As government agencies prepare to review broadband Internet projects vying for $4.8 billion in new federal stimulus funds under the American Recovery & Reinvestment Act ("Recovery Act"), applicants are refining their proposals to ensure key technology, finance and compliance criteria are addressed. Intended to encourage a wide range of ideas for bringing high-speed Internet access to underserved areas and populations, the latest broadband stimulus gives business, community, education and municipal interests an opportunity to tap federal funds for capital and launch expenses.
In this Q&A, Pillsbury Communications partner Glenn S. Richards and Government Contracts & Disputes partner Joël Van Over, members of Pillsbury's Recovery Act Opportunities Team, describe broadband stimulus opportunities and key issues applicants need to consider, particularly those unaccustomed to government funding proposals and contracts.
Q. What are these broadband stimulus programs trying to achieve?
Richards: The Recovery Act includes expanding U.S. broadband penetration and adoption among its many initiatives intended to create jobs and spur economic activity. While there are significantly more broadband users today than even a few years ago, large areas of the country do not have adequate broadband connectivity, forcing residents to depend on slow or unreliable Internet connections. By tasking relevant federal agencies to fund new broadband projects in these areas, the Recovery Act envisions a near-term jobs catalyst as new networks are deployed, more computers made available and programs implemented that will encourage more people to subscribe to broadband services. This will ideally be followed by a strategic economic boost as residents then use the high-speed access to realize greater education and employment opportunities in a knowledge economy.
Q. The application window for projects seeking the final round of broadband funds runs from February 16 through March 15, 2010.
Van Over: It is important to note that the Recovery Act assigns separate federal agencies to review broadband applicants' proposals and disburse funds to awardees, depending on the nature and location of projects. The Department of Commerce's National Telecommunications and Information Administration (NTIA) manages the Broadband Technology Opportunities Program (BTOP), which is generally focused on expanding broadband through middle mile projects, rather than to end users, and to community institutions, such as public safety, libraries, and schools. The BTOP program also has funding to increase access to computers in public areas and for programs that will increase adoption of broadband services. At the same time, the U.S. Department of Agriculture's Rural Utilities Service (RUS) is managing the complementary Broadband Initiatives Program (BIP), which is focused more toward providing last mile connectivity in rural areas in particular, which for all practical purposes might not have any existing broadband options for residents.
Richards: The focus areas of each agency's program are important to understand because applicants need to determine which is a better fit, both in terms of the project type they have in mind, and the funding awards each provides. Awards can include grants, loans, or a combination of both, each with different considerations, from the amount of funds available to tax implications.
To select the appropriate program, applicants should review the separate "Notices of Funds Availability," or NOFAs, published for BTOP and BIP for full details on the types of projects agencies are looking to fund. There are categories for middle-mile projects establishing a broadband infrastructure presence in a given region, last-mile projects extending connectivity all the way to a residence or other premises, and awareness and training programs aimed at supporting populations who could be unaccustomed to using broadband. It is critical for applicants to consult the NOFAs and BIP and BTOP information through www.broadbandusa.gov, because last-mile and middle-mile project specifics can vary by agency. The documents also specify other eligibility criteria, such as determining which areas are rural and the availability of existing broadband connections in a proposed project's region.
Q. Who is eligible to submit a BTOP or BIP funding proposal?
Richards: The application process and forms are designed to encourage a wide range of proposals from a lot of applicant organizations. Existing telecommunications service providers of any size, as well as entrepreneurs, rural municipalities and education organizations can all submit projects for review. By focusing tightly on the broadband delivery objective, BTOP and BIP allow for a great deal of flexibility. There is a wide array of wired and wireless network equipment options today and a lot of creative potential, when you consider how different technology and community groups could join efforts to maximize the impact of broadband and its benefits in more communities.
Van Over: When you look at what the Recovery Act really wants to foster - a larger, self-sustaining economy – we think "creativity" is really going to weigh heavy in agencies' evaluation processes. Consider how you make the jump from simply new technology to its innovative uses that make improvements in commerce, healthcare, education and other areas possible.
It's technologically impressive to take broadband to rural community centers surrounded by farmland, for example, but what happens next? These connections can handle much more than e-mail and YouTube. What if there was an education component to help farmers establish a co-op and sell goods online with dynamic pricing? That gets at strategic ways to grow new broadband users' income, as well as reinforcing demand for the new broadband service. Cementing new incomes and productivity on each side is really in-line with the Recovery Act's intent.
Q. Are certain technologies or implementation approaches particularly well-suited to receive BTOP and BIP funding?
Richards: The government is not looking to "play favorites" with technology, so as long as the technical and implementation aspects are sound, different ideas should get a fair view on their merits. Most of the technologies powering broadband today are fairly mature and proven. There are frequently unique, individual factors applicants have to consider that impact their technology and other project contours, such as a region's size, user attributes or geography. Ultimately, the government wants to fund networks that can not only carry a signal, but are also well-managed, highly reliable and have the finances to cover operating expenses, which cannot be funded with government grants or loans. Agencies cannot afford to fund projects that take public funds and crash on users later, so we counsel clients to focus hard on maintenance and support issues as much as the breakthrough connectivity. Proposals addressing these are likely to be well-positioned. You have to approach the application process as if you were seeking funding from a bank or venture capitalist; every assumption will be challenged and must be supported by data provided with the application. You can't leave anything on the table – everything must go into the application.
Q. Current gaps in broadband penetration are often attributed to business and economic factors. Will Recovery Act funding finally overcome these barriers?
Richards: The Recovery Act is a stimulus – a boost. It can give applicants a jump-start by providing funds to cover capital costs, but applicants need to have detailed, comprehensive business plans demonstrating how they will be up and running, and ultimately self-sustaining in a few years' time. Federal funds are not indefinite, which means applicants have to carefully map their cost structures, whether applying alone or with partners, and know how they will handle pricing, budgets and operations accordingly. Again, these are meant to be durable, well-conceived projects taking extensive local attributes, users and business issues into account. The projects must also be "shovel-ready;" that is, ready to start as soon as funding is made available and substantially completed within two years after the award.
Q. What kind of compliance and regulatory requirements does government funding place upon broadband applicants and awardees?
Van Over: The regulatory and compliance "fine print" accompanying Recovery Act funding opportunities and awards is far-reaching and complex, and this is certainly true of broadband stimulus programs under BTOP and BIP. Because all these applications and awards concern government contracts, organizations unaccustomed to the federal contracting environment in particular face a steep learning curve and should consult experienced advisors to establish a compliance program and understand risks.
Broadband stimulus applications reference numerous federal contracting statutes, regulations, terms and guidance with significant legal implications, but if you are not extensively familiar with the contracting structure it makes compliance hard to appreciate at-a-glance.
The cost of complying with terms of this scale really needs to be factored into applicants' budgets, as anyone managing federal contracts in defense, energy, medicine or other fields will tell you. In addition to managing compliance with the Recovery Act's transparency, auditing and accountability requirements, applicants must also watch for evolving guidance on these items from the White House's Office of Management and Budget (OMB), as well as Commerce (NTIA) and USDA (RUS). New requirements could emerge and would need to be factored into project management.
Richards: Ensuring compliance across subcontractors is a major issue in BTOP and BIP opportunities, simply because of what goes into deploying broadband. You are inevitably going to have major construction work such as digging trenches or erecting, testing and configuring wireless gear. Not every applicant has earthmovers or enough field crews in-house, so they will have to turn to subcontractors. This could have the positive effect of keeping local contractors employed, but it also means these firms are going to be receiving and spending awardees' federal dollars, with all the accompanying rules and regulations.
Van Over: A crucial distinction is that when you submit one of these applications or proposals, you are effectively "certifying" to the government that you will not only comply with the terms, but that everything in your application – from details of your proposal's cost items to your technological approach – is 100 percent accurate. Even an inadvertent error, if material to the government, could technically constitutes making a false statement to the federal government, which would raise the risk of possible civil and/or criminal charges under the False Statements Act and False Claims Act, or result in termination of funding. Again, the federal aspect makes broadband stimulus proposals fundamentally different from making a funding pitch to private sector investors, for example.