Friday, October 29, 2021
$1.15 Billion Available through the ReConnect Program
You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week. The digest is delivered via e-mail each Friday.
Round-Up for the Week of October 25-29, 2021
Last week, the U.S. Department of Agriculture (USDA) announced that on November 24, USDA will begin accepting applications for up to $1.15 billion in loans and grants to expand the availability of broadband in rural areas. USDA’s Rural Utilities Service is making the funding available through the ReConnect Program and plans to make available up to $200 million in ReConnect Program loans, up to $250 million in loan/grant combinations, up to $350 million in grants with a 25 percent matching requirement, and up to $350 million in grants with no matching requirement for projects in tribal and socially vulnerable communities. RUS encourages applicants to consider projects that will advance the following key priorities:
“For too long, the ‘digital divide’ has left too many people living in rural communities behind: unable to compete in the global economy and unable to access the services and resources that all Americans need.”—USDA Secretary Tom Vilsack
- Assisting rural communities recover economically from the impacts of the COVID-19 pandemic, particularly disadvantaged communities,
- Ensuring all rural residents have equitable access to Rural Development programs and benefits from Rural Development funded projects, and
- Reducing climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities.
What is ReConnect
The ReConnect Program, created by Congress in 2018, provides loans, grants, and loan/grant combinations to facilitate broadband deployment in rural areas. In facilitating the expansion of broadband services and infrastructure, the program aims to fuel long-term rural economic development and opportunities in rural America. ReConnect rules require applicants to demonstrate that their projects:
- can be completely built out within five years from the date funds are first made available,
- are technically feasible,
- can be fully funded or accounted for,
- will provide the broadband service proposed in the application, and
- will provide broadband service through the amortization period of the loan.
For the current fiscal year, loans, grants, and loan/grant combinations will be made for the costs of construction, improvement, or acquisition of facilities and equipment needed to facilitate broadband deployment in rural areas.
Who is Eligible for ReConnect Support
To be eligible for ReConnect Program support, at least 90 percent of the households proposed to be served by the project must currently lack access to sufficient broadband which the USDA defines here as fixed, terrestrial broadband service of at least 100 megabits per second (Mbps) downstream and 20 Mbps upstream.
Of note, the areas of existing Rural Utilities Service borrowers without sufficient access to broadband are eligible for ReConnect funding. And areas that receive support from the Federal Communications Commission, but are without sufficient access to broadband are also eligible for this ReConnect funding.
In 2019, the FCC established the $20.4 billion Rural Digital Opportunity Fund to support broadband deployment in rural areas. The areas that have already received or are under consideration for a Rural Digital Opportunity Fund award are explicitly eligible for ReConnect support. USDA explains that Rural Digital Opportunity Fund covers both operational expenses and capital expenses, while ReConnect funds only capital expenses. However, an application should explain why the Rural Utilities Service should provide additional funding. For example, will the applicant commit to an accelerated deployment schedule if it receives ReConnect funding? Rural Utilities Service will also require all ReConnect awardees receiving or under consideration for Rural Digital Opportunity Fund awards to submit a statement certifying that the funds requested from ReConnect have not been and will not be reimbursed by the Rural Digital Opportunity Fund award. That is, funds must be used only for complementary purposes and not for duplicative ones, and therefore funding recipients cannot claim that both Rural Digital Opportunity Fund and ReConnect funds were used to pay for the same labor or materials used to deploy broadband to specific locations or to procure the same unit of network equipment. Recipients that receive both Rural Digital Opportunity Fund and ReConnect funding must keep separate accounts to track the sources and uses of each funding source as needed to support the certification statement submitted with its ReConnect application.
If two or more applications are submitted for the same non-Tribal Land area receiving or under consideration for a Rural Digital Opportunity Fund award, and one of those applications is submitted by the Rural Digital Opportunity Fund winning bidder and its application scores equally as high as the other application(s) for the area, RUS will give preference to the applicant receiving or under consideration for the Rural Digital Opportunity Fund award, except that on Tribal Lands, Rural Utilities Service will give preference to the applicant that has Tribal government consent.
If an applicant has applied for or is receiving other federal funding to deploy broadband in an area, the applicant should explain how Rural Utilities Service funding will be complementary to but not duplicative of the other funding. ReConnect awardees will be required to submit a statement certifying that the funds requested from ReConnect have not been and will not be reimbursed by any other federal funding mechanism.
ReConnect Loans and Grants
The ReConnect Program is somewhat unique in its support of broadband deployment because of its use of both loans and grants. Here’s a look at its three funding categories. (The minimum amount that can be requested in any ReConnect Program application is $100,000.)
100 Percent Loan
Applicants may request that 100 percent of project costs be covered by a loan that is repaid to the USDA over the life of the project’s infrastructure (plus 3 years). The interest rate on the loan is 2 percent and any payments on principal and interest are deferred for the first three years of the project. The maximum amount a 100 percent loan project can request is $50 million.
50 Percent Loan/50 Percent Grant Combination
An applicant may request that project costs be covered by a combination of a USDA loan and grant (the split is always half for each). Loans are still repaid over the life of the project’s infrastructure (plus 3 years) and principal and interest payments are deferred for three years. The interest rate for the loan is the Treasury rate, meaning that it is the current interest rate that investors earn on debt securities issued by the U.S. Treasury. (For example, the 30 Year Treasury Rate this week was 2.05 percent.) The maximum amount a grant/loan project may request is $25 million for the loan and $25 million for the grant.
100 Percent Grant
Applicants may request that the full support from USDA come in a Reconnect grant. In that case, applicants must provide a matching contribution of at least 25 percent of the cost of the overall project. The applicant may provide that funding itself, receive it from a third party, or even take out its own loan to cover the match. The maximum amount a 100 percent grant project can request is $25 million.
Tribal and Socially Vulnerable Communities
For Tribal Governments proposing to provide broadband service on their own lands, there is no matching fund requirement. $350 million total is available for grants; the maximum grant allowed is $25 million. But if the Tribal Land has a very low population density or high geographic remoteness, the applicant may request up to $35 million.
USDA defines Socially Vulnerable Community as a community or area identified in the Center for Disease Control’s Social Vulnerability Index with a score of .75 or higher. The index uses U.S. Census data to determine the social vulnerability of every census tract. Census tracts are subdivisions of counties for which the Census collects statistical data. The CDC/ATSDR SVI ranks each tract on 15 social factors, including poverty, lack of vehicle access, and crowded housing, and groups them into four related themes. Each tract receives a separate ranking for each of the four themes, as well as an overall ranking. A percentile ranking represents the proportion of tracts that are equal to or lower than a tract of interest in terms of social vulnerability. For example, an index ranking of 0.85 signifies that 85% of tracts in the state or nation are less vulnerable than the tract of interest and that 15% of tracts in the state or nation are more vulnerable.
How Applications Will Be Evaluated
The network applicants proposed to be funded must be capable of delivering 100 Mbps symmetrical service to every premise in the service area. And all premises in the area must be able to receive this service at the same time.
Applications will be scored based on ten criteria: population density, level of existing services, the economic need of the community, affordability, labor standards, serving Tribal lands, public-private partnerships, Socially Vulnerable Communities, net neutrality, and wholesale broadband services.
- Population density (Rurality): Points will be awarded for serving the least dense rural areas as measured by the population of the area per square mile or if the area is located at least one hundred miles from a city or town that has a population of greater than 50,000 inhabitants. If multiple service areas are proposed, the density calculation will be made on the combined areas as if they were a single area and not the average densities. For population densities of 6 or less or if the area is located one hundred miles from a city or town of 50,000, 25 points will be awarded.
- Level of existing service: Projects that are proposing to build in areas that are not receiving service of at least 25 Mbps downstream and 3 Mbps upstream will receive 25 points, with points awarded based on the number of households lacking such service that the project will serve. Applicants must provide supporting evidence that 25/3 service does not exist for those households. To the extent possible, applicants must identify all existing providers in the area and indicate what level of service is actually being provided. (Applicants are not required to treat the publicly available FCC data as dispositive of what speed service currently exists.)
- Economic need of the community: Economic need is based on the county poverty percentage of the area. The percentages must be determined by utilizing the United States Census Small Area Income and Poverty Estimates (SAIPE) Program. For applications where 75 percent of the area includes communities with a SAIPE score of 20 percent or higher, 20 points will be awarded. Proposed funded service areas located in geographic areas for which no SAIPE data exists will be determined to have an average SAIPE poverty percentage of 30 percent. Such geographic areas may include territories of the United States or other locations eligible for funding through the ReConnect Program.
- Affordability: Applications can receive 20 points based on their affordability measures. Applicants should demonstrate that the broadband prices they will offer are affordable to their target markets, provide information about the pricing and speed tiers they intend to offer, and include at least one low-cost option offered at speeds that are sufficient for a household with multiple users to simultaneously telework and engage in remote learning. Applicants should also commit to applying to participate in the Federal Communication Commission’s Lifeline Program, the Emergency Broadband Benefit Program, and any successors to those programs which provide low-income consumers with discounts on broadband services.
- Labor Standards: Applicants should include in their applications a description of whether and, if so, how the project will incorporate strong labor standards, including whether workers (including contractors and subcontractors) will be paid wages at or above the prevailing rate; whether the project will be covered by a project labor agreement; what safety training, professional certifications, in-house training and/or licensure will be required of workers (including contractors and subcontractors); whether a locally-based workforce will be used; whether work will be performed by a directly employed workforce or whether the employer has policies and practices in place to ensure employees of contractors and subcontractors are qualified; and whether the applicant, its contractors, or subcontractors have any violations of state or federal labor, workplace safety and health, or employment laws within the last five years. For applicants that commit to strong labor standards, consistent with Tribal Laws when the project proposes to build infrastructure on Tribal Lands, 20 points will be awarded. Projects that propose to build infrastructure on Tribal Lands must follow Tribal Laws such as Tribal Employment Rights Ordinances to be in compliance with a ReConnect award, regardless of receiving points under this standard.
- Tribal lands: For applicants that are Tribal Governments and tribal entities and, at a minimum, 50 percent of the geographical area is on tribal lands, 15 points shall be awarded. For non-tribal entities where at least 50 percent of the geographic area is on tribal lands, 10 points shall be awarded.
- Local governments, non-profits and cooperatives: Applications submitted by local governments, non-profits or cooperatives (including for projects involving public-private partnerships where the local government, non-profit, or cooperative is the applicant) will be awarded 15 points.
- Socially Vulnerable Communities: For applications where at least 75 percent of the area is Socially Vulnerable Communities (see above) 15 points will be awarded
- Net neutrality: For applicants that commit to net neutrality, 10 points will be awarded. The applicant’s network shall not (1) block lawful content, applications, services, or non-harmful devices, subject to reasonable network management; (2) impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management; and (3) engage in paid prioritization, meaning the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.
- Wholesale broadband services: Recipients that commit to offering wholesale broadband services at rates and terms that are reasonable and nondiscriminatory will receive 10 points.
Upcoming Request for Information on Speed Requirements
A last note to highlight: the Rural Utilities Service intends to issue a Request for Information (RFI) seeking feedback from potential applicants and other interested parties on whether the requirement for facilities constructed with RUS funding to provide 100 Mbps symmetrical service to every premise in the proposed funded service area (PFSA) at the same time should apply in future funding rounds. The feedback from that RFI will help inform future funding announcements, including potentially scoring criteria.
On November 24 USDA will begin accepting applications for ReConnect support. The window for submitting applications will be open for 90 days.
This article is meant to serve as a quick summary of the Rural eConnectivity Program Funding opportunity announcement. We suggest interested parties read that document, attend upcoming webinars on the program, and/or direct any questions to USDA.
Weekend Reads (resist tl;dr)
ICYMI from Benton
Nov 2—Lessons from the First Internet Ages (Knight Foundation)
Nov 9—Protecting Political Speech While Reducing Harm on Social Media (Information Technology & Innovation Foundation)
Nov 16—Where Network Intelligence Meets Public Policy (Marconi Society)
Nov 18—How Will Online Advertising Work In A World Without Cookies? (Center for Data Innovation)
Nov 18—November 2021 Open Meeting (FCC)