On Friday afternoon, Jan. 15, 2010, the Commerce Department’s National Telecommunications and Information Administration (NTIA) and the Department of Agriculture’s Rural Utilities Service (RUS) released separate Notices of Funds Availability (NOFAs) triggering the second and final funding round for applications for broadband infrastructure, Public Computer Center and Sustainable Broadband Adoption grants and loans under the American Recovery and Reinvestment Act (the “Recovery Act”), as described in our previous alerts. Applications for the remaining $4.8 billion in grant and loan funding may be submitted starting Feb. 16, with a filing deadline of 5 p.m. Eastern Time on March 15, 2010.
Although most of the award decisions from the first round have not yet been announced, the agencies have now launched a second and final funding round, with many significant changes in direction and requirements from the first round. The new process uses different applications for NTIA’s Broadband Technology Opportunities Program (BTOP) and RUS’ Broadband Initiatives Program (BIP). This advisory provides an overview of key aspects of these NOFAs, with an emphasis on changes from the prior round.
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NTIA will spend the vast majority of its remaining funds on “comprehensive community” middle-mile infrastructure projects, with a strong preference toward public-private partnerships that emphasize the connection of “community anchor institutions” and regional economic development. Whereas in the first round NTIA required all projects to be located at least partly in unserved or underserved areas, that showing is now only a plus in favor of an application. This change opens the door for applicants barred by that requirement in the first round, and will raise increased concerns among existing service providers that funding will be provided to new overbuilders in areas where broadband is already available and widely adopted.
RUS dropped its controversial and highly limiting requirement to restict 100 percent grant awards to remote, unserved areas that were located more than 50 miles from a non-rural area. Instead, RUS will award up to 75 percent grant funding to projects in rural areas where less than 50 percent of homes have access to broadband of 5 Mbps (downstream plus upstream). In addition, RUS applicants can draw their proposed service areas without regard to census blocks, which could make it easier to meet this 50 percent test. On the other hand, RUS will not provide any funding for areas that do not meet the 50 percent / 5 Mbps availability test.
Most money (90 percent of BTOP and nearly 100 percent of RUS) is again reserved for infrastructure, which will disappoint advocates of greater funding by NTIA for Public Computer Center and Sustainable Adoption programs. However, significant funding for these programs is available, with largely unchanged rules. RUS also created a new Rural Libraries program, a supplemental Technical Assistance program, and a Satellite Projects program for areas that would remain unserved even after all other projects are funded.
Changes in the NTIA BTOP
- Focus on middle-mile projects serving community anchor institutions. Ninety percent of the second round’s total BTOP funding, $2.35 billion, has been set aside for Comprehensive Community Infrastructure (CCI) projects. These projects are intended to provide funds for new or substantially upgraded broadband infrastructure to community anchor institutions including schools, community colleges, hospitals, libraries, public safety entities and agencies that support greater use of broadband by vulnerable populations, including low-income, the unemployed and the aged.
- Public-private partnerships. The NOFA indicates a strong preference for public-private partnerships among government, nonprofit and for-profit entities, and other key community stakeholders.
- Demonstrating underserved populations not required. CCI projects need not be located in unserved or underserved areas, although location in such areas will considered as a benefit in the scoring system.
- Preference for economically distressed areas. NTIA will favor projects in areas with low per capita income and/or high unemployment.
- Preference for projects with 30 percent or more matching funds. The 20 percent minimum matching requirement is retained, and preference will be given for applications offering at least a 30 percent match. Applicants may satisfy this requirement through direct matching funds (including loan commitments) or through in-kind contributions such as network facilities that are eligible for funding under program rules.
- Scoring. Other scoring preferences include points for collaboration with other Recovery Act programs, contracting with small and disadvantaged businesses, offering affordable services and higher speeds, and demonstrating a clear upgrade path.
- Service areas must be comprised of census block groups. The minimum geographic unit for a proposed service area will be a census block group, rather than a block as in the first round. Block groups include an average of 39 blocks, although they vary widely. This change will make it more difficult for applicants to isolate small pockets of underserved populations (and thereby qualify for funding to serve them) within larger areas that are not underserved. However, this change is less important given that it is no longer mandatory for applicants to demonstrate that the area is underserved.
- Middle-mile projects may include last-mile component. A middle-mile project may, but is not required to, include a last-mile component if it costs less than $10,000 per home passed. NTIA will favor projects with last-mile components in unserved or underserved areas and those that include commitments or nonbinding letters of intent from one or more last-mile broadband service providers. In rural areas, lastmile costs may not exceed 20 percent of the project, although rural middle-mile BTOP applicants may want to consider not requesting any last-mile funding because NTIA appears to prefer that such funding be sought from RUS.
- Clear ranking of evaluation criteria. The NOFA spells out the order of importance of each of its criteria, and suggests that an application that meets all of the lower-ranked criteria would be prioritized lower than an application that only meets one or two of the top criteria. NTIA’s complete list of criteria is listed at the end of this advisory.
- Range of expected awards. NTIA expects most awards to fall within the following ranges, and requires applicants seeking more to provide additional justification. CCI: $5 million – $150 million; Computer Center and Adoption projects, $500,000 – $15 million.
Changes in the RUS BIP
- Focus on last-mile projects in rural areas without 5 Mbps broadband. The "vast majority" of RUS funding ($1.7 billion of $2 billion) will go to last-mile projects in areas that are 75 percent rural and where fewer than 50 percent of households currently have access to “high speed” broadband service of 5 Mbps or higher (upstream and downstream combined). The NOFA does not specify whether advertised or actual speeds will be used for this measurement. RUS will assign higher priority to projects that are constructed to deliver higher speeds. RUS will also fund some middle-mile projects (up to $300 million of the whole), but only to current RUS borrowers and only where 75 percent of the interconnection points are in rural areas with fewer than 50 percent of premises having 5 Mbps access.
- “Standard” 75 percent grant/25 percent loan awards. In the first round, grant awards were capped at 50 percent of a project cost (with the rest to be provided as a loan) unless the application proposed to serve a remote, unserved area. In this round, the "standard" award for all projects will be a 75 percent grant/25 percent loan combination for all projects, although applicants can score more points for proposing a lower grant percentage and can also seek a waiver to apply for a higher grant percentage. Note that RUS does not have a matching requirement, so a 25 percent loan component could be viewed as similar, if not preferable, to NTIA’s 20 percent matching requirement.
- Elimination of census block as mandatory unit for service areas. Whereas in the first round service areas were generally required to be composed of whole census blocks, in this round the only requirement is that the proposed area be contiguous (and that requirement is navigable by the option of creating multiple proposed service areas). The ability to draw any boundary for the service area is a significant change that could make it easier for those armed with data to identify eligible areas.
- Scoring. RUS will award additional points for, among other things, higher speeds, lower proposed grant percentages and greater distances from non-rural areas.
- “$10,000 per premises” limitation. RUS will limit last-mile funding to no more than an average of $10,000 per premises passed unless a waiver is granted (e.g., in cases where the project will serve a significant number of critical community facilities).
- One-step process. BIP will now have a one-step consideration process, without a second "due diligence" phase. Materials previously required during the second step, such as an Environmental Questionnaire and required environmental permits, will now be due with the application.
- New, later funding window for “satellite projects.” RUS will reserve up to $100 million for funding of satellite projects in areas that still remain unserved after all other awards are made.
- Later funding window for technical assistance and rural libraries funding. New applicants and firstround awardees will be eligible to apply for additional grant funding of up to $200,000 for “Technical Assistance” in developing regional broadband development strategies in rural areas, working in publicprivate partnerships. In addition, RUS indicated that it will subsequently invite proposals for a small grant program for connecting rural libraries.
- New "reconsideration opportunity." RUS may permit applicants who otherwise would not receive awards to adjust their applications in order to be successful.
Other requirements and changes for BTOP and BIP
- Rapid completion of otherwise unexecuted projects. BIP and BTOP applicants must demonstrate that the project can meet two-thirds of its milestones within two years and be fully completed no later than three years after issuance of the award, and that the project would not have been implemented during the grant period without federal assistance.
- Nondiscrimination and interconnection. Both agencies retained their network nondiscrimination and interconnection obligations for project facilities.
- Ease of initial application. The agencies went in different directions in addressing the burden of the application form. The NTIA application may be somewhat easier to complete, as NTIA removed from the initial application the requirements to provide a professional engineer certification and eliminated the requirement to use the mapping tool. Some other application attachments may also be deferred to the due diligence phase.
- State and tribal input. NTIA will invite states and tribal entities to provide input on applications and priorities for funding, similar to the prior round process. RUS does not have a formal process for receiving such input.
- Reimbursement of application preparation costs. Pre-application costs incurred after the official publication date of the NOFA, including legal and consultant fees, are reimbursable (not to exceed 5 percent of the award) if it is granted.
- NTIA relaxation of assignment restriction. In the first round, funded broadband facilities could not be sold or leased unless the applicant included the proposed sale or lease in the application or the agencies waived the restriction after 10 years from the date of award. Under the new NTIA NOFA, awardees may petition for a waiver authorizing the sale or lease of assets at any time during the life of the award-funded facilities. RUS did not relax these requirements.
- Reporting requirements. BTOP’s reporting requirements have been expanded slightly to include new quarterly reports on the costs of middle-mile projects (cost per mile, cost per household and, if applicable, per tower) and similar information for projects with a last-mile component. Public Computer Center award recipients must submit quarterly reports including, among other things, the total project cost per workstation.
- Partnership and vendor database. The agencies have established a database where parties can search for potential partners, vendors and community anchors.
- Project funding limitations. RUS will not fund more than one project to serve any given geographic area or any project in existing broadband service areas of current RUS borrowers.
Response process for existing service providers
Existing service providers will again be able to file responses to applications, but each agency adopted its own different procedures.
The RUS NOFA provides little detail about the response process other than to say that existing service providers will have 30 days to file after the release of a Public Notice regarding the proposed service areas. The RUS process could be significantly more frustrating for existing service providers than the prior round, because proposed service areas will not necessarily be linked to any standard geographic area such as census areas, municipal boundaries or ZIP codes.
Service providers electing to respond will have to manually review the applicants’ maps and then try to extract their network and subscribership information for that area. Otherwise, the RUS response form may be similar to the one used in the prior round, except that responders will presumably be required to provide data that would show the percentage of premises in the proposed service area that they are capable of providing broadband service of at least 5 Mbps (downstream plus upstream). The number of actual subscribers is no longer part of any RUS underserved test, so that data is not as important for the RUS response as it was in the first round, although the agency may well still ask for it.
Responding to BTOP applications should be somewhat easier than RUS since proposed service areas must consist of entire contiguous census block groups or tracts, and since responders will no longer be required to use the mapping tool to draw maps of their own service areas. Existing service providers will only be given 15 days rather than 30 to respond. These responses are potentially less consequential than in the first round, since an applicant is no longer disqualified if the area is not underserved, but the response remains the only invited means for an existing service provider to attempt to affect the agencies’ scoring of an application.
Appendix: NTIA criteria for BTOP infrastructure funding
As noted above, NTIA has established a precise order of importance of the criteria for CCI projects. An application that does not include, for example, the second criteria (public-private partnerships), even if it meets all of the other criteria, could be scored lower than an application that only meets the first two criteria and none of the others. The criteria ranking is as follows:
(1) Projects that will deploy middle-mile broadband infrastructure with a commitment to offer new or substantially upgraded service to community anchor institutions. Those projects proposing to serve a significant number of community anchor institutions that have expressed a demand or indicated a need for access or improved access to broadband service will receive higher priority; (“Community anchor institutions means schools, libraries, medical and healthcare providers, public safety entities, community colleges and other institutions of higher education, and other community support organizations and agencies that provide outreach, access, equipment, and support services to facilitate greater use of broadband service by vulnerable populations, including low-income, the unemployed, and the aged.”)
(2) Projects that will deploy middle-mile broadband infrastructure and incorporate a public-private partnership among government, nonprofit and for-profit entities, and other key community stakeholders, particularly those that have expressed a demand or indicated a need for access or improved access to broadband service;
(3) Projects that will deploy middle-mile broadband infrastructure with the intent to bolster growth in economically distressed areas (which are areas with per capita income of 80 percent or less of the national average or an unemployment rate that is at least one percent greater than the national average unemployment rate for the most recent 24-month period for which data are available).
(4) Projects that will deploy middle-mile broadband infrastructure with a commitment to serve community colleges that have expressed a demand or indicated a need for access or improved access to broadband service;
(5) Projects that will deploy middle-mile broadband infrastructure with a commitment to serve public safety entities that have expressed a demand or indicated a need for access or improved access to broadband service;
(6) Projects that will deploy middle-mile broadband infrastructure that includes (i) a last-mile infrastructure component in unserved or underserved areas; or (ii) commitments or nonbinding letters of intent from one or more last-mile broadband service providers. For last-mile infrastructure components in rural areas, however, the additional costs of the last-mile component used to offer service to residential consumers and noncommunity anchor institutions may not exceed more than 20 percent of the total eligible costs of the project; and
(7) Projects that will deploy middle-mile broadband infrastructure and propose to contribute a non-federal cost match that equals or exceeds 30 percent of the total eligible costs of the project.