colleges and libraries; and Sustainable Broadband Adoption Grants (at least $250 million) – Competitive grants to fund "innovative programs to encourage sustainable adoption of broadband service."

Absent a need-based waiver, applicants must provide 20% match and demonstrate that the proposed project cannot be implemented without NTIA funding. They must also provide assurance Created by B& D Consulting BDDB01 5583463v2

1

that they will substantially complete their proposed projects in accordance with project timelines, with all work completed no more than two years following the award. Priority will be given to applicants whose projects can be started and finished quickly, with at least 50% of their grant money spent on activities initiated within 120 days of the date on which the ARRA was signed into law (February 17). Applicants are not required to satisfy any minimum requirements as to the speed of the proposed networks. However, network speed will be a criterion for comparing competing proposals. Grants will be available for rural, suburban and urban areas, although applications for areas deemed “unserved” or “underserved” by broadband may be afforded priority in the application process. NTIA has the option of consulting with the States when attempting to determine whether an applicant is proposing service to a truly "unserved" or "underserved" area. NTIA also must give due consideration to whether an applicant is a socially and economically disadvantaged small business concern under the Small Business Act. Selection of the winning applicants (and the amount of money awarded to each) is left to NTIA’s discretion. NTIA must, however, make at least one award in each State, if practicable. As to infrastructure grants, NTIA must consider whether an award will increase the affordability of, and subscribership to, broadband to the greatest population of users in the area, or enhance service for the greatest population of users in the area. Finally, it must be emphasized that the ARRA requires NTIA to condition its awards on the winning applicant’s compliance with certain undefined non-discrimination and network interconnection obligations. At a minimum, winning applicants will be required to comply with the FCC’s 2005 Internet access policy statement, which generally requires that Internet users be permitted to access whatever lawful content and use any lawful applications and Internet-based services of their choice, so long as they do no harm to the underlying network. Rural Utilities Service (RUS) The $2.5 billion available through RUS will consist of grants, loans and loan guarantees for broadband projects anywhere in the United States, provided that "at least 75% of the area by a project" proposed to be served is a rural area without sufficient access to high speed broadband service to facilitate rural economic development. To preclude double-dipping, no area of a project funded by RUS may receive funding from NTIA’s new BTOP for the purpose of providing broadband service. Funding through RUS will be available until September 30, 2010. Some of the criteria for successful applications filed through RUS are similar to those for the new BTOP (e.g., speed of implementation). Under the RUS model, however, priority will be given to projects that serve the highest proportion of consumers in unserved rural areas, or that give consumers a choice of more than one broadband service providers. An applicant also must demonstrate that if its application is approved, all elements of its proposed project will be fully funded. Public Hearings

Created by B& D Consulting BDDB01 5583463v2

2

In March, NTIA and RUS held a series of public hearings and put out a joint request for public comment. Public hearings included topics such as definitions of broadband and underserved, rural and unserved areas, interconnection obligations, and the role of the States. Through this process, the agency received nearly 1,600 public comments. The public hearings have been posted on NTIA's website (http://www.ntia.doc.gov/broadbandgrants/), along with public comments. Key notes from the hearings process include: • • •

NTIA is planning to coordinate the release of its NOFA with RUS. The first round of the NOFA is expected prior to June 22, 2009; the second round between October and December; and the third round between April and June, 2010. The first round of funding will be directed towards "shovel ready" projects. Numerous stakeholders have expressed varying viewpoints at the public hearings regarding how the NTIA should define "underserved" and "unserved". Though there have been no direct comments from the agencies, there is indication that funding through RUS will focus on projects that are at least 75% rural but funding through NTIA will focus on projects in both rural and urban areas.

Additionally, the U. S. Department of Agriculture (USDA), released a Request for Quotation (RFQ) in April for contractors to help deal with the anticipated high volume of applicants. Congressional Testimony In April, Mark Seifert, Senior Advisor to the Assistant Secretary at NTIA, testified before the House Committee on Energy and Commerce. Highlights from the testimony include: • • •

The five stated goals of the program are: job creation; closing the broadband gap; stimulating investment; ensuring that schools, universities, libraries, community centers, and hospitals have high-speed access; and encouraging demand for broadband. NTIA and RUS are coordinating to establish a common application form to allow entities to file grant applications with both agencies in a simplified manner. Current stated challenges include defining statutory terms such as broadband, underserved, unserved; scope of consultative role the States will play; and determining an equitable way to select grant recipients.

Furthermore, both Chairman Henry Waxman and Subcommittee Chairman Rick Boucher have indicated that they believe the federal dollars should be spent not only on unserved regions but also on underserved regions that lack competition or the latest technology or have coverage gaps. Additional Comments At a recent conference hosted by Wireless Communications Association International (WCAI), officials from NTIA, RUS and the Federal Communications Commission (FCC) made some key points regarding the ARRA Broadband program:

Created by B& D Consulting BDDB01 5583463v2

3

•

•

•

Bernadette McGuire-Rivera, associate administrator at NTIA, said that once final rules are published, the agencies will hold workshops and roundtables around the country to educate potential applicants. Additionally, the agencies plan to work together to provide technical assistance to prospective applicants. Amy Levine, counsel to the House Energy and Commerce Subcommittee on Communications, Technology and the Internet, said it is important to keep in mind that the stimulus money is not a national broadband policy but that these funds are just the beginning of a policy. Levine also stated that NTIA and RUS should consider several elements in developing their rules, including serving unserved and underserved areas and that it is important to define "underserved" not just in terms of number of providers, but in price, speed and sustainability.

Created by B& D Consulting BDDB01 5583463v2

4