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The Federal Communications Commission (“FCC” or “Commission”) is poised to implement a comprehensive overhaul of its existing broadband data mapping and collection process with a new Broadband Data Collection (“BDC”) program. Under the BDC, all facilities-based providers of fixed and mobile broadband Internet access services will be required to submit broadband data on a biannual basis. As discussed below, the initial filing window is between June 30, 2022, and September 1, 2022.

Ensuring nationwide access to affordable high-speed broadband service is a national priority. A critical but elusive step in this effort is accurate broadband availability data. This challenge is even more pressing in light of the unprecedented federal broadband funding being made available under the Infrastructure Investment and Jobs Act (“IIJA”)(See Keller and Heckman’s Broadband Infrastructure Funding Blog Series | Beyond Telecom Law Blog).

This entry is the first in a series of posts on the FCC’s Broadband Data Collection program and will provide background and an introduction to the program, as well as an overview of key requirements. Subsequent posts will delve more deeply into specific requirements as well as corresponding data collection provisions of the IIJA.

Current Broadband Data Collection Processes and the History of Form 477

Over the past two decades, the FCC has addressed the challenge of obtaining accurate broadband availability data, with the most comprehensive effort to modernize data collection coming in 2019 with the FCC’s adoption of a Digital Opportunity Data Collection (“DODC”) proceeding. Not long after, Congress passed the Broadband Deployment Accuracy and Technological Availability (“DATA Act”). These two efforts pushed the FCC to work towards a data collection solution that fits today’s landscape culminating in the new BDC program.

Historically the FCC has collected broadband deployment data from facility-based service providers through FCC Form 477. In its current iteration, Form 477 collects data twice each year at the census block level, instructing service providers to report as “served” any Census block in which any homes or businesses are served by the service provider. Under this approach, if a provider makes fixed broadband available to one location in a census block, the entire block is considered served by the provider.

Digital Opportunity Data Collection and the Broadband DATA Act

In 2019, the Commission concluded “that there is compelling and immediate need to develop more granular broadband deployment data” and, to meet this goal, initiated a proceeding to create the Digital Opportunity Data Collection (“DODC”) program.[1] The FCC described the DODC initiative as “a new data collection that will collect geospatial broadband coverage maps from fixed broadband Internet service providers of areas where they make fixed service available.”[2] In addition to establishing the Data Collection, the FCC adopted a process for crowdsourcing information to allow the public to provide input regarding providers’ broadband coverage maps. As part of this effort, the FCC sought comment on sunsetting the Form 477.

On March 23, 2020, Congress enacted the DATA Act. The DATA Act requires the FCC to adopt rules regarding the collection and dissemination of granular broadband service availability data, with the goal of establishing a “Broadband Serviceable Location Fabric,” which will be a dataset of all locations in the U.S. where fixed broadband Internet access service can be installed. The data must be geocoded, compatible with commonly used GIS software, and updated at least every 6 months.

In creating the Fabric, the DATA Act requires the Commission to establish processes to (i) verify the accuracy of the data submitted by broadband service providers, (ii) collect verified availability data from other federal agencies, state, local, and Tribal governmental entities, and other third parties, and (iii) facilitate “a user-friendly challenge process through which consumers, state, local, and Tribal governmental entities, and other entities or individuals may submit coverage data to the Commission.

Over the past two years, the Commission has adopted a series of orders aimed at implementing the DATA Act and creating its new BDC program.[3] These include data submission requirements, verification procedures, and coverage maps necessary to create the Fabric, as well as establishing a challenge process as to what constitutes a “broadband serviceable location,” as well as rules on sunsetting the census-block approach used on Form 477.

Under the FCC’s BDC program, all facilities-based fixed service providers are required to report broadband Internet access service coverage and identify where such services are offered to residential and business locations. The rules establish speed and latency reporting requirements for fixed service providers and require terrestrial fixed wireless services providers to report the coordinates of their base stations. Mobile service providers are required to provide even more information.

On February 22, 2022, the Commission issued a Public Notice announcing the filing dates for the inaugural data collection under the new BDC program. Providers can begin submitting data on June 30, 2022, and all data must be submitted by September 1, 2022. On March 4, 2022, the Commission published Data Specifications for the Broadband Data Collection related to the biannual submission of subscription, availability, and supporting data for the BDC. The specifications provide guidance to filers on how to prepare and format availability and other related data for submission. On March 9, 2022, the Commission published two more data specifications, which provided additional detail about the technical elements of the data to be collected as part of the mobile challenge, verification, and crowdsource processes.[4]

The FCC’s implementation of the BDC and the initial filing window does not alter the on-going obligation of facility-based fixed or mobile broadband service providers to file the semiannual Form 477. Until the Commission announces a sunset date for the submission of Form 477 broadband deployment data, all service providers currently required to submit these data under Form 477 must continue to do so.

We encourage broadband service providers to closely review the data specifications in preparation for the upcoming BDC. Once the filing window opens, we recommend that providers submit their information as early as possible to allow for issues that may arise due to the new process.

Our next entry will focus on the who, what, how, when, and where of the BDC filing.

[1] FCC Establishes New Digital Opportunity Data Collection, WC Docket Nos. 19-195, 11-10, Press Release (rel. August 1, 2019).

[2] Id.

[3] Second Report and Order and Third Further Notice of Proposed Rulemaking; Third Report and Order.

[4] FCC Publishes Data Specifications for the Broadband Data Collection; FCC Releases BDC Mobile Technical Requirements Order.

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We understand that regulatory compliance is not the most engaging issue. Whether planning to deploy a new broadband network or operating an existing one, ensuring that the network and services are fully compliant with various state and federal regulatory obligations is an easy task to put off. But if not addressed, regulatory compliance can turn into a very expensive problem.

Now would be an ideal time to identify and address any regulatory compliance issues for several reasons:

  • A regulatory compliance failure could have implications for grant funding. Many broadband projects have received funding support through the American Recovery and Reinvestment Act (ARPA). Subawards made through ARPA typically require recipients to comply with all applicable state and federal regulations as a contractual matter. Broadband grants made under forthcoming Infrastructure Act programs (BEAD, etc.) may include similar requirements.
  • Any transfer of control or acquisition of a broadband network or company will normally require a detailed review of the company’s regulatory compliance status. Transactions involving broadband providers that receive support from one of the FCC’s Universal Service Fund/High Cost Fund programs will involve close scrutiny to ensure the target company is in compliance with applicable requirements. Any outstanding compliance issues can significantly delay those transactions.
  • The FCC could implement an enforcement action, potentially resulting in fines and other adverse consequences.

As readers are probably aware, broadband service is comparatively “unregulated” (as opposed to “telecommunications service”). Consequently, broadband providers that are not also providers of “telecommunications service” have relatively few regulatory obligations. Nevertheless, a number of important regulatory obligations are likely to apply to most broadband providers, including the following:

  • Posting of a “network transparency” statement
  • Annual submission of Form 477 (broadband connection reporting)
  • Submission of data for the new FCC Broadband Data Collection initiative (as finalized)
  • Submission of a CALEA System Security and Integrity Plan
  • Compliance with Digital Millennium Copyright Act safe harbor requirements (copyright policy, etc.)

If interconnected VoIP is provided alongside broadband service, the regulatory compliance obligations expand significantly. In that case, regulatory obligations may also include, for example:

  • Annual submission of Form 499-A, and, if not a de minimis contributor, quarterly 499-Q (Federal Universal Service Program Reporting and Contributions)
  • Development of Customer Proprietary Network Information (CPNI) compliance program and annual certification regarding such compliance
  • STIR/SHAKEN compliance certification
  • Annual disability reporting certification (per CVAA)
  • E-911 fee requirements

Even if you have undertaken a compliance review at some point in the past, keep in mind that the FCC’s rules are constantly evolving, and the nature of your services and customers may have changed as well.   It is important to periodically refresh past compliance decisions to ensure that they are still valid.

If you would like to explore whether your company or project is fully compliant with all applicable regulatory requirements – and what to do if you are not – we would be glad to speak with you. Please contact one of the attorneys in the Telecommunications Practice Group, or email us at khbroadband@khlaw.com to set up an initial discussion.

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Keller and Heckman Partners Jim Baller, Casey Lide, Tracy Marshall, Sean Stokes, and Wes Wright will present at a workshop during the Broadband Communities Summit to take place in Houston, Texas on May 2-5, 2022. The summit will feature presentations by community leaders focusing on providing high-speed broadband networks. It will also address the key legal issues at every stage, from preliminary opportunity assessment to ongoing operation and regulatory compliance. Jim, Wes, Tracy, and Sean’s presentation is titled, “Key Legal Issues Affecting Public Broadband Initiatives and Partnerships.” Additionally, Jim will present at a super session sponsored by the Coalition for Local Internet Choice (CLIC) on, “Broadband Partnerships for these Extraordinary Times.”

For more information on this event, including registration, please click here.

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Broadband grants awarded under programs established by the American Rescue Plan Act (ARPA) and the Infrastructure Investment and Jobs Act (IIJA) could be subject to federal corporate income tax, effectively requiring corporate recipients of grant funds to return 21 percent of it to the federal government.

While the IRS has in the past declared a “safe harbor” from taxation for certain broadband grants (specifically, BTOP and BIP grants, in 2010), doing so now could be more challenging due to statutory changes adopted as part of the 2017 Tax Cuts and Jobs Act, as described below.

If not conclusively addressed, the taxation issue could significantly blunt the positive impact of broadband grants made under ARPA and the IIJA, including the massive $42 billion infusion forthcoming under the BEAD program. Entities expecting to receive grant funds would need to budget for the tax bill, potentially requiring a reduction in the scope of their project. Entities might also consider structuring a project so that grant funds are received by tax-exempt entities.

This blog post provides a high-level overview of these issues. Please note that the following is a greatly simplified discussion provided for general informational purposes only. It is not intended to serve as legal advice and should not be treated as such, especially with respect to an individual entity’s tax status.

1. In general, federal grants are taxable.

As a starting point, the receipt of a government grant by a business is generally not excluded from the business’s gross income under the Internal Revenue Code and is, therefore, taxable.[1] “A federal grant is ordinarily taxable unless stated otherwise in the legislation authorizing the grant.”[2] (A government loan, on the other hand, is not taxable, because it must be paid back.)

2. “Nonshareholder contributions to capital” (Brown Shoe Co., Inc. v. Commissioner).

While the general rule states that a federal grant is taxable income, a doctrine first enunciated in 1950 has provided a basis to hold that a federal grant can be excluded from gross income. In the 1950 case of Brown Shoe Co., Inc. v. Commissioner, the U.S. Supreme Court considered the tax treatment of cash and property received by a shoe company from community groups as an inducement to locate company facilities in the community.[3] The Court held that the income received by the shoe company from the community groups represented “contributions to capital” by nonshareholders, and could, therefore, be excluded from income. The Court’s reasoning emphasized that the contributions to the shoe company by the community were made for a community benefit, and not in exchange for direct service, “their only expectation being that such contributions might prove advantageous to the community at large.”[4]

3. IRC Section 118.

In 1954, Congress enacted IRC Section 118, which directly addressed nonshareholder contributions to capital and essentially codified the Brown Shoe Co. holding. The general rule of Section 118 was that gross income of a corporation does not include any contribution to its capital. As a 2018 publication from Deloitte notes, Section 118 “went on to say that a contribution to capital did not include any contribution in aid of construction or any other contribution from a customer or potential customer, meaning that these amounts were taxable and included in gross income. This meant that other non-shareholder capital contributions could be excluded from a corporation’s gross income.”[5]

4. 2010 BTOP and BIP grant programs: IRS Rev. Proc. 2010-34.

In the American Recovery and Reinvestment Act of 2009, Congress created two significant broadband grant programs: The $4 billion Broadband Technology Opportunities Program (BTOP) administered by NTIA, and the $2.5 billion Broadband Initiatives Program (BIP) administered by the U.S. Department of Agriculture’s Rural Utilities Service.   The BTOP and BIP programs presented the same taxation issue as that currently before us: would corporate grant recipients be required to report the grant funds as gross income?

In 2010, the IRS pronounced that BTOP and BIP grant funds need not be reported as gross income.[6] In doing so, the IRS relied entirely on the aforementioned Section 118. The IRS said: “Section 118(a) of the Code provides that in the case of a corporation, gross income does not include a contribution to the capital of the taxpayer. Section 1.118-1 of the Income Tax Regulations provides that section 118 applies to contributions to capital made by a person other than a shareholder, for example, property contributed to a corporation by a governmental unit for the purpose of enabling the corporation to expand its operating facilities.”[7] On this basis, the IRS said it would not challenge a corporate taxpayer’s exclusion of BTOP and BIP grant funds from gross income.

Based on the IRS’s 2010 determination, one might reasonably assume that broadband grants made under ARPA and IIJA programs could be safely classified as non-taxable income, with the IRS perhaps needing only to update its 2010 determination (which dealt specifically with BTOP and BIP) to apply to the new grant programs. Unfortunately, a 2017 legislative change has complicated the situation.

5. The 2017 Tax Cuts and Jobs Act.

The 2017 Tax Cuts and Jobs Act (TCJA) significantly amended IRC Section 118.[8] Most relevant for our purposes, the TCJA added an exception to the definition of “contribution to the capital of the taxpayer” so that the term no longer includes “any contribution by any governmental entity or civic group….”[9] As the Deloitte paper notes, “[t]he TCJA left unchanged Section 118’s general rule that contributions to capital are not included in gross income. What did change is the addition of language to Section 118 that makes grant proceeds from governmental entities or civic groups to a corporation taxable upon receipt as gross income….”[10]

In short, the legislative changes adopted in 2017 seem to foreclose the rationale used by the IRS in 2010 to allow BTOP and BIP grant funds to be exempt from taxation.

6. What Now?

As explained above, broadband grant funds received by corporations under ARPA (for example, as a subrecipient in a project funded under the Coronavirus State and Local Fiscal Recovery Fund), or under the forthcoming IIJA programs (including the BEAD program) could well be “gross income” subject to taxation at a 21 percent rate. Such an outcome would be clearly contrary to the objectives of ARPA and the IIJA and would hamstring national efforts to deploy vitally needed broadband infrastructure.

Prompt action by the IRS would resolve the issue, but after the 2017 TCJA, it is unclear whether and how the IRS would be able to do so. If the IRS is unable to solve the problem, Congressional action may ultimately be necessary.

[1] Internal Revenue Service, “CARES Act Coronavirus Relief Fund frequently asked questions,” accessed 3/1/2022.

[2] Internal Revenue Service, Publication 937 Business Reporting, IRS Pub. 937, 1989 WL 508466 (1989).

[3] Brown Shoe Co., Inc. v. Commissioner of Internal Revenue, 339 U.S. 583 (1950).

[4] Id., at 591; see, e.g., U.S. v. Chicago, Burlington, and Quincy Railroad Co., 412 U.S. 401 (1973).

[5] Deloitte, “Tax Reform Impacts on Section 118,” Journal of Multistate Taxation and Incentives, Vol. 28, No. 6, September 2018.

[6] Internal Revenue Service Rev. Proc. 2010-34.

[7] Id.

[8] See James Adkinson, “State and Local Location Incentives:  Reminder That the Rules Have Changed,” The Tax Adviser, June 1, 2019.

[9] 26 U.S.C. § 118(b).

[10] Deloitte, supra.

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$10 Billion Treasury Program Makes Available $100 Million+ for Each State – But States Need to Apply For It

Over the past several months, broadband policymakers, advocates, and service providers have focused primarily on two main developments in the world of broadband infrastructure funding:

  1. American Rescue Plan Act (ARPA) funds that are already available to States and local governments through the ARPA State and Local Fiscal Recovery Fund (SLFRF) (ARPA Sections 602 and 603), which may be used for “necessary…broadband infrastructure”; and
  2. The massive broadband funding programs enacted as part of the Infrastructure Investment and Jobs Act (“IIJA”), including the $42.45 billion Broadband Equity and Deployment (BEAD) Program (from which funding is unlikely to be generally available until 2023).

States, local governments, service providers and potential partners should also be aware of the Coronavirus Capital Projects Fund (CPF), another significant broadband infrastructure funding opportunity that seems to have been overshadowed by the other programs above. While States await rules and eligibility determinations for the Infrastructure Act funds, CPF funding may be available in the meantime. Moreover, CPF funding might be suitable for projects that may not otherwise be eligible for funding under the Infrastructure Act: there is no formal requirement that CPF-funded broadband projects serve “unserved” or “underserved” locations, for example (as further discussed below). 

Adopted as Section 604 of ARPA and administered by the Treasury Department, the CPF makes available $10 billion to States, territories, and Tribal governments – not directly to local governments – “to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency.” Each State is allocated at least $100 million. Note that this is in addition to ARPA SLFRF funds that the State may already have received. 

Unlike the ARPA provision establishing the SLFRF, which enables funds to be used for “necessary… broadband infrastructure,” the CPF statute does not even include the word “broadband.” However, Treasury has made clear that broadband infrastructure is an acceptable use of CPF funds. In fact, Treasury seems to be actively encouraging it, giving more emphasis to broadband than to any other purpose to which the funds may be put: “Treasury is launching the Capital Projects Fund to allow recipients to invest in capital assets that meet communities’ critical needs in the short- and long-term, with a key emphasis on making funding available for broadband infrastructure.”  

100 Mbps symmetrical. A broadband infrastructure project supported with CPF funds must be “designed to deliver service that reliably meets or exceeds symmetrical speeds of 100 Mbps so that communities have future-proof infrastructure to meet their long-term needs.” More to the point, “[r]ecipients are encouraged to prioritize investments in fiber-optic infrastructure where feasible.” As with SLFRF funding, though, if it would be impracticable “because of geography, topography or excessive cost,” a broadband project may provide between 20 Mbps and 100 Mbps upload speeds so long as it is scalable to symmetrical 100 Mbps.

No “unserved”/“underserved” requirement. There is no firm requirement that a CPF-funded broadband project must primarily serve “unserved” or “underserved” locations, but Treasury’s CPF Guidance states that applicants are “encouraged to focus on serving locations without access to reliable wireline speeds of [100/20 Mbps].” State recipients must articulate “why the communities they have identified to be served by Broadband Infrastructure Projects have a critical need for those projects as is related to access, affordability, reliability and/or consistency.” (at p. 4)

“Any available data.” “When determining the communities to be served by Broadband Infrastructure Projects, Recipients may choose to consider any available data including but not limited to documentation of existing broadband internet service performance, federal and/or state collected broadband data, user speed test results, interviews with community members and business owners, reports from community organizations, and any other information they deem relevant.”

Local governments, non-profits, and cooperatives encouraged. As with SLFRF-funded broadband projects, Treasury “encourages Recipients [i.e., States] to prioritize Projects that involve broadband networks owned, operated by or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to generate profits and with a commitment to serving entire communities.” (CPF Guidance, at p. 3)

Affordability. Treasury’s CPF Guidance encourages States to address affordability “as a barrier to full use of the internet when developing their Program Plans for Broadband Infrastructure Projects,” and States are required to consider affordability when selecting broadband infrastructure projects to fund.  States “are also encouraged to consult with the community as part of the process they undertake to consider affordability and are required to publish the description of their process for considering affordability in their project selection process.”
(at p. 4)  

States must submit a “Grant Plan” for CPF funds. Unlike ARPA SLFRF funds, which are automatically provided to States and local governments in accordance with a particular formula, States must submit an application to receive CPF funds. States should have already applied to receive CPF funds generally (the deadline was December 27, 2021). States must then submit a single, detailed Grant Plan proposing how the State will use the funds, along with one or more “Program Plans,” which must be received by September 24, 2022. “For example, a State might file a Grant Plan that indicates that it intends to spend funding on broadband deployment throughout the State, and a Program Plan that provides detailed information on its deployment plan for only some of the counties in the State. Later, it could file Program Plans detailing its deployment plans for other counties in the State.” (CPF Guidance, at p. 15)

State Grant Plans will be reviewed by Treasury, and funds disbursed, on a rolling basis.

Subawards by State Recipients. As noted, CPF funding will be made available only to States, territories, and Tribal governments. Those recipients are expected to award funds to subrecipients, such as other levels or units of government (e.g., municipalities or counties), non-profits, or private entities. 

For additional details on the Coronavirus Capital Projects Fund, please refer to the following Treasury Department publications:

• Treasury Department CPF Website

• CPF Guidance

• CPF FAQ

Part 6 of the Keller and Heckman Infrastructure Act Blog Series

This is our 6th entry in our blog series on the major provisions of the Infrastructure Investment and Jobs Act (“the IIJA” or “the Act”). Previous blog entries examined the $42.45 billion Broadband Equity Access and Deployment (BEAD) Program, the $1 billion Middle Mile grant program, the Act’s support for broadband partnerships,  the Affordable Connectivity Program, and the Act’s key cybersecurity provisions. Today’s post reviews the Act’s provisions aimed at promoting digital equity by increasing broadband adoption and accessibility.

Digital Equity Act Allocates $2.75 Billion for Digital Equity and Inclusion

The Digital Equity Act (“DEA”) (enacted as §§ 60301 – 60307-the IIJA) allocates $2.75 billion to promote digital equity and digital inclusion. The DEA establishes three new grant programs to be administered by the National Telecommunications and Information Administration (“NTIA”): (1) State Digital Equity Planning Grants, (2) State Digital Equity Capacity Grants, and (3) Digital Equity Competitive Grants. Each is briefly summarized below.

Before proceeding, readers should note that NTIA has issued a request for comment on several IIJA broadband programs, including the Digital Equity Planning Grant Program, with comments due February 4, 2022. NTIA intends to release a future request for comment on the State Digital Equity Capacity Grant Program and the Digital Equity Competitive Grant Program.

1. State Digital Equity Planning Grant Program ($60 million)

The State Digital Equity Planning Grant Program allocates $60 million for states and territories to develop “Digital Equity Plans.” The purpose of the program is to ensure that states have the planning capacity to design and support digital equity and inclusion programs. The NTIA will make planning grants available directly to states.

To be eligible for a grant, a state must submit an application in response to the NTIA’s publication of a “Notice of Funding Availability” and designate a plan administrator.[1] The application must include a commitment to develop the state digital equity plan within one year after being awarded the grant.

Among other things, a State Digital Equity Plan must:

  • Identify barriers to digital equity faced by covered populations[2] in the state;
  • Identify measurable objectives for documenting and promoting: (1) the availability, affordability, and access to broadband technology; (2) the online accessibility and inclusivity of public resources; (3) digital literacy; (4) awareness and use of measures to secure an individual’s online privacy and cybersecurity; and (5) the availability and affordability of consumer devices and technical support;
  • Provide an assessment of how the objectives will impact the state’s: (1) economic and workforce development goals; (2) educational goals; (3) health goals; (4) civic and social engagement; and (5) delivery of other essential services; and
  • Provide a description of how the state plans to collaborate with key stakeholders including: (1) community anchor institutions; (2) municipal governments; (3) local educational agencies; (4) nonprofit organizations; (5) organizations that represent people with disabilities, aging individuals, individuals with language barriers or low levels of literacy; (6) the state’s non-federal incarcerated population; (7) civil rights organizations; (8) workforce development programs; and (9) public housing authorities.

2. State Digital Equity Capacity Grant Program ($1.44 billion)

The State Digital Equity Capacity Grant Program allocates $1.44 billion for states and territories to support the implementation of their State Digital Equity Plans.[3] The NTIA will dispense grant funding based on the following criteria:

  • 50% of the total grant amount shall be based on the population of the eligible state in proportion to the total population of all eligible states.
  • 25% of the total grant amount shall be based on the number of individuals in the eligible state who are members of covered populations in proportion to the total number of individuals in all eligible states who are members of covered populations.
  • 25% of the total grant amount shall be based on the comparative lack of availability and adoption of broadband in the eligible state in proportion to the lack of availability and adoption of broadband of all eligible states.

Digital Equity Capacity Grants may be used to:

  • Update or maintain the State Digital Equity Plan (no more than 20% of total).
  • Implement the State Digital Equity Plan (including subcontracting for assistance implementing the plan).
  • Pursue digital inclusion activities consistent with the State Digital Equity Plan.

States will have five years to spend grant awards. The grant funds are meant to supplement, not supplant, other federal or state support for these activities.

3. Digital Equity Competitive Grant Program ($1.25 billion)

The Digital Equity Competitive Grant Program allocates $1.25 billion[4] to support efforts to achieve digital equity, promote digital inclusion activities, and spur greater adoption of broadband among covered populations.

Unlike State Digital Equity Planning Grants and State Digital Equity Capacity Grants, the Competitive Grants are broadly eligible to any political subdivision,  agency, or instrumentality of a state, including an agency responsible for administering adult education and literacy activities; an Indian Tribe, Alaskan Native, or Hawaiian Native organization; or a foundation, corporation, institution, association, or coalition if for a not-for-profit providing services in the state (but is  not a school); a community anchor institution located in the state; a local educational agency; an entity located in the state that carries out a workforce development program; or a partnership of eligible entities.

In reviewing applications, NTIA will consider:

  • Whether the applicant will increase Internet access and broadband adoption among covered populations;
  • Geographic diversity of applicants; and
  • The extent to which an application may duplicate or conflict with another program.

Grants must support at least one of the following:

  • Development and implementation of digital inclusion activities that benefit covered populations.
  • Facilitating the adoption of broadband by covered populations to provide educational and employment opportunities.
  • Implementation of training programs for covered populations that cover basic, advanced, and applied skills—or other workforce development programs.
  • Provision of free or low-cost equipment and networking capabilities to covered populations.
  • Construction, upgrade, or operation of new or existing public access computing centers for covered populations through community anchor institutions.

The federal share of any grant funded project cannot exceed 90%. Grants are to be used over a four year period. Finally, funds are meant to supplement, not supplant other federal or state support for these activities.

***

As always, if you require additional information or would like to discuss any aspect of the above, please reach out to any of the attorneys in the KH Telecommunications Practice Group. We also welcome your feedback and questions via KHBroadband@khlaw.com.

(To receive alerts when new blogs are published, please subscribe to the Beyond Telecom Law Blog by entering your email where indicated on the right side of this page, or subscribe to the KH Broadband Digest (an email compendium of broadband news delivered every couple of days)).

[1] The digital equity plan administrator may be a state, political subdivision, agency, or instrumentality of the state; an Indian Tribe, Alaskan Native, or Hawaiian Native organization; or a nonprofit or governmental community support organization located in the state (other than a school).

[2] “Covered populations” include those living in low-income households or rural areas, older adults, veterans, racial or ethnic minorities, and individuals with disabilities, language barriers, or who are incarcerated.

[3] The total funding is $1.44 billion comprised of $240 million in fiscal year 2022 and $300 million per year thereafter for fiscal years 2023-2026.

[4] Total funding is $1.25 billion comprised of $250 million per year in fiscal years 2022-2026.

Part 5 of the Keller and Heckman Infrastructure Act Blog Series

This is the fifth in Keller and Heckman’s series of posts pertaining to the new Infrastructure Investment and Jobs Act (H.R. 3684) (“the IIJA” or “the Act”), which was signed into law on November 15, 2021. Our first few posts examined the $42.45 billion Broadband Equity Access and Deployment Program, the $1 Billion Middle Mile Grant Program, the Act’s support for broadband partnerships, and the Affordable Connectivity Program. This post summarizes some key provisions in the Act that are intended to enhance the cybersecurity of utilities, the energy sector, and state and local governments. The programs and amounts of government funding available to eligible entities are significant, especially for those entities that lack cybersecurity resources due to size or region.

State and Local Government Information Systems

The IIJA appropriates $1 billion to enhance the cybersecurity of state and local government information systems, as follows: $200 million in federal grants for fiscal year (“FY”) 2022; $400 million for FY 2023; $300 million for FY 2024; and $100 million for FY 2025.

Cybersecurity of Electric Utilities

To promote the physical security and cybersecurity of electric utilities (as defined in the Federal Power Act), the IIJA requires the Secretary of Energy to implement a cybersecurity program, in coordination with the Secretary of Homeland Security, and in consultation with the heads of other Federal agencies, state regulatory authorities, industry stakeholders, and the Electric Reliability Organization. The program will include the development of models and methods for assessing physical security and cybersecurity, assistance with threat assessment and cybersecurity training and technical assistance for electric utilities, training to address and mitigate supply chain management risks, advancing the cybersecurity of third party vendors, promoting information sharing within the electric sector, and assisting electric utilities that own defense critical electric infrastructure with engineering reviews. Priority will be given to electric utilities with fewer resources due to size or region.

Rural and Municipal Utility Advanced Cybersecurity Grant and Technical Assistance Program

Significantly, the IIJA appropriates $250 million for FYs 2022 through 2026 for the establishment of a Rural and Municipal Utility Advanced Cybersecurity Grant and Technical Assistance Program for rural electric cooperatives, public utilities, certain investor-owned electric utilities, and other eligible entities to protect against, detect, respond to, and recover from cybersecurity threats. The objectives are to deploy “advanced cybersecurity technologies” for electric utility systems and increase participation in cybersecurity threat information sharing.  Priority for grants and technical assistance will be given to eligible entities that have limited cybersecurity resources, own assets critical to the reliability of the bulk-power system, or own defense critical electric infrastructure (as defined in the Federal Power Act).

Enhanced Grid Security

The IIJA also appropriates $250 million for FYs 2022 through 2026 for implementation of a cybersecurity research, development, and demonstration program for the energy sector to develop “advanced cybersecurity applications and technologies.”

Other notable appropriations include $50 million for FYs 2022 through 2026 for an energy sector Operational Support for Cyber-Resilience Program, and $50 million for FYs 2022 through 2026 for an advanced energy security program to secure energy networks, including electric, natural gas, and oil exploration, transmission and deliver networks.

Energy Cyber Sense Program

The Secretary of Energy, in coordination with the Secretary of Homeland Security and in consultation with the heads of other Federal agencies, is directed to establish a voluntary Energy Cyber Sense program to test the cybersecurity of products and technologies intended for the energy sector, including the bulk-power system, provide technical assistance, and oversee testing.

Advanced Cybersecurity Technology Investment by Public Utilities

The IIJA amends Part II of the Federal Power Act by adding incentives for cybersecurity investments. Within 180 days, the Federal Energy Regulatory Commission (“FERC”) will conduct a study that identifies incentive-based rate treatments for the transmission and sale of electricity to encourage investment in “advanced cybersecurity technology” (as defined in the Federal Power Act) and information sharing by public utilities. Within one year from the conclusion of the study, FERC will establish by rule incentive-based rate treatments for the transmission and sale of electricity by public utilities to encourage investments in advanced cybersecurity technology and expand participation in cybersecurity threat information sharing programs.

Cyber Response and Recovery Act of 2021

The IIJA appropriates $20 million for FY 2022 and each subsequent year until 2028 to a Cyber Response and Recovery Fund. These provisions incorporate the Cyber Response and Recovery Act of 2021, which authorizes the Secretary of the Department of Homeland Security, in consultation with the National Cyber Director, to declare that a “significant incident” has occurred or is likely imminent, and establishes authority to respond to and recover from such an incident. The Cyber Response and Recovery Act also includes directions to several agency heads to implement new programs to bolster cybersecurity capacity at the national, state, and local levels.

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As always, if you require additional information or would like to discuss any aspect of the above, please reach out to any of the attorneys in the KH Telecommunications Practice Group. We also welcome your feedback and questions via KHBroadband@khlaw.com.

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The Treasury Department has issued its Final Rule regarding the use of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) established under the American Rescue Plan Act (ARPA). The Final Rule significantly expands ARPA recipients’ flexibility to use the funds for broadband infrastructure projects.

Under the Interim Final Rule, eligible broadband infrastructure investments were limited to projects “designed to provide service to unserved or underserved households or businesses, defined as those that lack access to a wireline connection capable of reliably delivering at least minimum speeds of
25 Mbps download and 3 Mbps upload.”  (See March 15, 2021 Blog Post here)

The Final Rule entirely abandons the “unserved or underserved” requirement. “The final rule expands eligible areas for investment by requiring recipients to invest in projects designed to provide service to households and businesses with an identified need for additional broadband infrastructure investment, which would include but not be limited to a lack of broadband service reliably delivering certain speeds.” (at 296, emphasis added). In addition, “examples of need include lack of access to a connection that reliably meets or exceeds symmetrical 100 Mbps download and upload speeds, lack of affordable access to broadband service, or lack of reliable broadband service.” (at 302)

In making a determination of “need,” “recipients may choose to consider any available data, including but not limited to documentation of existing broadband internet service performance, federal and/or state collected broadband data, user speed test results, interviews with community members and business owners, reports from community organizations, and any other information they deem relevant.” (at 338)

Additional notable aspects of the Final Rule:

  • The Final Rule “continues to encourage recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, nonprofits, and cooperatives.” (at 298)
  • The Final Rule retains the Interim Rule’s requirement that eligible projects be designed to reliably provide at least 100 Mbps symmetrical service. In areas where it is not practical to do so due to excessive cost or geography or topography of the area to be served, a project may be designed to provide 100/20 Mbps service, scalable to 100 Mbps symmetrical.
  • The Final Rule adds a requirement that ARPA-funded broadband service providers participate in the FCC’s Affordable Connectivity Program or provide access to a commensurate affordability program. (at 308)
  • Nonduplication of support: The Final Rule does not prohibit the use of ARPA funds in areas for which there are already “existing enforceable federal or state funding commitments for reliable service at speeds of at least [100/20 Mbps],” but “recipients must ensure that SLFRF funds are designed to address an identified need for additional broadband investment that is not met by existing federal or state funding commitments.”
  • Cybersecurity: Modernization of cybersecurity for existing and new broadband infrastructure is an eligible use for ARPA broadband infrastructure funds. (at 312)

The effective date of this Final Rule is April 1, 2022.

Part 4 of the Keller and Heckman Infrastructure Act Series

This is our 4th entry on the  major provisions of the Infrastructure Investment and Jobs Act (“the IIJA” or “the Act”), which allocates $65 billion to support various broadband initiatives. We previously examined the $42.45 billion Broadband Equity, Access and Deployment (“BEAD”) Program and the $1 Billion Middle Mile Grant Program, each of which focuses on deploying broadband networks to unserved and underserved areas. This entry reviews the Act’s program aimed at making broadband services more affordable and accessible through a $14 billion subsidy  for low-income households.

Emergency Broadband Benefit Program Renamed and Refunded

Essentially, the  Affordable Connectivity Program (“ACP”) expands and makes permanent the temporary Emergency Broadband Benefit (“EBB”) program created in response to COVID-19.  Under the ACP, participating broadband providers will receive up to $30/month to provide discounted broadband service to low-income households (households on tribal lands and in “high-cost areas” are eligible for up to $75/month). The EBB provided $50/month, but with more stringent end-user qualifications.

Broadband providers can also receive up to $100 per household for the purchase of a connected device from the provider, such as a laptop, tablet or desktop computer. Smartphones do not qualify.

The ACP will be subject to the regulations of the Federal Communications Commission (“FCC”) and administered by the Universal Service Administrative Company (“USAC”). On November 18, 2021, the  FCC issued a Public Notice seeking comments on how to implement the new program requirements. Initial comments were due December 8, 2021, with reply comments due December 28, 2021.

Eligible Broadband Providers

As with the EBB, broadband provider participation in the ACP is voluntary. A “participating provider” is defined as a broadband provider that is either designated as an eligible telecommunications carrier (“ETC”) or a provider that seeks approval from the FCC to participate in the program. As with the EBB, the FCC is proposing to allow ETCs and their affiliates to simply file information with the Universal Service Administrative Company (“USAC”) to participate in the APC; obtain approval to participate in the states where they have secured ETC status.

Similarly, the FCC is proposing that all existing EBB Program providers need not file or resubmit a new application to participate in the ACP; these providers need only resubmit their ACP election notice to USAC. A provider that did not participate in the EBB Program and is not an existing ETC or affiliated with an ETC would need to file with the FCC for approval of an application. In addition, as with the EBB, the FCC is proposing that any eligible broadband provider that maintains an existing low-income program offered as of April 1, 2020, is eligible for automatic approval from the FCC for ACP participation.

Consistent with the EBB Program provider election notice process, new providers must possess registrations for the FCC Registration System (CORES), FCC Registration Number (FRN), Service Provider Identification Number(s) (SPINs), Study Area Codes (SACs), System for Award Management (SAM), Employer Identification Number (EIN), Tax Identification Number (TIN) and/or Dun & Bradstreet DUNS number.

Eligible Households

The FCC is proposing and seeking comment on household eligibility criteria, including the following:

  • Household income is at or below 200% of the Federal Poverty Guidelines for a household of that size (the EBB had been set at 135%);
  • At least one person in the household receives benefits from one of the following federal assistance programs: Medicaid, Supplemental Nutrition Assistance Program, Supplemental Security Income, Federal Public Housing Assistance, or Veterans and Survivors Pension Benefit;
  • At least one person in the household is in the free and reduced-price lunch program or the school breakfast program (including the Community Eligibility Provision);
  • At least one person in the household has received a Federal Pell Grant in the current award year; or
  • The household is eligible for an existing qualified low-income program offered by a broadband service provider

Households participating in the FCC’s Lifeline program may simply opt-in to a plan provided by their current mobile or fixed broadband provider  or  enroll in the ACP.  The FCC is proposing that households that are not currently enrolled in Lifeline  apply for the ACP through the National Lifeline Verifier.

The Act decouples the ACP from COVID-19; households that qualified for the EBB due to a substantial loss of income because of a job loss or furlough since February 29, 2020, or by meeting the eligibility criteria for a participating provider’s COVID-19 program, must apply to qualify for the ACP at the expiration of the 60-day transition period discussed below. Other legacy EBB Program households will not need to reverify their eligibility to continue to receive the ACP benefit after the end of the transition period.

Transition Period from EBB to ACP

End-user enrollments for the ACP begin on December 31, 2021 (the “effective date”). The Act provides for a 60-day transition period for “households that qualified” for the EBB Program before the effective date of the ACP that would otherwise see a reduction in their benefit as a result of the changes made in the revised program. The FCC released an Order on December 8 providing guidance on the transition from the EBB to the ACP. Among other things, the FCC has clarified  that the 60-day transition period for the ACP will start on December 31, 2021 for all households enrolled in the EBB Program as of December 30, 2021. During the transition period, legacy EBB households will continue to receive the $50 EBB subsidy (rather than $30 under ACP) for the 60-day transition period and may transfer their benefit to another participating service provider.

Consumer Choice and Protection

 Under the ACP, providers must allow eligible households to apply their discount to any broadband Internet access plan the provider offers to the public. In addition, the ACP adopts certain consumer protection rules aimed at prohibiting inappropriate upselling (or downselling), extended service contracts, and restrictions on the ability to switch providers or services. Broadband providers participating in the ACP will be required to notify all eligible customers about the program, as well as the FCC’s ACP consumer complaint procedures.

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This entry highlights the current rural broadband funding opportunity presented by the $1.15 billion “ReConnect” program administered by the US Department of Agriculture’s (USDA) Rural Utilities Service (RUS).[1] Under the Funding Opportunity Announcement (FOA) for its third round of Reconnect funding (ReConnect III), the RUS will be awarding loans and grants to construct, improve, or acquire facilities needed to provide broadband service to rural areas. The application filing window opened on November 24, 2021 and closes on February 22, 2022.

Broad Eligibility To Participate

ReConnect III enables funding for a wide variety of recipients, including current broadband services providers, utilities, cooperatives, state and local government entities, and tribal authorities. Public-private partnerships consisting of these entities are also eligible. Notwithstanding this ostensibly broad class of eligible entities, the ReConnect III FOA reflects an explicit preference for cooperatives, state and local government entities, and public-private partnerships as additional points are granted to applications submitted by such entities. (For a public-private partnership to qualify for these additional points, the “applicant” must be a local government, non-profit, or cooperative).

Increased Speed Requirements for Unserved Areas

ReConnect funding is for new broadband facilities to serve unserved rural communities. Significantly, ReConnect III dramatically increases the broadband service speed eligibility threshold in determining whether an area is unserved. Under Reconnect III, an end-user location is not “served” unless fixed residential broadband service is available at a speed of 100 Mbps downstream and 20 Mbps upstream. The higher “served area” threshold should make it easier to identify and create grant application areas that are not riddled with a “swiss cheese” of prior funding initiatives that have far less robust broadband service obligations, such as 25/3 Mbps or even 10/1 Mbps service requirements.

More specifically, a proposed ReConnect III project must meet the following criteria:

  • Lack Sufficient Access to Broadband: At least 90% of households in the proposed funded service area (PFSA)[2] must lack sufficient access to fixed broadband service (100/20 Mbps);
  • Serve All Premises in the PFSA: The proposed network must be capable of providing 100 Mbps symmetrical broadband service to every premises located in the PFSA. According to the FOA, the phrase “capable of delivering 100 Mbps symmetrical service to every premises” means that all premises in the PFSA must be able to receive this service at the same time;
  • Be in a Rural Area: A rural area is any area not located in a city, town, or incorporated area that has a population of greater than 20,000 inhabitants or an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 inhabitants;[3] and
  • Provide Symmetrical 100 Mbps Service: A ReConnect III award recipient must commit to providing symmetrical 100/100 Mbps service to all locations within a funded area.

Funding Amounts

ReConnect III makes funding available in the form of loans, grants, and loan/grant combinations, as follows:

  • 100 Percent Loan ($200 million available)
    • Maximum amount of a loan request is $50 million.
    • Interest rate on the loan is 2%, with payments on principal and interest deferred for the first three years.
  • 50 Percent Loan/50 Percent Grant Combination ($250 million available)
    • Maximum amount a grant/loan request is $25 million for the loan and $25 million for the grant.
    • Interest rate is the US Treasury rate on debt securities.
  • 100 Percent Grant ($350 million available)
    • Maximum amount of grant request is $25 million.
    • Applicant must provide a 25% matching cash contribution. (Unlike the matching requirement in the IIJA BEAD Program, in-kind matching contributions are not allowed in ReConnect.)
    • Applicant may provide match funding itself, from a third party, or use a loan.
  • 100 Percent Grant For Tribal Governments or Vulnerable Communities
    ($350 million available)

    • Maximum amount is $25 million, or $35 million for projects in Tribal lands with very low population density or high geographic remoteness.
    • No matching requirement.
    • “Socially Vulnerable Community” is a community or area identified in the Center for Disease Control’s Social Vulnerability Index with a score of .75 or higher.[4]

Use of ReConnect Funds

The ReConnect program is for capital construction of broadband networks, and not ongoing service costs. The following additional requirements apply to the use of the funds:

  • Only ReConnect loan funds (not grant funds) may be utilized to acquire existing network facilities, and only up to 40% of the total requested loan amount may be utilized for acquiring existing facilities.
  • The applicant must own the facilities to be funded by the ReConnect award and cannot use funds to lease dark fiber for the operation of the network.
  • Up to 5% of requested funds may be used for application costs.
  • Funding is subject to a 5-year network build out requirement.
  • Funded facilities must be used to provide the broadband service proposed in the application for the composite economic life of the facilities.

Proposed Project Must be Financially Viable and Sustainable

Only projects that the RUS considers to be financially feasible and sustainable will be eligible for an award under ReConnect III.

  • All project costs must be able to be fully funded or accounted for in the application.
  • An eligible project application must demonstrate a positive ending cash balance as reflected in the cash flow statement for each year of the forecast period, and demonstrate positive cash flow from operations by the end of the forecast period.

Application Scoring

ReConnect applications that meet the minimum application requirements are scored on a variety of factors:

  • Population density (Rurality) – 25 points: For applications proposing to serve the least dense rural areas as measured by the population of the area per square mile or if the area is located at least 100 miles from a city with a connectivity population of greater than 50,000.
  • Level of existing service – 25 points: For applications proposing to build in areas that are not receiving service of at least 25/3 Mbps (Note that Federal Communications Commission  data is not the sole or dispositive criteria for determining whether an area is being served).
  • Economic need of the community – 20 points: For applications proposing areas with the greatest economic need measured by the poverty percentage utilizing the US Census Small Area Income and Poverty Estimates.
  • Affordability – 20 points: For applications demonstrating that the broadband prices they will offer are affordable, and that commit to offer at least one low-cost option; applicants “should” also commit to participate in the FCC’s Lifeline Program and the Emergency Broadband Benefit Program.
  • Labor Standards – 20 points: For applications demonstrating that the project will incorporate strong labor standards, including whether workers will be paid wages at or above the prevailing rate.
  • Local governments, non-profits and cooperatives – 15 points: For applications submitted by local governments, non-profits or cooperatives, including projects involving public-private partnerships where the local government, non-profit, or cooperative is the applicant.
  • Socially Vulnerable Communities – 15 points: For applications where at least 75% of the area is comprised of Socially Vulnerable Communities.
  • Net neutrality – 10 points: For applicants that commit to meet “net neutrality” requirements.
  • Wholesale broadband services – 10 points: For applications that commit to offering wholesale broadband services at rates and terms that are reasonable and nondiscriminatory.

While the RUS ReConnect program has rigorous accounting, grant application and security requirements, it represents a significant, near-term rural funding opportunity, and may be well-suited to certain state and local governmental entities, cooperatives, tribal authorities, and broadband providers, as well as public private partnerships.

[1] There has been a great deal of focus on the historic opportunity created by the $65 billion in broadband funding in the Infrastructure Investment and Jobs Act (“IIJA”), but the vast majority of that funding will likely not be available until late 2022 at the earliest.

[2] Unlike some other federal funding programs that utilize census block to determine funding areas, PFSAs for ReConnect are self-defined by the applicant.

[3] Information on non-rural areas and additional service area eligibility requirements are available on the ReConnect Program Service Area Map.

[4] A GIS layer identifying the Socially Vulnerable Communities can be found at https://www.usda.gov/​reconnect.