The flood of infrastructure funding for broadband

Another $42 billion of infrastructure spending dedicated to improving broadband connectivity is now moving from federal to state coffers, spurring comparisons to electrification efforts under the New Deal nearly a century ago and potentially kickstarting additional bond issuance.

The Broadband Equity Access and Deployment Program, or BEAD, flows from the Bipartisan Infrastructure Law and is aimed at building out broadband networks, subsidizing internet costs for low-income households, and providing training and devices to end users. 

The Biden administration has set lofty goals for the effort. “With this funding along with other federal investments, we’re going to be able to connect every person in America to reliable high-speed internet by 2030,” President Biden said Monday at an event promoting the administration’s broadband funding plan.

The money comes with strings that encourage working with local stakeholders in marginalized communities. Program priorities include the use of fiber-optic cable made in America and tapping unserved locations first.

Bond issuance could be a factor as the money starts to roll in.

“Tax exempt bonds traditionally are issued for capital projects and not every eligible purpose that BEAD funds can be used for involves an infrastructure project that a jurisdiction can issue bonds for,” said Lourdes German, executive director of the Public Finance Initiative. 

German also points to a list of items that could be funded by bond issuance including expenses around planning, research, data collecting, outreach, training, deploying or upgrading internet in unserved areas; improving service to community anchor organizations; installing broadband in multifamily buildings; digital equity programs; workforce development; and vocational training.  

According to the National Governors Association, Ohio, Vermont, and Louisiana have already launched initiatives to use federal funds for job training by teaming up universities and industry groups. The NGA estimates that 205,000 fiber-optic technicians, engineers, and construction workers will be needed over the next five years to put the plans into action. 

The National Telecommunications and Information Administration, operating within the U.S. Department of Commerce, administers the funds and is relying on a revised map prepared by Federal Communications Commission depicting areas of poor coverage. The first version of the map received nearly four million challenges about its accuracy from states, tribes and municipalities. Internet service providers also took heat for overrepresenting their areas of coverage.  

NTIA data shows that Texas will be getting the most funds, racking up $3.31 billion while North Dakota gets just over $130 million. The program also includes U.S. territories. 

The states have already demonstrated the kind of projects that could be brought to life as NTIA money adds to the flow. The Treasury’s Capital Projects Fund, which was stocked with $10 billion via the American Rescue Plan, has already pushed out $6 billion to forty states as of May. The winning projects are required to participate in the FCC’s Affordable Connectivity Program. 

On June 23 the Treasury approved $195.7 million in Washington State to connect 33,000 homes and businesses. Earlier this year, Maine parlayed $20 million in federal funds with another $13 million kicked in by internet service providers. 

The Maine Connectivity Authority keeps an eye on the bottom line by only funding “line extensions to locations that the MCA has determined are most likely to be cost-effectively served by the expansion of existing networks.”   

Minnesota has a similar program valued at $15 million in place that allows ISPs to participate in a reverse auction in which they bid to connect to an address in exchange for a requested grant amount. 

West Virginia’s $25 million program is attempting to connect ISPs that already have a system in place who can connect to a list of targeted premises. Some of the capital expenditures incurred are eligible for reimbursement from the state. 

Pennsylvania’s $200 million program includes municipalities in the list of eligible applicants and rolls in fiber-optic line extensions with large scale regional infrastructure projects. The state is also looking for a 25% match for its money. Grant money cannot be used for paying interest on outstanding debt, issuance costs of new debt or refinancing existing debt. 

Applying for the programs and grants can circle into a Catch-22 in the remote corners of American Indian land. “If you know about the information and you’re going to participate in it, and you don’t have internet, how do you submit the information?” said Susan Masten, interim executive director of the Native American Financial Officers Association. 

Masten is a member of the Yurok Tribe in northern California and has been participating in efforts to bring broadband to Indian country since the Clinton administration. According to Masten, substandard connectivity on tribal lands is currently over 80%. 

Assuming the tribes are aware of the grant and have a channel to respond, a lack of human resources can present another hurdle. “If you’re a small tribe and you don’t have a grant writer, it makes it more challenging,” said Masten.

In May the House Energy and Commerce Committee held a hearing where a panel of interests including representatives from the cable industry lamented the high costs of running new lines to remote locations. Dr. George Ford, chief economist, Phoenix Center for Advanced Legal & Economic Public Policy Studies, cited an example that would require a $150,000 investment to connect one home.  

Some municipalities including Baltimore, Maryland, are exploring standing up and operating a publicly owned broadband system. Vermont is encouraging the formation of communication union districts that allows separate towns to team up on building out broadband infrastructure.  

Vice President Kamala Harris helped introduce the president’s remarks on Monday by saying, “Today twenty-four million people in our country do not have access to high-speed internet either because they cannot afford a monthly cost of care or because they live in communities that have not yet been fully connected to fiber optic networks. But let us agree in the 21st century in America high speed internet is not a luxury. It is a necessity.”