Biden Administration Decides Cities Should Not Use Broadband Dollars for Broadband

Earlier this year in March, the Biden Administration signed the American Rescue Plan Act, which included, among many other things, multiple sources of funds for broadband infrastructure. The U.S. Department of Treasury was tasked with writing the rules of how local governments can spend the various funds. The Interim Rule has been published and it appears to significantly limit local ability to invest in needed networks. 

The rules say that communities are expected to focus on areas that do not have 25/3 Mbps service reliably available. But there is no measure of what “reliably” means (in federal statute or otherwise). More than 90 percent of Americans have 25/3 “available” to them by best estimates. The result is considerable confusion for urban areas across the nation who no longer qualify for broadband investments under a strict reading of the proposed rules. This is not what the Biden Administration had suggested we should expect in its many press communications about its broadband approach. 

This discussion is about Section 602, which details the direct payments to local governments under the Coronavirus State Fiscal Recovery Fund. The aid offered to local governments has numerous authorized expenditures, including broadband infrastructure.

The Interim Rule that governs this program was released yesterday and appears to limit broadband infrastructure investment solely to the most rural regions: those lacking wireline connections reliably delivering 25/3 Mbps (Fact Sheet). Though in excess of 10 million children struggled with remote schooling in urban areas, the Biden Administration is not allowing local governments responsible for them in urban areas to build better networks that would meet their long-term needs. Unconnected families may get some temporary help via the Emergency Broadband Benefit or hotspots from temporary aid to schools, but communities cannot use the funds intended for broadband infrastructure to actually build networks that would permanently solve this problem in a financially responsible way.

We are still trying to understand what is happening here and we will update this developing story with any corrections or additional context. Do read to the end for a nice moral. In the meantime, tune into Connect This! at 6:45 PM ET on May 11 as I and several industry experts attempt to unpack how this ruling would uproot the plans of many cities that were planning to invest in improved networks but are now stuck floating in limbo.

UPDATE (5/13/2021) - Watch the Connect This! Show starting at 24:45 to skip right to a discussion about how much the rule discussed below still leaves the door open to broadband investment in urban areas and whether my analysis below is overly critical of the White House. Doug Dawson has posted his more hopeful reading here but I think there is still risk of cable monopoly lawsuits to disrupt that reading of the Rule. To clarify, the $10 Billion Capital Projects Fund will have an application but the Direct Payments discussed below do not. (end update)

The Interim Rule Relating to Broadband Infrastructure

Specifically, the Interim Rule states, starting on page 69:

The COVID-19 public health emergency has underscored the importance of universally available, high-speed, reliable, and affordable broadband coverage as millions of Americans rely on the Internet to participate in, among critical activities, remote school, healthcare, and work. Recognizing the need for such connectivity, the ARPA provides funds to State, territorial, local, and Tribal governments to make necessary investments in broadband infrastructure.

...

[A lot of detail about how important broadband is and then on page 71 it lays out some rules about requiring 100/100 Mbps (up and downstream) generally and why such robust connectivity is needed.]

...

[Starting at bottom of page 75] Under the Interim Final Rule, eligible projects are expected to focus on locations that are unserved or underserved. The Interim Final Rule 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 as households and businesses lacking this level of access are generally not viewed as being able to originate and receive high-quality voice, data, graphics, and video telecommunications. [Emphasis added and the Rule continues to note that this speed definition is consistent with the FCC's current broadband benchmark]

To reiterate, Treasury recognizes that families really need 100/100 Mbps service, but the interim rule issued mandates suggests that if they are living in a dwelling that has a "wireline connection capable of reliably delivering at least minimum speeds of 25 Mbps download and 3 Mbps upload," no matter the cost of service, those areas are not eligible to use Rescue Plan funds on broadband infrastructure. This is puzzling in multiple respects.

Exploring the Rule

The rule also includes the word "reliably," which does show that those who crafted the rule understand a significant problem with Internet access today: connections that claim to be faster than they are or that can deliver a gigabit but regularly suffer outages.

The problem here is the lack of any standard for what “reliably” means, and how one would collect the data to make the case. Additionally, who decides whether that standard has been met? I can imagine many city attorneys worrying that even if the facts are in their favor, a lawsuit from the cable monopoly would not be worth risking.

This rule is unnecessarily restrictive for the vast majority of Americans that hoped the Rescue Plan would help to establish the broadband competition that the Biden Administration has talked about.

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Nearly all cable networks appear from afar to be capable of offering 25/3, and some 90% of American households have access to cable according to their trade association. (My understanding of that is due in part to how local franchise agreements largely prevented red-lining in cable.) Add in the small amount of DSL or rural fiber, and probably 90-95 percent of Americans are in areas that cannot use the Rescue Plan broadband infrastructure dollars without having to risk running afoul of these rules.

That is basically all of urban and suburban America.

In a quick analysis that we plan to update with a more detailed one, the areas that are lacking wireline 25/3 Mbps access today (per the flawed FCC Form 477 data), are 80 percent white, while the country as a whole is 60 percent white, non-Hispanic. This is one of the reasons that the National Digital Inclusion Alliance has said that limiting broadband investment to rural-only areas discriminates against people of color. 

The good news is that for those areas that do qualify, the broadband dollars will have to be spent on future-proof infrastructure that will long serve the community - not equipment that will be obsolete in a few years like so much of what the FCC has focused on for the last 10 years.

Another good decision is that recipients are encouraged not to build in areas that are receiving other awards, like RDOF. But that decision making appears to be up to them. This is smart; some RDOF and other program awards will be built quickly and meet local needs. Others may not get built at all and communities should be able to make their own decisions about what course they are on.

How Did I and Others Get This So Wrong?

I just spent months talking about how much investment we would see in both rural and urban areas based on the plain intent of Congress and talking points from the Biden Administration to use Rescue Plan dollars to improve broadband. It is clear that the nation needs affordable choices and resilient networks, especially - most especially - in neighborhoods that have largely been passed over by the big monopolies for historic reasons that result in damning racial inequity today. Was it obvious from the start that the Biden Administration would turn its back on those communities?

The White House issued a fact sheet on April 15 and broadband is mentioned twice (emphasis added).

The Rescue Plan will provide needed relief to state, local, and Tribal governments to enable them to continue to support the public health response and lay the foundation for a strong and equitable economic recovery. In addition to helping these governments address the revenue losses they have experienced as a result of the crisis, it will help them cover the costs incurred due responding to the public health emergency and provide support for a recovery – including through assistance to households, small businesses and nonprofits, aid to impacted industries, and support for essential workers. It will also provide resources for state, local, and Tribal governments to invest in infrastructure, including water, sewer, and broadband services.

...

The COVID-19 crisis starkly illuminated key shortcomings – and inequalities – in U.S. infrastructure. While some communities were able to adapt to the pandemic with remote or socially-distanced options for work, education, and health care, others lacked the infrastructure needed to do so, compounding the disruptions of the pandemic and exacerbating existing inequalities, with long-term consequences for American families. One particularly salient infrastructure challenge has been the digital divide and the absence of foundational conditions that enable network connectivity and access. As more and more areas of work and education move online, this divide risks leaving many American families behind.

Recognizing these challenges, the American Rescue Plan provides $10 billion for states, territories, and Tribes to cover the costs of capital projects like broadband infrastructure.

When I read that, I don't believe the White House only meant to include 5-10% of the U.S. in benefiting from better broadband networks. (Imagine limiting the water and sewer improvements solely to areas where there wasn't such infrastructure. I wonder how many lobbyists for water/sewer infrastructure met with Treasury folks as compared to broadband...)

Treasury's Odd Decision

The trouble may have started on May 10, when Treasury noted this regarding the forthcoming rules for another pot of money, the Coronavirus Capital Projects Fund (Sec 604). There, we find (emphasis added):

Capital projects include investments in depreciable assets and the ancillary costs needed to put the capital assets in use. Under the American Rescue Plan, these projects must be critical in nature, providing connectivity for those who lack it. 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.

This is the language from Congress creating that program:

In addition to amounts otherwise available, there is appropriated for fiscal year 2021, out of any money in the Treasury not otherwise appropriated, $10,000,000,000, to remain available until expended, for making payments to States, territories, and Tribal governments to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency with respect to the Coronavirus Disease (COVID–19).

When the legislation was introduced, Congress did not limit the Capital Projects Fund to only those who lack broadband access. But that was Sec 604 and here we are focused on Sec 602 (though evidence suggests the Treasury is planning somewhat similar rules for both). Nonetheless, there is no limiting language in this Sec 602 language either (feel free to ignore A, B, and C as they are joined by "or" and not "and):"

USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraph (3), a State, territory, or Tribal government shall only use the funds provided under a payment made under this section, or transferred pursuant to section 603(c)(4), to cover costs incurred by the State, territory, or Tribal government, by December 31, 2024—

“(A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;

“(B) to respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay to eligible workers of the State, territory, or Tribal government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;

“(C) for the provision of government services to the extent of the reduction in revenue of such State, territory, or Tribal government due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency; or

“(D) to make necessary investments in water, sewer, or broadband infrastructure.

“(2) FURTHER RESTRICTION ON USE OF FUNDS.—

“(A) IN GENERAL.—A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.

“(B) PENSION FUNDS.—No State or territory may use funds made available under this section for deposit into any pension fund.

If Congress wanted to limit the use of broadband infrastructure funds to only areas that lacked access, they actually had an explicit section to do so under "FURTHER RESTRICTION ON USE OF FUNDS."

The phrase "capital project" occurs four times in the bill. It’s not at all clear why Treasury decided to limit broadband investments to those who lack it (while, for instance, not limiting water and sewer capital projects to those who lack it). As best I can tell, this is the Biden Administration choosing to limit funds that Congress aimed to broadly improve Internet access for all communities. Or at least giving them the option to decide if that was their priority.

Where We Are

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So here we are. Treasury has published this Interim Rule and it will soon be open for a short comment period, I guess. I'm not a lawyer (not even a humble country one) and I struggle to understand how all these processes work.

And yet, there are a few important points to keep in mind when considering these rules in the larger context:

Cities have already begun planning for these funds. I think it is important that local governments who feel the rug has been pulled out of them make sure that both their congressional delegations and organizations like the National League of Cities hear about any plans that have been disrupted. There is time to fix this, but the cable lobbyists are no doubt bragging to their friends how clever they are (rightfully so - well done, guys) and they will be fighting hard to make sure the vast majority of Americans do not see better networks anytime soon.

One specific fix is to use the word "underserved" properly by defining it as areas with more than 25/3 and less than 100/100, while requiring local governments to prioritize "unserved." But it fits within statute to allow communities to invest in underserved areas if they decide it is that important after the pandemic.

Finally, this is not about a bad person or bad people in the White House or Treasury. Those institutions are mostly filled with people working every waking moment, trying to figure out solutions to our hardest problems, and probably neglecting their loved ones while doing so. We should not personalize this. It is about a system that lets a few massive monopolies centralize so much power that those good people in the White House feel like they cannot act too aggressively to make needed investments to deal with the massive inequity in our society. 

For timely updates, follow Christopher Mitchell or MuniNetworks on Twitter and sign up to get the Community Broadband weekly update.

Header image from Unsplash user René DeAnda

Inline image of sticky note from Flickr use Ben Dalton (CC BY-SA 2.0)