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Treasury Preps Billions for States and Localities. Will it Mean More Broadband?

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 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 May 10-14, 2021

Kevin Taglang
Taglang

Typically, the Department of Treasury is outside the scope of broadband policy. But in March, President Joe Biden signed the American Rescue Plan Act, directing Treasury to disperse many, many billions of dollars to help State, local, and Tribal governments respond to the pandemic. And these billions may be used to expand access to broadband. The Department of Treasury recently issued an Interim Final Rule that would implement the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund which can be used for a number of purposes and investment in broadband infrastructure is explicitly one of them. In releasing the Interim Final Rule, Treasury is seeking public comment on its proposal.

The Coronavirus State Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Fund

The Coronavirus State Fiscal Recovery Fund provides $195.3 billion to the 50 states and the District of Columbia. Of this amount, the Act requires $25.5 billion to be allocated equally to the 50 states and the District of Columbia. (The Act also requires $754.9 million to be paid to the District of Columbia.) After the equal allocation to the 50 states and the District of Columbia and the “additional amount” for the District of Columbia, approximately $169 billion remains. The Act requires that this remaining amount be allocated to each state and the District of Columbia:

…in an amount which bears the same proportion to such remainder as the average estimated number of seasonally-adjusted unemployed individuals (as measured by the Bureau of Labor Statistics Local Area Unemployment Statistics program) in the State or District of Columbia over the 3-month period ending with December 2020 bears to the average estimated number of seasonally-adjusted unemployed individuals in all of the 50 States and the District of Columbia over the same period.

Based on this formula, California will receive over $27 billion, Texas $15.8 billion, New York $12.7 billion (find the amount for each state).

The Coronavirus Local Fiscal Recovery Fund provides $65.1 billion to counties. The Act requires that these funds are allocated based on each county’s population share of the total population of all counties. Cook County, Illinois, home to Chicago, for example, will receive just more than $1 billion (find the amount for each county). The Coronavirus Local Fiscal Recovery Fund provides $45.57 billion to metropolitan cities. As an example, Evanston, Illinois, will receive $43 million (find your city).

Eligible state, territorial, metropolitan city, county, and Tribal governments may now request their allocation of Coronavirus State and Local Fiscal Recovery Funds through the Treasury Submission Portal. Local governments will receive funds in two tranches, with 50% provided beginning in May 2021 and the balance delivered approximately 12 months later. States that have experienced a net increase in the unemployment rate of more than 2 percentage points from February 2020 will receive their full allocation of funds in a single payment; other states will receive funds in two equal tranches. Governments of U.S. territories will receive a single payment. Tribal governments will receive two payments, with the first payment available in May and the second payment, based on employment data, to be delivered in June 2021.

Recipients may use these funds to:

  • Support public health expenditures, by, for example, funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff;
  • Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector;
  • Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic;
  • Provide premium pay for essential workers, offering additional support to those who have and will bear the greatest health risks because of their service in critical infrastructure sectors; and 
  • Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet.

Investment in Broadband Infrastructure

The Fiscal Recovery Funds provide funds to State, local, and Tribal governments to make necessary investments in water, sewer, and broadband infrastructure. The Interim Final Rule outlines eligible uses within each category, allowing for a broad range of necessary investments in projects that improve access to clean drinking water, improve wastewater and stormwater infrastructure systems, and provide access to high-quality broadband service. Necessary investments are designed to provide an adequate minimum level of service and that are unlikely to be made using private sources of funds. Necessary investments include projects that are required to maintain a level of service that, at least, meets applicable health-based standards, taking into account resilience to climate change, or establishes or improves broadband service to unserved or underserved populations to reach an adequate level to permit a household to work or attend school, and that are unlikely to be met with private sources of funds. The investments are to be carried out in ways that produce high-quality infrastructure, avert disruptive and costly delays, and promote efficiency. The Department of Treasury encourages using strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions to support the economic recovery through strong employment opportunities for workers. Treasury will seek information from recipients on their workforce plans and practices.

Eligible investments in broadband are those that are designed to provide services meeting adequate speeds and are provided to unserved and underserved households and businesses. The Interim Final Rule provides flexibility to identify the specific locations within communities to be served and to otherwise design the project. Treasury treats users as being unserved or underserved if they lack access to a wireline connection capable of reliably delivering at least minimum speeds of 25 Mbps download and 3 Mbps upload.

Eligible projects are expected to be designed to deliver, upon project completion, service that reliably meets or exceeds symmetrical upload and download speeds of 100 Mbps. Recipients are also encouraged to prioritize investments in fiber optic infrastructure where feasible, as such advanced technology enables the next generation of application solutions for all communities. In setting these standards, Treasury identified speeds necessary to ensure that broadband infrastructure is sufficient to enable users to generally meet household needs, including the ability to support the simultaneous use of work, education, and health applications, and also sufficiently robust to meet increasing household demands for bandwidth. Treasury also recognizes that different communities and their members may have a broad range of internet needs and that those needs may change over time.

There may be instances in which it would not be practicable for a project to deliver such service speeds because of the geography, topography, or excessive costs associated with such a project. In these instances, the affected project would be expected to be designed to deliver, upon project completion, service that reliably meets or exceeds 100 Mbps download and between at least 20 Mbps and 100 Mbps upload speeds and be scalable to a minimum of 100 Mbps symmetrical for download and upload speeds. 

Specifically, the text of the rule reads that a recipient may use funds for one or more of the purposes including making necessary investments in broadband infrastructure that is designed to provide service to unserved or underserved households and businesses and that is designed to, upon completion:

(a) Reliably meet or exceed symmetrical 100 Mbps download speed and upload speeds; or

(b) In cases where it is not practicable, because of the excessive cost of the project or geography or topography of the area to be served by the project, to provide service that: (i) Reliably meet or exceed 100 Mbps download speed and between at least 20 Mbps and 100 Mbps upload speed; and (ii) Be scalable to a minimum of 100 Mbps download speed and 100 Mbps upload speed.

Recipients are also encouraged to consider ways to integrate affordability options into their program design.

To meet the immediate needs of unserved and underserved households and businesses, recipients are encouraged to focus on projects that deliver a physical broadband connection by prioritizing projects that achieve last-mile connections.

Treasury also encourages recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.

Treasury is interpreting the American Rescue Plan Act to allow for longer-term support for eligible projects: Fiscal Recovery Funds must be obligated (not spent) by December 31, 2024. Projects are expected to be completed by December 31, 2026.

Digital Inclusion Assistance

In addition to infrastructure, the Interim Final Rule indicates that the funds can also support “internet access or digital literacy assistance” for households that have experienced “a negative economic impact from the pandemic.” This appears to be support for two crucial elements of digital inclusion: making service affordable and helping people develop the skills they need to use broadband internet access service.

Seeking Public Input

Although funding from the Coronavirus State and Local Fiscal Recovery Funds is already subject to the requirements specified in the Interim Final Rule, the Department of Treasury is seeking public comment on the following questions. [Please note the following question numbers are from Treasury’s public notice and commenters may want to refer to them by those numbers.]

Question 22: What are the advantages and disadvantages of setting minimum symmetrical download and upload speeds of 100 Mbps? What other minimum standards would be appropriate and why?

Question 23: Would setting such a minimum be impractical for particular types of projects? If so, where and on what basis should those projects be identified? How could such a standard be set while also taking into account the practicality of using this standard in particular types of projects? In addition to topography, geography, and financial factors, what other constraints, if any, are relevant to considering whether an investment is impracticable?

Question 24: What are the advantages and disadvantages of setting a minimum level of service at 100 Mbps download and 20 Mbps upload in projects where it is impracticable to set minimum symmetrical download and upload speeds of 100 Mbps? What are the advantages and disadvantages of setting a scalability requirement in these cases? What other minimum standards would be appropriate and why?

Question 25: What are the advantages and disadvantages of focusing these investments on those without access to a wireline connection that reliably delivers 25 Mbps download by 3 Mbps upload? Would another threshold be appropriate and why?

Question 26: What are the advantages and disadvantages of setting any particular threshold for identifying unserved or underserved areas, minimum speed standards or scalability minimum.  Are there other standards that should be set (e.g., latency)? If so, why and how? How can such threshold, standards, or minimum be set in a way that balances the public’s interest in making sure that reliable broadband services meeting the daily needs of all Americans are available throughout the country with the providing recipients flexibility to meet the varied needs of their communities?

More to Come from Treasury

In addition to the Coronavirus State and Local Fiscal Recovery Funds, the Department of Treasury is also preparing rules for the $10 billion Coronavirus Capital Projects Fund, also created by Congress in the American Rescue Plan. That money will support critical capital projects that directly enable work, education, and health monitoring, including remote options, in response to the public health emergency. The Capital Projects Fund thus allows for investment in high-quality broadband as well as other connectivity infrastructure, devices, and equipment. In addition to supporting broadband, it also provides flexibility for each state, territory, and Tribal government to make other investments in critical community hubs or other capital assets that provide access jointly to work, education, and health monitoring. All projects must demonstrate that they meet the critical connectivity needs highlighted and amplified by the COVID-19 pandemic.

Eligible applicants will be required to provide a plan describing how they intend to use allocated funds under the Capital Projects Fund consistent with the American Rescue Plan and guidance to be issued by Treasury. Applications will be accepted for review in the summer of 2021.