CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

The original approach (for the first tranche) allowed applicants to file a single application for funding from both BTOP (i.e., NTIA ) and BIP (i.e., RUS), effectively allowing applicants to play the field with one application. No longer. Under the second tranche NOFA, applicants must choose which program they want to file under. This is not a small matter, since the programs focus on very different broadband approaches:

NTIA: As before, NTIA administers a straight grant program (i.e., no loan component). It will award up to 80% of the qualified infrastructure construction costs, but requires applicants to come up with the remaining 20% from other sources. Once again, no operating costs will be funded with these funds. In this tranche, a total of $2.6 billion will be available, with the lion's share, $2.35 billion, allocated to “Comprehensive Community Infrastructure” (CCI) projects. These are primarily “Middle Mile” broadband projects. The remainder of the money will be split between “Public Computer Center” (PCC) projects (at least $150 million) and “Sustainable Broadband Adoption” (SBA) projects (at least $100 million).   Almost any domestic entity is eligible to receive a BTOP grant, although local governments and state agencies are cautioned to determine their qualifications under state law to build and operate the facilities proposed in a BTOP application. Prior blog articles have addressed this eligibility issue. 

1.     “Last Mile” and “Middle Mile” Projects. In the first tranche, BTOP funds were available for both “Last Mile” projects and “Middle Mile” projects, with no particular emphasis of one over the other. This time, the focus will definitely be on “Middle Mile” projects (i.e., those systems that connect "Last Mile" distribution systems to an Internet point-of-presence or provide interoffice transport, backhaul or special access which furthers economic development). You can ask NTIA for money for a “Last Mile” project, but don’t expect to get the money unless (a) it is ancillary to a “Middle Mile” project and (b) the “Last Mile” component costs 20% or less than the total capital cost of the project. Instead, NTIA and RUS urge that you seek funding for Last Mile projects through the RUS’s BIP program (described below). Note well: NTIA will not fund a Middle Mile project in any area where RUS has already made a Middle Mile award with Stimulus Act funds.

In this funding round, NTIA wants to direct the grants to projects that serve community institutions. So the perfect application would involve a public-private partnership proposing a Middle Mile solution to “community anchor institutions” (e.g., public safety service, community colleges and the like) in economically distressed areas which are presently unserved or underserved, and relying on federal funds for 70% or less of the capital cost. The greater the deviation from that ideal, the less likely is the funding.

Many actual and potential applicants in the first tranche complained about the complexity of the application, and NTIA felt their pain. Several of the requirements of the last application round, such as engineering certifications, technical feasibility showings and budget reasonableness showings, have been eliminated or will be requested only if an application is down-selected for final review. Moreover, applicants are no longer confined to “unserved” or “underserved” areas.  Individual awards are expected to be in the $5 million to $150 million range.     NTIA and RUS have pledged to make all award decisions for the first round by the end of February, but prospective Round 2 applicants may not know until then whether there is a conflicting prior award in their target area.  

2.     “Public Computer Center” Projects. “Public Computer Centers” are places that provide broadband access to the general public or a specific vulnerable population, such as low-income, unemployed, aged, children, minorities, and people with disabilities. Think places like community colleges, libraries, schools, youth centers, employment service centers, Native American chapter houses, community centers, senior centers, assistive technology centers for people with disabilities, community health centers, and Neighborhood Network Centers in public housing developments. NTIA expects to make PCC awards to enhance the availablility of broadband in these facilities in the $500 thousand to $15 million range. 

3.    “Sustainable Broadband Adoption” Projects. This is the catch-all category for creative means of promoting broadband adoption. NTIA expects to fund innovative projects that promote broadband demand, including projects focused on providing broadband education, awareness, training, access, equipment, or support, particularly among vulnerable population groups that traditionally have underutilized broadband technology.   SBA awards will be in the $500,000 to $15 million range. 

RUS: The BIP program provides grants, loans, or grant/loan combinations. As before, RUS will award up to 100% of a project’s qualified infrastructure construction costs. Once again, no operating costs will be funded with BIP funds. Typical awards will be 75/25% grant/loan combinations, although projects that request a higher percentage of loan funds will receive a preference. This ratio differs from the available mix of grants and loans for the last tranche, in which 100% grants were available for areas that were entirely “remote” from urbanized areas and entirely unserved, and in which the grant portion of a grant/loan combination for non-remote areas could not exceed the size of the loan portion.   The much-criticized "remote" designation has been abandoned. 

While BIP loans must be secured with first priority liens on the assets purchased with the BIP money, RUS has dropped the controversial requirement that all of an applicant's assets (regardless of whether they were acquired with BIP money) must be subject to first lien in favor of RUS.   RUS will now agree to share its first lien position with other senior lenders on terms acceptable to RUS.  

In this tranche, approximately $2.2 billion will be made available. Reflecting the different focus of the BIP program, $1.7 billion is devoted to Last Mile projects with only $300 million available for Middle Mile projects. Of the remaining $200 million, up to $100 million will be made available for a new category called “Satellite” projects and up to $5 million will be available for two new categories called “Rural Library Broadband” and “Technical Assistance” projects. This leaves a balance of $95 million that will be held in reserve. 

Almost any domestic entity is eligible to receive a BIP grant, although local governments and state agencies are again cautioned to determine their qualifications under state law to build and operate the facilities proposed in a BIP application.

1.     “Last Mile” and “Middle Mile” Projects.  In this funding tranche, the emphasis will be on “Last Mile” projects (i.e., projects predominantly intended to provide broadband service to end users).  Although money is still available for Middle Mile projects, RUS has stressed that basically only existing RUS borrowers should apply for such projects.    RUS will prefer those Last Mile applications that propose to serve unserved households in remote rural areas, with high broadband speeds, discounted rates to community facilities and low cost per passed premises, where the applicant has a strong management team, has borrowed from RUS in the past and is a socially and economically disadvantaged small business concern. Further preference will be given to those proposals in which the ratio of BIP funding to new equity is lower, and to those proposals where the ratio of BIP loan money to BIP grant money is higher. Middle Mile projects will be evaluated with the same criteria, except that the RUS will look at the throughput to interconnection points and will not consider the cost per passed premises.

Unlike the NTIA, which has made the initial application process less burdensome, the RUS has compressed its two-part application process into a single application. That means that there is a lot more involved in preparing the BIP application. RUS will still require applicants to provide technical diagrams, a project timeline, and the certification of a professional engineer. 

RUS did loosen some filing restrictions. As before, a Last Mile service area must be at least 75% rural, but now it qualifies as underserved if less than 50% of the service area premises currently have access to broadband at speeds faster than 5 Mbps (combined up and downstream). This is a significant change from the gating criteria applied to the first tranche of BIP funds, where the proposed funded service area had to be an at least 75% “unserved” or “underserved” rural area and the broadband service metrics for incumbents were more easily met. RUS has also added an efficiency standard: federal assistance for Last Mile projects may not exceed $10,000 per passed premises (subject to waiver).

2.    “Satellite” Projects. “Satellite” projects are those that use satellites to provide broadband service to unserved, rural premises, either by: funding customer premises equipment (at no cost to the user); funding terrestrial equipment (at no cost to the user); and/or providing discounted broadband service (with at least a 25% discount for at least one year). The country will be divided into eight regions, and applicants will be eligible to serve any one or more of them. The details of this funding program will be revealed in the near future through the release of an RFP. In effect, there will be a Round 2-and-a-Half to receive applications for this money and the two following programs, all of which are ancillary or supplementary to the main projects funded in Rounds 1 and 2.

3.     “Technical Assistance” Projects. Under this category, RUS will make grants to fund the development of regional broadband development strategies in rural areas. The concept is that the awardee will work in public/private partnership to develop a USDA-approved regional plan to provide broadband service in rural areas that remain “critically unserved”.  In addition, technical assistance plans may be submitted to other federal agencies. Technical assistance grants are limited to $200,000 per grant and are available to those who receive an award for a Last Mile, a Middle Mile or a Satellite project through applications submitted in the first or second rounds.

4.     “Rural Library Broadband” Projects. This is another grant program used to reimburse the awardee for the costs of connecting one or more rural libraries to the broadband system. This grant program is available to those awarded BIP funds for a Last Mile, Middle Mile or Satellite project through application submitted for the first or second round, and need not be requested until after the RUS issues an RFP. 

There are, of course, many other details and nuances involved in planning a project for the funding of NTIA or RUS that simply cannot be covered in this overview. If you desire further information on this upcoming funding application process, please contact one of the attorneys in the Fletcher, Heald & Hildreth Stimulus Group.

Procedures.   Applicants in Round I lodged numerous complaints about the volume of unnecessary and burdensome information that was demanded. The administrators seem to have realized that their Round I processes required a lot of newly-created applicant entities to submit a lot of information which was worthless. The requirement that service areas be defined at the micro-level of census blocks also struck many applicants as needlessly burdensome. Much of the information required in Phase I might be more appropriate to either Phase II or even the point of closing on funding rather than in the initial application. This category of information would include legal opinions, lien searches, boilerplate certifications, and other information irrelevant to the selection process.   

Importantly, the administrators released on October 30 a guidance sheet clarifying how the environmental and historical preservation rules apply to these applications. There had been some question about whether applicants proposing construction projects in connection with their applications had to show compliance with these rules in Phase I, Phase II, or some later Phase. It seemed, frankly, absurd to require 2,200 applicants to undertake expensive and time-consuming environmental review projects for thousands of sites that would never be built if the stimulus money was not awarded.   

BIP and BTOP have now clarified that the Environmental Questionnaire covering sites where significant construction is to be undertaken need not be submitted until Phase 2. But even then applicants have only 10-30 days to get the information in. Since environmental and historical review projects usually take a minimum of 60 days to complete, the administrators have left a window open for applicants to explain why they don’t have environmental sign off on all sites within the 30 days.    Again, though, because it makes sense to undertake these onerous procedures only for sites that are really going to be built, it might make more sense for this review process to be deferred to the pre-closing period.

On the other hand, the administrators realized that in some cases they need more information.    For example, where applicants are comprised of multiple participants, it had been unclear how much information was required regarding the non-lead participants. Similarly, the process whereby incumbents could challenge the showings of applicants without any opportunity for rejoinder seemed unfair.   The cloak of secrecy over the applications also seemed unnecessary, except in the rare case where proprietary information was involved.   Changes in all of these areas have been proposed.

Another big area for improvement would be answering "frequently asked questions." In Round I, the government released a list of FAQ and the answers to those questions. But over the next few weeks numerous other questions arose which were answered by the staff in e-mails but not made available to all other applicants. It seems that it would not only have ensured consistency but cut down on the multitude of questions posed to the staff to update the FAQ responses more frequently.

Substantive Issues.   The BIP and BTOP administrators also did some soul-searching about how the money should be distributed.   There had been considerable flack about their definition of "remote" areas (i.e., 50 miles from any urbanized area) as being too restrictive, and a revision of that definition certainly seem to be in the offing.    More broadly, the powers-that-be are looking at whether funding should be prioritized for (1) “comprehensive community” projects where broadband services are integrated with anchor institutions like community colleges, libraries, public safety institutions, and health care facilities, (2) regional development projects where broadband services are part of larger economic development plans for job creation and infrastructure build-out, and (3) projects targeted at specifically needy populations like the elderly or Indian tribes.

In addition, they heard considerable criticism of the definitions used for “unserved”, “underserved”, and “broadband” – all fundamental concepts in this process. Changes in any of these categories could dramatically alter areas of eligibility.    The degree to which proposals are “cost effective” is also under review, occasioned by the realization that projects for the most remote and underserved areas are often the least “cost effective” yet are still worthy of funding in furtherance of the objectives of the Act.

Finally, the issue of whether or when facilities built with stimulus money may later be sold is being re-visited.   The original rules severely constrained post-grant sales.   The BIP and BTOP administrators are now open to making those restrictions more flexible, provided awardees are not “unjustly enriched”.

Deadline.   No one disputes that there is plenty of room for improvement in this process, but the time to get your suggestions in is short. The deadline is November 30, with the Thanksgiving holiday falling right in the middle. So prospective applicants must act fast if they want to have a role in shaping the direction of the final funding round.

As far as nitty-gritty factual information goes, the Commission is interested in the current availability and implementation of broadband services within schools and school districts. Where broadband services have been implemented, how are they being used for online learning systems, backroom data reporting systems and the like? Have various communications systems (instant messaging, online video conferencing and such) assisted in the introduction of new learning opportunities that were not otherwise available?

On a more conceptual level, the Commission is asking about the role of government in supporting the introduction and development of broadband use in schools and school districts, and what specific steps the Commission could or should be taking along those lines (including the setting of technology standards and the support of technology literacy programs).

The E-Rate program is yet another focus of the FCC’s interest: what modifications to that program might “stimulate the adoption of broadband throughout communities”?   How do current participants use the program, and should the program be expanded (through Congressional action, of course) to include additional educational programs such as Head Start? Also, how about maybe modifying the distribution of E-Rate funds – would that assist broadband deployment? And might changes to the E-Rate program affect the expansion of broadband deployment, and what might the impact of such expansion be on the level of E-Rate Funding? (The Commission is particularly concerned that the current limit on funding – $2.25 billion – may prevent further expansion of broadband deployment. But if that limit were to be upped, what types of services could be provided?)

It’s not exactly clear how such a vast amount of information covering a vast number of subjects might be compiled and usefully presented in a mere 16 days – let alone thoughtfully digested and analyzed by the Commission in the next three months. Why the FCC waited until this late date to initiate a soup-to-nuts review of the use of “broadband for educational purposes” is unclear, but it reminds us of a frantic midnight call to a fellow student for their notes to prepare for the big calculus test the next day. While the goals of the Commission are obviously worthwhile and could lead to the development of important policies, the rushed nature of the agency’s efforts does nothing to dampen skepticism as to whether a tsunami of information submitted in the next 16 days can or will be put to good use. Only time will tell.

Prof. Greenstein has posted a comment on Paul’s blog (check it out here) and has separately blogged on his own space (titled “Virulent Word of Mouse” – an excellent name, IMHO) – each time taking issue with the use of the term “contrarian”. (Happily, Prof. Greenstein approves of the substance of Paul’s description of the workshop. Thanks to Prof. Greenstein – and props to Paul – for that.)

If I’m reading Prof. Greenstein’s posts right, though, I suspect that he and I are really on the same page. His concern about “contrarian” appears to be that that term suggests that anyone branded as a “contrarian” is something of a knee-jerk nay-sayer, bucking against the majority view simply for the sake of being, well, contrary. As he carefully explains, that does not reflect his attitude at all.

Rather, he insists on using actual data, subjecting those data to rigorous analysis, and only then formulating public policy based on the results of such analysis. It’s hard to argue rationally against such an approach.

The problem, of course, is that that is often not the way of Washington. Those in government – whether elected or appointed or just plain hired – often find it necessary or convenient to ignore the facts, to go all fuzzy Big Picture when the nitty-gritty details don’t happen to point in the preferred direction. And often when confronted by some calamitous situation – like a major-league economic meltdown – the Washington establishment’s willingness and ability to focus on any detail at all (much less unpleasant detail) tend to be even more, er, impaired – kind of like a thoroughbred horse trapped in a burning barn. 

So it shouldn’t be surprising that the Conventional Wisdom around Washington seems already to have reached conclusions at odds with his (and his colleagues’) analyses in the broadband area, as Prof. Greenstein acknowledges (“conventional wisdom has settled on a view that just ain’t so”). From a Washington-centric perspective, anyone questioning those conclusions may be seen as “contrarian”. That doesn’t make the questioners wrong – just contrary to the prevailing perceptions. But, as Prof. Greenstein’s workshop presentation and blog properly remind us, just because the Washington establishment has reached a conclusion, that doesn’t mean that that conclusion is necessarily correct.

We can only hope that rigorous and thoughtful analysis is brought to bear on the appropriate data before final policies are etched in stone and billions of federal dollars have been irretrievably doled out. On that I’m guessing Prof. Greenstein and I are in agreement.

While two of the six speakers did stick to the CW, the others offered a far more analytical – and far less positive – view. The four were academics (economists) whose message was that, at best, there are not enough good data to make a strong connection between broadband and economic growth, and at worst, that there isn’t even a particularly strong connection between the two. 

You can find links to a recording of the entire workshop, as well as the individual presentations, here. Here’s a big picture summary:

James Prieger (Pepperdine University School of Public Policy) stated that it is difficult to measure the economic impact of broadband. Still, he asserted that there are certainly contexts in which adding broadband would not make a significant positive impact. For example, user entities whose staff lack the training to maximize use of broadband, or whose management/production style are not likely to lead to maximized broadband use. He cited schools in particular as a prime example of this. As to employment, he noted the mixed results of broadband implementation: workers may become more productive and work can be more easily out-sourced, which can lead to reduction in the number of necessary employees in a company.

Chris Forman offered complex analyses showing that the relationship between broadband use and growth in personal income is strongest in areas with the highest income, skills, education and IT production – in other words, a “rich get richer” scenario not necessarily consistent with the concept of broadband-as-panacea. He stated that there appears to be little impact outside of urban areas, and that there is little evidence of growth in employment as a result of broadband.

Ryan McDevitt (Northwestern University) noted that pure economic growth can’t be determined solely from calculation of increases in revenue and/or available services attributable to broadband. Rather, opportunity costs and reduction of revenue from dial-up services must also be considered. McDevitt also asserted that implementation of broadband in rural areas is particularly expensive, when compared with the associated benefits over use of dial-up services.

Brent Goldfarb (University of Maryland, Robert H. Smith School of Business) focused on the uses to which broadband is currently put. He noted that the largest current consumption of broadband is for P2P file sharing, much of which is illegal (not to mention potentially harmful to the recording industry).

In contrast to this salvo of academic realism, Ralph Everett (Joint Center for Political and Economic Studies) relied on the standard statistics for the assertion that broadband has a huge positive impact on the economy and employment. And the presentation by venture capitalist Tom Wheeler (Core Capital Partners, LLC) involved no statistics at all, but rather was a gut-level emotional plea for greater broadband development, based largely on analogies to the social and economic impact of the trans-continental railroads. Hmmmmm…… 

It will be interesting to see what the FCC does with this.   We still believe that they will go with the idea that increased broadband growth is necessary or good for economic growth. Everybody seems to be saying it, including the President, the Congress, and the FCC Chairman. That must make it true, right? 

To be sure, the received truth does have an appealing credibility, supported by studies that, for whatever reason, were largely MIA at the workshop. But the workshop’s presentations should still give everyone involved in the process cause for reflection. 

The FCC’s staff must have known that the majority of presenters would present contrarian – or, at least, not entirely upbeat – approaches. Which leads us to wonder: did the staff line up this group of contrarians in an effort to create some appearance of balance on the issue? Or perhaps the workshop’s organizers were affirmatively trying to attune the public to the notion that, as the government flings billions of dollars out the door at broadband development, it could use much more information – so please recommend to Congress that that information be obtained through the Census or other means.

Stay tuned for more developments in this evolving drama.

Section VI.A of the FAQs asks and answers:

Q:        Do the nondiscrimination and interconnection requirements apply to the portions of the applicant's network that are not funded by BIP or BTOP?

A:        No

(A brilliantly concise answer which we applaud.)  Logic appears to prevail.

But there is more:

 Q:        Is last mile infrastructure subject to the same nondiscrimination and interconnection obligations as middle mile infrastructure?

 A:        Yes. The same nondiscrimination and network interconnection obligations apply to both Last Mile and Middle Mile projects. (See NOFA section V.C.2.c.) For BTOP only, Broadband Infrastructure applications will be evaluated on the applicant’s commitment to exceeding the minimum requirements. Section VII.A.2.c of the NOFA (“Project Benefits”) explains how Last Mile and Middle Mile applicants may exceed the minimum requirements, based on the different technical characteristics of the two types of projects.

As straightforward as these answers seem, the practical aspects of compliance may not be so easy to resolve. After all, if one or more parts of a network are subject to net neutrality obligations, it may be difficult to sector the network so as to be net neutrality-compliant only in funded portions, while still retaining operational flexibility in non-funded portions. And conceptually, it might be challenging to justify such a bifurcation.

Also, as our colleague Mitchell Lazarus has previously noted, it may be hard to tie down precisely where in a particular network a net neutrality violation actually occurs. Thus, any network with any BTOP/BIP-funded component could theoretically be pulled into a net neutrality battle.

So while the FAQs give concise, logical answers, the practical and conceptual realities are less clear.

Also less clear is the FAQs’ authoritative significance, if any. The FAQs don’t say where they came from. Federal agencies act through the issuance of formal orders, notices and the like, pursuant to the Administrative Procedure Act and other statutes. In their current posture, the FAQs, while no doubt intended to help clarify matters, may not have any binding effect on RUS, NTIA, the FCC, or anybody else. Trust, but verify. Or, better – first verify, then trust.

Our colleague Joe Di Scipio has already provided a summary of some of the post-award requirements in store for BTOP and BIP winners. As he notes, NTIA imposes limits on the sale or lease of award-funded facilities. (Recently, RUS has confirmed to us that it may be willing to consider permitting a sale of award-funded property sooner than 10 years out, as long as the grantee submits a written request with “all pertinent information”.) But it appears that, in addition to those limits, NTIA/RUS also expect awardees to plow any income generated by their project back into “the funds committed to the project by RUS or NTIA and the recipient”. As we understand this, it means that it will be difficult, if not impossible, to pocket any profits, at least in the short term. Of course, it’s probably unlikely that the system would be spinning off profits in the first three years anyway, but still, it’s good to keep this in mind.

Joe also described some, but not all, of the regular (“regular” here meaning “quarterly”) reporting requirements. Over and above those he mentioned, BTOP grantees are also expected to provide regular reports on a long laundry list of operational minutiae. What kind of minutiae? How about “total and peak utilization of access links”, or “total and peak utilization on interconnection links to other networks”, or “Internet protocol address utilization and IPv6 implementation”? Or “average end-user and middle mile megabit per second increase”? More importantly, grantees will have to report certain business information such as: the terms of any interconnection agreements entered into;  traffic exchange relationships (e.g., peering) and terms; the number of households and businesses subscribing to new and existing broadband service; advertised and averaged broadband speeds; and the price of the broadband services.

There are lots more such categories of reportable information where these came from, but you get the idea. These regular reports will be made available to the public. (While you can always request that your reports be kept confidential, there is no guarantee that your request will be granted.)

In addition to the reporting chores, a BTOP award also invites the government into various aspects of the awardee’s business. Award winners will have to get prior approval for changes in budgets and key personnel and use of “subgrantees”. They’ll be subject to federal procurement standards (including a preference for competitive bidding for subcontractors) and federal cost principles (i.e., costs must be allowable, reasonable and allocable). And their ability to determine the wages of their workers (and their subcontractors’ workers) will not be entirely within their discretion: any project using Recovery Act funds requires the payment of not less than the prevailing wages for "all laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part by and through the Federal Government.” Doubtless there are, or will be, other fine print constraints in such operational areas.

And to keep everybody honest, all grantees are required to comply with still more regulations set forth in OMB's Interim Final Guidance for Federal Financial Assistance. Grantees that expend $500,000 or more of federal funds during their fiscal year are required to submit an organization-wide financial and compliance audit report. The audit must be performed in accordance with Government Auditing Standards (check them out here, among others).  Awardees are responsible for ensuring that sub-recipient audit reports are received and for resolving any audit findings. 

The fun doesn’t necessarily stop there: Grantees will also be subject to random compliance/performance audits by the Office of Inspector General of the Department of Commerce.

Applicants should also be aware that, in their applications, they will be coughing up significant amounts of proprietary information. For example, explanations as to why proposed service pricing is affordable compared to other local providers . . . and detailed proposed network diagrams and build-out timelines . . .  lists of vendors . . . detailed budgets . . . subscriber estimates . . . Pro Forma 5-year financial forecast and assumptions. All of this (and more) will be reviewed by at least three volunteer “peer reviewers”. While the NOFA encourages applicants to identify and label any confidential and proprietary information contained in their applications, and while RUS/NTIA may make a bona fide effort to keep confidential material confidential, remember this: the Recovery Act requires substantial transparency, and various mechanisms (the Freedom of Information Act comes immediately to mind) exist by which confidentiality claims may be thwarted. In other words, while confidentiality may be requested, there is, again, no guarantee that it will be accorded.

Similar concerns exist regarding the requirement that grantees report certain information for use in connection with the separate State Broadband Data and Development Grant Program.  This would include reporting data on the availability of broadband service within the service area and the residential average revenue per user (ARPU). Some parties have already expressed concerns about having to report ARPU figures.

Finally, let us not forget about the “net neutrality” limitations described by our colleague Mitchell Lazarus here. 

There is unquestionably a huge amount of upside potential here singing siren songs into the ears of would-be applicants. While we encourage all would-be applicants to take advantage of the opportunities which the stimulus programs present, we caution them that, as Circe counseled Ulysses, even the most alluring siren songs can lead to unpleasant and regrettable results.

Two agencies are in charge of the Recovery Act’s broadband project funding. The Rural Utilities Service (RUS) has established the Broadband Initiatives Program (BIP) to facilitate broadband deployment in rural areas.  The National Telecommunications and Information Administration (NTIA) has established the Broadband Technology Opportunities Program (BTOP) for: (1) deploying broadband infrastructure in unserved and underserved areas in the United States; (2) enhancing broadband capacity at public computer centers; and (3) promoting sustainable broadband adoption projects.  

While BIP funding is reserved for projects serving rural areas, BTOP-funded projects are anticipated to serve a variety of geographic areas.   (For additional information on these factors, check out our post here as well as other posts in our “Broadband Stimulus 101” series.)  All of the criteria used to evaluate funding applications are based on these purposes and the priorities of each program. 

BIP Evaluation Criteria

BIP funding requires that 75 percent of the area to be served be in a rural area that “lacks sufficient access to high speed broadband service to facilitate rural economic development.”  RUS will give priority to projects that: (a) give end users a choice of providers; (b) serve the highest proportion of rural residents that lack access to broadband service; (c) are projects of current or former RUS borrowers (also known as Title II borrowers); and (d) are fully funded and ready to start once stimulus funding is received.  

The application process uses a scoring system that awards points based on how well the proposed project meets BIP’s purposes and priorities. After establishing whether a particular applicant is eligible for BIP funding (ineligible or incomplete applications will be rejected), all applications will be ranked based on their total score. Each application is independently scored against the criteria. That is, applications are not scored relative to other applications. Only the highest scoring applications, however, will be allowed to proceed to the next level of evaluation. Lower scoring applications will be rejected.

The scoring criteria are grouped into four categories: (1) Project Purpose; (2) Project Benefits; (3) Project Viability; and (4) Project Budget and Sustainability. For BIP applications, each of these categories is given an equal number of points (25) and the number of points within each category is based on fairly specific criteria.

Project Purpose (25 points total):

• Proportion of rural residents served in unserved areas (1-5 points) – One point for every 10,000 unserved households. 
• Rural area targeting (1-5 points) – One point for every 5% increase in the rural service area over the minimum 75 percent requirement. 
• Remote area targeting (1-5) points – One point for every 50 miles a service area is located from a non-rural area. 
• Recovery Act/other governmental collaboration (1-5 points) – One point for each Recovery Act or other governmental program that is partnered with the proposed project. 
• RUS Title II Borrower (5 points) – All or nothing five points if the application is a past or present RUS Title II borrower.

Project Benefits (25 points total):

• Performance of the offered services (10 points) – Ten points if the project will deliver broadband speeds that meet or exceed the benchmarks set for the type of service provided (e.g., wireline “last mile” projects must deliver at least 20 Mbps service to households).
• Affordability of services offered (1-5 points) – Up to five points if the proposed rates are considered affordable for the target audience.
• Choice of provider (5 points) – Applications that propose to allow more than one provider to serve end users will receive five points.
• Critical community facilities (5 points) – Applications that propose to offer discounted rate packages to all “critical community facilities” in the proposed funded service area will receive five points.

Project Viability (25 Points)

• Applicant's organizational capability (1-12 points) – RUS will evaluate past performance and accomplishments of the project’s management team and award points accordingly.
• Community support (2 points) – Community support for the project must be evidenced by letters of support from all communities in the proposed funded service area. To receive the two points, the letters must be from a “designated community leader” in each community.
• Ability to promptly start project (10 points) – Applicants must demonstrate that all licenses and regulatory approvals have been obtained, all required contractors and vendors are ready to enter into contracts, all required equity contributions have been made, and that the project timeline is reasonable.
• Disadvantaged small businesses (1 point) – Applicants that meet the definition of a socially and economically disadvantaged small business concern under section 8(a) of the Small Business Administration will receive one point.

Project Budget and Sustainability (25 Points)

• Reasonableness of the budget (1-5 points) – Points awarded based on the clarity and reasonableness of the proposed budget.
• Leverage of outside resources (1-10 points) – Points awarded on a sliding scale based on the ratio of outside funding to requested BIP funding, with greater outside funding earning a greater number of points.
• Extent of grant funding (1-10 points) – Points awarded on a sliding scale based on ratio of funds requested in the form of grants to funds requested in the form of loans with loan funding favored over grant funding (e.g., zero points if grant funds make up 100 percent of the request and 10 points if loan funds make up 100 percent of the request).

BTOP Evaluation Criteria

As noted above, BTOP funding will be distributed among three different project categories: Broadband Infrastructure, Public Computer Centers, and Sustainable Broadband Adoption Projects. NTIA’s evaluation criteria differ for each category of BTOP project.  Thus, although BTOP applications are evaluated on the same broad criteria as BIP applications (Project Purpose; Project Benefits; Project Viability; and Project Budget and Sustainability), the specific factors and weight given to each factor vary from BIP evaluations.  In addition, the information provided thus far suggests that BTOP scoring may be less rigidly structured than the BIP scoring system, with reviewers of BTOP applications having more latitude to weigh and balance factors within each criterion. As with BIP application, the highest scoring applications go forward, lower scoring applications go home. Thus, as with BIP applications, applicants must ensure their applications fully address each of the following criteria.

Project Purpose (30 points) Applications will be judged with respect to how well the proposed project matches BTOP’s statutory purposes. In doing so, reviewers will consider:

• The project’s “fit” with BTOP statutory purposes
• The level of collaboration with other Recovery Act and other governmental programs.
• The project’s ability to enhance service for health care, education, and children.
• Whether the applicant meets the definition of a socially and economically disadvantaged small business concern under section 8(a) of the Small Business Administration

Project Benefits (25 points) The factors considered in reviewing project benefits vary according to the type of project being reviewed, as follows:

• Broadband Infrastructure “Last Mile” projects – cost-effectiveness, performance of the offered service, affordability of services offered, and the degree to which the project meets nondiscrimination, interconnection, and choice of provider standards.
• Broadband Infrastructure “Middle Mile” projects – the impact the project will have on the proposed service area, the level of need in that area, network capacity, the affordability of the services offered, and the degree to which the project meets nondiscrimination, interconnection, and choice of provider standards.
• Public Computer Center projects – the degree to which the center will be available to the public, the training and educational programs to be offered, and the availability and qualifications of the proposed consulting and teaching staff.
• Sustainable Broadband Adoption projects – the number of new broadband users that may be generated by the program, the projected cost per new user, and demonstrated innovation in methods to encourage sustainable broadband adoption.

Project Viability (25 points)

• Technical feasibility. For Broadband Infrastructure and Computer Center projects, applications will be evaluated on the comprehensiveness and appropriateness of the proposed technical solutions and system designs. For Sustainable Broadband Adoption projects, the operational details of the project will be assessed.
• Organizational capability. Reviewers will assess the experience and expertise of the project’s management team and applicant’s past history with similar projects.
• Community involvement. Reviewers will examine whether the project proposes meaningful “linkages” with community organizations in the project area, with special emphasis on community anchor institutions, public safety organizations and socially and economically disadvantaged small business concerns.
• Ability to promptly start project. Reviewers will evaluate whether required licenses and regulatory approvals have been obtained, whether required contractors and vendors are ready to enter into contracts, and whether the project timeline is reasonable.

Project Budget and Sustainability (20 points)

• Reasonableness of the project budget. Applicants must be able to demonstrate that their proposed budgets are reasonable based on, among other things, the budget’s clarity, level of detail and appropriateness to the proposed project.
• Sustainability of the project. Applicants must be able to demonstrate that their projects are sustainable past the initial funding period. For Broadband Infrastructure and Computer Center projects, reviewers will consider business plans, market projections and other relevant data.  For Sustainable Broadband Adoption projects, reviewers will consider whether the increases in broadband adoption rates will be sustained beyond the conclusion of the project.
• Leverage of outside resources. All projects must meet a matching funds requirement of 20 percent of total project costs. Applicants must demonstrate the ability to provide, from non-federal sources, funds required to meet or exceed that 20 percent matching funds requirement unless a waiver of that requirement has been requested.

As noted above, applicants must be mindful of the scoring systems that will be used to evaluate BIP and BTOP applications. The evaluation of applications does not end with the scoring systems, however. Indeed, the scoring system is just the first stage of the overall grant process. In step two of the process, applicants are required to submit additional documentation to support the claims made in their initial applications. Thus, applicants should not attempt to “game” the scoring system by making unsupportable claims as to their projects’ purpose, benefits, viability or sustainability. Rather, applicants should seek to ensure that they have ample evidence that their projects match the statutory proposes and priorities of the funding programs. Doing so will require a considerable amount of time and effort. With the August 14th deadline for first round funding fast approaching, organizations interested in applying for funding should begin those efforts immediately.

Some helpful definitions 

The decisional criteria for both BIP and BTOP include, in particular, three crucial factors: the “area” to be served by the applicant; whether or not that area is “rural”; and whether or not that area is “unserved” or “underserved”.  A quick summary of those terms for BIP/BTOP purposes:

“Area” – For both programs, applicants must specify the “area” to which the funds would be applied. The precise area covered by any proposal is determined by the applicant and is referred to as the “proposed funded service area” (PFSA). Each PFSA must be no smaller than a census block and can be composed of as many contiguous census blocks as the applicant proposes to serve.   Service to at least one entire census block is required (absent a waiver from the administering agency). 

“Rural” – Another consideration common to both programs is the “rural” character of the PFSA. An area is “rural” if it is outside of any city, town or incorporated area that has a population that is greater than 20,000 inhabitants and if it is also outside of an urbanized area adjacent to a city with a population greater than 50,000 inhabitants. Whether an area is “rural” is determined by information derived from the last (i.e., the 2000) decennial census.

“Unserved” v. “Underserved” – According to both RUS and NTIA, an area is “unserved” if terrestrial broadband (minimum advertised speeds of “at least” 768 kbps down and 200 kbps up, fixed or mobile) is not available to 90% or more of the households in the area. 

An area is “underserved” if it features any of the following three characteristics: (1) no more than 50% of the households have access to facilities-based, terrestrial (fixed or mobile) broadband service (minimum advertised speeds of at least 768 kbps down and 200 kbps up); (2) no fixed or mobile broadband service provider advertises downlink speeds of three megabits per second (Mbps) or more for the area; or (3) 40% or fewer of the households in the area subscribe to broadband service. 

Note that the availability of broadband service from satellite – as opposed to terrestrial – carriers is not a factor in determining whether an area is unserved or underserved.

Now that we have some sense of what these terms mean, let’s look at how they play out in the application process.

BIP – Strictly “rural”    The BIP money is intended for use in rural unserved or underserved areas. BIP funds are available for “last mile” and “middle mile” broadband infrastructure projects in PFSAs that are: (a) at least 75% rural and (b) without access to broadband services or underserved with broadband services.   If you propose service to an area that is at least 75% “rural,” you MUST apply through the BIP.

BTOP – Not necessarily rural, definitely unserved/underserved     If your project does not qualify for BIP funds, it may still qualify for NTIA’s BTOP funding. BTOP funds are also available for “last mile” and “middle mile” projects. The major difference between BIP and BTOP is that BIP is focused on rural unserved or underserved areas, while BTOP is focused upon unserved or underserved areas whether or not they happen to be “rural”. A project can qualify for BTOP funds as long as the area is unserved or underserved and the proposed funded service area does not qualify for BIP funds. Thus, presumably, a census block consisting of a population density like that of Soho in Manhattan would qualify as long as it can be demonstrated that the census block is either unserved or underserved.

The most difficult eligibility criterion applicants will face is determining broadband service availability. Unfortunately, neither RUS nor NTIA has offered any advice on exactly how that determination will be made. The NTIA and RUS define broadband speed in any area as the advertised speed, with the focus on the “least” advertised speed.   But in real life, a network operator will offer peak speeds and average speeds, and may advertise speed ranges. 

Moreover, a network operator’s service literature or contracts may provide that speeds lower than advertised may be experienced. Do such fine-print provisions establish or affect the operator’s “advertised speed”? Because neither NTIA nor RUS has addressed this issue, it’s hard to say. However, we believe it wise to ignore such fine-print qualifications on speed limits in this context. Rather, applicants should look instead to the slowest speed which the operator actually advertises, since that is the minimum a prospective customer (i.e., somebody who does not have immediate access to service literature or formal access agreements) can expect.

Further complicating the speed issue is the pesky quirk that wireless carriers tend to advertise speeds on a nationwide, rather than local market-by-market, basis. AT&T Mobility’s advertisement of dongle speeds illustrates this dilemma. In a press release dated June 4, 2008, AT&T announced new dongle download speeds of between 700 kbps and 1.7 Mbps and upload speeds between 500 kbps and 1.2 Mbps that will be available in “nearly 350 major metropolitan areas.” So what is the advertised minimum data speed in my particular PFSA? What defines the limits of a “metropolitan area” as AT&T uses that term? How is wireless coverage defined?   Neither NTIA nor RUS has addressed these issues. Based upon our belief that those who guess wrong on the outcome of these issues will not get the benefit of the doubt, we suggest that applicants err on the conservative side.  

As noted, the agencies will fund two different types of broadband infrastructure projects: “last mile” projects, in which service to end users or end user devices is the predominant use of the infrastructure; and “middle mile” projects, in which the infrastructure is used to support the last mile portion with point-to-point backhaul, special access, or some other transport infrastructure. The discussion above focused upon the areas where “last mile” facilities would be built. “Middle mile” projects must connect at least two points. For “middle mile” facilities to qualify for BIP funds, the proposed funded service area must be at least 75% rural and at least one terminus of the project must be within an area that is “unserved” or “underserved.” For BTOP funds, a “middle mile” project is eligible if at least one connection terminates in an underserved area.

All of these factors make the careful selection and definition of an applicant's proposed service area a critical part of the process. Failure to meet the "rural" and "unserved" or "underserved" tests can result in either outright disqualification or less favorable consideration for your application.   Accordingly, extreme caution should be exercised in the initial design of the proposed project to avoid being shut out at the starting gate.

BIP Requirements – Let's first take a look at highlights of the post-award requirements for BIP winners. If you are a BIP winner, you will have to comply with all "reasonable" RUS requests to support ongoing monitoring efforts. That means, for example, that at all times during business hours RUS and its minions may (with appropriate notice) inspect the broadband system and any other property encumbered by the mortgage or security agreement and review and make copies of all of your stuff (both written and electronic). The mortgage and security agreements secure the government's investment in your assets, just as a bank would collateralize a commercial loan by taking a lien on your property.

To regularize accounting, BIP winners must adopt a GAAP system of accounts that is acceptable to and approved by the RUS (we’ll leave out the jokes about what the government knows about accounting).   Awardees must submit annually an audited financial statement prepared by a CPA approved by the RUS and a report on compliance and a management letter. In addition to the BIP-specific and general Recovery Act requirements (covered below), BIP winners must submit within 30 calendar days at the end of each quarter, balance sheets, income statements, statements of cash flow, rate package summaries, and the number of customers taking broadband service on a per community basis, utilizing RUS’s Broadband Collection and Analysis System (BCAS). There are numerous other BIP-specific quarterly and annual reporting requirements, but suffice it to say that the government intends to monitor its investment very closely.  These requirements persist for three years from the date of the award.

BTOP Requirements – As a general rule, the sale or lease of any of the award-funded broadband facilities is prohibited. There are, of course exceptions (which require notice to the requisite agencies). Sales or leases will be approved if: (i) adequate consideration is given, and (ii) the buyer or lessee agrees to fulfill the terms and conditions of the project; and (iii) either (y) the sale or lease was included in the initial application and was included in the proposal for funds or (z) the requisite agencies waive the provision for any sale or lease occurring after the tenth year from the date of issuance of the grant/loan. None of this, however, is intended to limit awardees from leasing facilities to another service provider for the provision of broadband service.   As a practical matter, we cannot envision that RUS would want – or have any reason – to prevent alienation of these properties so long as the purposes of the stimulus money continue to be served by the buyer. 

As with BIP winners, the NTIA has the right to inspect the broadband system and any other property funded by the system and make copies of everything. An audit may be conducted at any time.

Finally, all BTOP Broadband Infrastructure awardees that offer Internet access service to the public for a fee must participate in the State Broadband Data and Development Grant Program. This program gathers data on: (i) the availability of broadband service within the service area (with different reporting requirements for the wireline and wireless based systems); (ii) the residential average revenue per user; (iii) the first point of aggregation for last mile connection points like remote terminals and cable headends; (iv) middle connection points; and (v) a list of community anchor institutions to which service is provided.

General Reporting Requirements– Both BIP and BTOP awards (loans, grants, loan/grant combinations) are subject to all statutes and regulations regarding reporting on Recovery Act funds. Note that if Recovery Act funds are combined with other funds, awardees must account for the RUS or NTIA funds separately. The awardee and any subcontractor must report to the relevant agency: (i) the total amount of Recovery Act funds received; (ii) the amount of those funds that were used or obligated to projects; (iii) a detailed list of those projects (with specific reporting requirements); and (iv) detailed information on any subcontracts or subgrants awarded by the awardee which must include the elements required to comply with the Federal Funding Accountability and Transparency Act of 2006 (register with the CCR database http://www.ccr.gov/). Recovery Act reports are due ten days after the end of the quarter in which the award was issued and each quarter thereafter until a final report is made at the end of three years. Failure to timely report could result in suspension of further payments until the awardee complies with reporting requirements. At this point, it will come as no surprise that unknown additional reporting requirements will be specified at the time the award is issued.

In addition to the general reporting requirements, there are also specific BTOP Broadband Infrastructure Awardees and Public Computer Center Awardees which we do not include here, but are available for review in the Notice of Funds Availability.

The bottom line here is that, like most everything else in life, cashing in on the stimulus program is a process that isn’t over until the paperwork is done – and in this case, the paperwork will keep coming and coming for years after the award. Successful applicants must be ready to maintain fastidious records and be prepared to open those records up to the government at any time.

• access the lawful Internet content of their choice;
• run applications and use services of their choice;
• connect their choice of devices; and
• have competition among providers.

As usual, the principles are subject to the needs of law enforcement and reasonable network management.

The list is fine, as far as it goes. Some observers would like to have seen an additional principle barring discrimination among content providers. The biggest omission, however, is not in the list itself, but rather in the FCC’s having skipped the step of adopting the list as enforceable rules.

The legal effect of the principles, if any, is the topic of a lawsuit now pending in the U.S. Court of Appeals. A year ago the FCC determined that Comcast, which provides both cable service and Internet service, had selectively interfered with an Internet application called BitTorrent which, among other uses, helps subscribers to download movies.  Comcast claimed this was reasonable network management. Skeptics noted that BitTorrent offered a free alternative to Comcast’s on-demand cable TV offering. Citing its four principles, the FCC ordered Comcast to stop targeting particular applications. Comcast said it had already stopped, but went to court anyway, to assert that the principles, not being actual rules, were legally inadequate to support an order. The court has not yet issued a decision in the case.

In the meantime, two government agencies not usually associated with private-sector telecommunications regulation have written a form of network neutrality into law, for all practical purposes.

The broadband stimulus program – about which more may be found elsewhere on CommLawBlog.com (here and here, for example) comes in two parts. The Broadband Technology Opportunities Program (BTOP), administered by the Rural Utilities Service (RUS), will facilitate broadband deployment in rural areas. The Broadband Initiatives Program (BIP), administered by the National Telecommunications and Information Administration (NTIA), will deploy broadband infrastructure in unserved and underserved areas, improve broadband capacity at public places, and promote sustainable broadband adoption projects. The actual funding document, all 121 pages of it (slimmed down to fit into a mere 32 pages of minuscule Federal Register text), is here.    

If the thought of a quarter-ream of bureaucratese does not quicken the pulse, the number $7.2 billion might. That’s billion, with a B. Just for broadband programs.

But with a catch. Systems taking funds under either BTOP or BIP must commit to a specific form of network neutrality. It has are five requirements:

1. Adhere to the FCC’s four principles.
2. Do not favor particular content or applications over others (the “fifth principle” missing from the FCC’s original formulation).
3. Publicly explain any network management policies (to head off Comcast-type problems).
4. Connect to the public Internet (disqualifying projects that consist entirely of closed private networks).
5. Offer interconnection on reasonable rates and terms (a throwback to the FCC’s “Computer II/III” rules to open the market for Internet access to competition).

On point(4), the funding agencies are quick to clarify that awardees may use private networks rather than the public Internet for “managed services” such as telemedicine, public safety, and distance learning, where necessary for quality of service. The document is not entirely clear, but we think point (4) means that an awardee proposing to use funds for a private network must also offer a public Internet connection. We also note that the four principles apply to all “Internet access or Internet Protocol-enabled (IP-enabled) services,” presumably including a private network that uses IP-based communications, as many do.

The agencies emphasize that awardees are free to manage their networks responsibly. They can use caching and bandwidth allocation (without discriminating among content or applications), and can take reasonable measures to combat spam, denial of service attacks, illegal content, and other harmful activities.

The network neutrality obligations are binding not only on awardees, but also on contractors and subcontractors who build or operate funded systems. And the obligations continue to apply for the life of the facilities, not just the particular networks that run on them. If company A builds network facilities with stimulus money, and at some later time transfers the facilities to company B, which wants to use them for some other purpose, all of the above conditions nevertheless carry over.

Any disputes over the requirements are referred to the FCC for action based on “any FCC rules implicated in the dispute.” Today, of course, there are none. An aggrieved party’s next stop is the funding agency, which may “exercise all available remedies to cure the default.” Vague threats are always the worst.

If the FCC maintains its disinclination to adopt actual rules on network neutrality, we will have the awkward situation of systems being subject to different requirements, depending on whether they were built with stimulus money or otherwise. A content provider that suspects discrimination would have to inquire into the origins and funding of the facilities used by the network in question. This will become difficult as various companies buy and sell and interconnect both publicly and privately funded networks, and even parts of networks, in ever-more-complex configurations. Worse, content moving from the provider to the end user may traverse both stimulus-funded and other facilities. Pinpointing where the discrimination occurs, for purposes of bringing a complaint, may well be impossible.

Many observers – this author included – think that the best solution is for the FCC to step up and do its job of requiring all broadband service providers, however funded, to treat content suppliers and end users even-handedly. A good start would be simply to adopt as rules the four principles, plus two more from the stimulus list: no content discrimination, and mandatory disclosure of network management policies. Those of us favoring this view are surprised there might be any serious question that this is the right thing to do.

First-Round Deadline. The most daunting feature of the rules is the August 14 deadline for filing. That leaves less than a month to pull together a fairly complicated package of information and projections, perhaps involving the receipt and expenditure of millions of dollars. But remember, the underlying purpose of this program is to stimulate the economy, so in this case haste makes not waste, but good public policy. Your whole package must either be electronically filed by 5:00 p.m. (EDT) on August 14. (A limited exception to the electronic filing requirement permits some handicapped people or those seeking smaller awards to file paper copies, which must be hand-delivered or postmarked by August 14.)

To be sure, the August deadline only applies to the first round of funding – there will be subsequent opportunities to file later in 2009 and then again in 2010, but as we will explain, there may be some advantage to filing in the first round.

Know Your Acronyms. The Feds have adopted cute acronyms for the two funding vehicles. “BIP” – Broadband Initiatives Program – is the name for the RUS program intended primarily to bring broadband to rural areas. “BTOP” – Broadband Technology Opportunities Program – is the NTIA program open to both rural and urban areas. BIP and BTOP sound like lovable clowns in a small European circus, but they are no laughing matter here.

Funds Available.  There’s a reason that the official moniker for the document released by RUS and NTIA is "Notice of Funds Availability": the announcement says that $2.4 billion is being made available for rural areas by the RUS and $1.6 billion is being made available from NTIA sources.   This $4 billion represents a hefty chunk of the $7.2 billion that has been allocated for this program overall. So even though there are two funding tranches still to come, the Feds have front-loaded the awards to try to get the money out there sooner rather than later.   Particularly in the case of rural applicants, there is some premium on filing early since RUS is proposing to shovel out 96% of its money in this first round.

Within the overall funding amounts, there are some key subsets. Of the $2.4 billion in BIP money, half is reserved for “last mile” projects (i.e., projects designed to get broadband service to the end user). Of that half, $400 million is reserved for grants for remote area projects – projects that address the most sparsely populated and needy parts of the country.  The other $800 million is reserved for loans or loan/grants for non-remote but nevertheless rural areas. Another $800 million is set aside for loans and loan/grants for "middle mile" projects – what most people would call “back haul”. By our math, that leaves $400 million in BIP money available for unrestricted purposes.

BTOP is offering $1.6 billion, divided as follows: no more than $1.2 billion for broadband infrastructure projects, $50 million to establish public computer centers so people will have public access to broadband, $150 million for "sustainable broadband adoption" projects (nobody, including NTIA, seems to be quite sure what this particular money is supposed to be for), and $200 million as a "national reserve" – a sort of broadband rainy day fund. 

It must be remembered that all of this money does not have to be doled out in the first round. If there are insufficient worthy applications, the funds can simply be held over to the next round. However, all the money has to be out the door by September 30, 2010.

Where is the Money Going?  There is both a geographic and a service-based component to determining which regions of the country qualify for project funds. As mentioned above, theBIP money is primarily intended for rural applications, so 75% of the areas to be served with this money must go to serve rural areas. Moreover, if you qualify as a rural area, you must apply through the BIP program first, even though your application can also be considered for BTOP money if it’s not found worthy of BIP. One of the initially perceived advantages of filing for BIP was that you would not be saddled with the requirement applicable to BTOP money to pay 20% of the project cost out of non-federal funds – i.e., you can get a grant for the whole amount. However, RUS poured cold water on those dreams by declaring that pure grants would be available only for those "remote" areas described above – the areas that nobody wants to serve now. BTOP funds can go to both urban and rural areas.

Both programs, however, emphasize the importance of providing service to unserved and underserved areas. It's not that difficult to determine if an area is completely unserved – a simple drive test or a look at a cable TV or telco service map would answer that – but how do you determine when an area is "underserved?" This is one of the most criticized elements of the rules as announced because it is so difficult to determine with any accuracy who is receiving service in an area already served by at least one broadband provider.   Those companies aren't saying how many subscribers they have, and they are obviously not going to be eager to help a government-subsidized competitor come into the market.   Those companies will also have the right to challenge your claims about service or the lack thereof, so this key component of an applicant's eligibility package is highly vulnerable.

Application Process. RUS and NTIA have published an electronic version of the application form on their website. You can access it by clicking here.  The form is an intimidating one, calling for a large amount of data from the applicant.

Required components include:

·     a detailed description of the project (including a granular description of the area to be served with maps, geography, numbers of households and businesses passed, job impact, etc);

·     a description of the proposed service offerings and proposed pricing plans;

·     the advertised rates of existing providers;

·     a network diagram certified by a network engineer;

·     a project timeline; management resumes;

·     legal opinions as to the applicants qualifications;

·     financial information about the applicant, both historical and projected; and

·     other information peculiar to BTOP. 

The application process itself could be a job-creation program for engineers, lawyers, accountants, geographers and others. Perhaps the Feds are relying on the onerousness of the process itself to deter less-than-committed applicants, but the process may also deter otherwise deserving applicants who are simply unable to amass this mountain of data in the 30 days available. 

Who Gets the Money? Each program includes its own scoring system to measure how well the applications serve the purposes of the program and how likely they are to succeed.   This is an attempt to make the selection process objective, though we note that the BTOP has an astonishing level of personal involvement by political appointees at NTIA at the back end of the award process – a design feature that does nothing to assuage fears that the awards may be based on political connections rather than merit. Perhaps to counteract that apprehension, applicants and their representatives are barred from any contact with the funding agencies while their applications are being considered (other than responding to formal notices). 

In general, the programs have been set up to prioritize applicants who contribute more rather than less of their own money, who request a larger component of their award as loan rather than grant, and who provide the greatest service to areas that currently have the least broadband access. This will require a challenging trade-off by applicants between getting the funds in the first place, ensuring the sustainability of their project, and risking as little of their own money and as much of the government's as possible.

Post-Grant Accountability. The rules prescribe detailed monitoring and reporting requirements for award recipients to ensure that they are spending the money quickly and as promised. Any failures to meet promised performance can result in "deobligation" of the committed funds and other severe penalties.   There are also restrictions on what you can do with the revenues you receive for a few years, and you must get permission to sell the system you have created.

All of this proves once again the adage that there is no free lunch, but that should not deter folks with a good plan from ordering up the menu.  The Broadband Stimulus Team here at Fletcher, Heald and Hildreth will be publishing features focusing on some of the specifics of the BIP and BTOP programs on an on-going basis to assist those interested in applying in understanding the process.

But the potential reward is not to be scoffed at.  In all, NTIA/RUS have been allotted a cool $7.2 billion to hand out “to expand access to broadband services”. Of that, $2.5 billion is earmarked for projects where at least 75% of the affected area is in a “rural area” that lacks “sufficient access” to “high speed broadband service” to “facilitate rural economic development”. RUS will be exclusively responsible for dispensing that particular trove. The remaining $4.7 billion has been appropriated to NTIA for broadband initiatives that will “spur job creation, stimulate long-term economic growth and opportunity, and narrow gaps in broadband deployment and adoption”. 

As of right now, a mere $4 billion is on the table. (The remaining $3.2 billion will be addressed in future NOFAs.)

For its part, RUS has established the Broadband Initiatives Program (BIP) to facilitate broadband deployment in rural areas. On the other hand, NTIA has come up with the Broadband Technology Opportunities Program (BTOP). BTOP funds will be used to: deploy broadband infrastructure in unserved and underserved areas; enhance broadband capacity at public computer centers (e.g., schools, community centers, libraries, and other places that provide broadband access to the general public or “a specific vulnerable population”); and promote sustainable broadband adoption projects.

Both programs are widely open to most everybody, but the application process is clearly designed to discourage all but the most seriously interested, highly motivated, and detail-oriented among us. (The complete application package will be available at http://www.broadbandusa.gov; you can also find additional information about BIP and BTOP there.)

If you have any questions about – or would like any help jumping into –  the application process, feel free to contact Don Evans (evans@fhhlaw.com) or Paul Feldman (feldman@fhhlaw.com) here at Fletcher Heald & Hildreth.