Economic Stimulus Funds for Service Providers - Update #4: July 7, 2009

The long-awaited Notice of Funds Availability (NOFA) has finally been published by the two agencies, RUS and NTIA, on July 1, 2009. The 121-page document outlines the process and intends to clarify the objectives and review criteria for applicants. The agencies will accept applications from July 14, 2009 at 8:00 a.m. EST until Aug. 14, 2009 at 5:00 p.m. EST. They intend to announce awards on or about Nov. 7, 2009, and to provide the documents to successful applicants within 30 days of the announcement. This means that grants will probably not be in awardees' possession before Dec. 2009 – 10 months after the law was enacted.

RUS gave its program a new name, Broadband Initiatives Program (BIP), complementing NTIA's previously established Broadband Technology Opportunities Program (BTOP).

This is the first in a series of NOFAs, and is set to distribute up to $4 billion of the total $7.2 billion available:

• $2.4 billion for RUS' BIP program, of which $1.2 billion are for "last mile projects," $800 million for "middle mile projects" and $400 million for "remote area" projects – plus $325 million as a "national reserve" that may go to any of the preceding categories or remain unused in this first NOFA. RUS is providing grants exclusively to projects that will serve remote, unserved, rural areas. Loans and loan/grant combinations will be used for non-remote and underserved areas.
• $1.6 billion for NTIA's BTOP program, of which $1.2 billion are allocated to Broadband Infrastructure projects (last or middle mile), up to $50 million for Public Computer Center projects, up to $150 million for Sustainable Broadband Adoption projects and $200 million as a reserve.

This means that RUS puts out almost all of its $2.5 billion of broadband stimulus money in this first NOFA, while NTIA only plans to spend ~ one third of its $4.7 billion. However, since RUS has a mix of grants and loans, this does not necessarily mean they have no funds left after this round.

Definition of Key Terms
It seems the agencies wanted to keep the definitions as broad (no pun intended) as possible to encourage applications from a wide spectrum of entities. However, very disappointing is the agencies' minimum definition of "broadband" - 768 kbps downstream and 200 kbps upstream to end-users. In fact, they have different criteria for wireline and wireless broadband networks, allowing wireless networks to provide significantly lower bandwidth and still receive the same funding – clearly not in the spirit of "technology neutral." This will not help the United States catch up with global competition and will not bring rural areas on par with the offerings available in urban areas today.

On the positive side, the NOFA differentiates "last mile projects" to connect end-users (including but not limited to households, businesses, schools, libraries and public safety institutions) from "middle mile projects" for broadband infrastructure to include interoffice transport, backhaul, Internet connectivity or special access.

As expected, the agencies relied heavily on the U.S. Census Bureau to define that "rural area" means any area that is NOT a city, town or incorporation with more than 20,000 inhabitants, or an urbanized area adjacent to a city or town with a population of more than 50,000. An "underserved area" for last mile projects is defined as such if at least one of the following factors is met:

• No more than 50 percent of the households have access to facilities-based, terrestrial broadband service at speeds greater than the minimum broadband speeds stated above.
• No fixed or mobile service provider advertises transmission speeds of at least 3 Mbps downstream to the end-user in the area.
• The rate of broadband subscribership is 40 percent of households or less.

An "unserved area" is an area, composed of one or more contiguous census blocks, where at least 90 percent of households in the proposed funded service area lack access to broadband service at the minimum broadband speed (see above). A "remote area" is an unserved, rural area 50 miles away from the limits of a non-rural area.

An RUS applicant has to prove that at least 75 percent of the service area qualifies as an unserved or underserved rural area. For middle mile projects, at least one interconnection point must terminate in an area that meets the last mile project requirements.

The agencies have also adopted a very broad definition of "eligible entities," including both for-profit and not-for-profit organizations. However, applicants must demonstrate their ability to substantially complete (defined as having received 67 percent of funds) the project in a timely manner (within two years), and that the project is fully funded after all applicable grants and loans are awarded. All projects must be fully completed within three years of the award date.

The NOFA also explains how to prove that a project would not have been implemented during the grant period without these funds: funding denials from public or private lending institutions or from RUS for a loan, a current fiscal year budget that demonstrates lack of funding or a business case that demonstrates that the project would not be economically feasible without the grant.

Application Process
The agencies have set up a new Web site (see link below) with Application Guidelines to simplify the registration and application process. Applications above $1 million must be filed electronically via this site, but some exceptions apply (e.g., applicants with disabilities). They offer training sessions on how to file an application between July 7 and 24.

There are several administrative steps before an application can actually be submitted.

Applicants must supply a Dun and Bradstreet Data Universal Number Systems (DUNS) number (see contact below) and prove current registration in the Central Contractor Registration (CCR) database – a link to register is provided below.

The list of documents required for the application is relatively long and includes the proposed service offerings and pricing as well as the technology of the system. Projects requesting more than $1 million require a network diagram certified by a professional engineer.

The BTOP application review is a two-step process with an initial screening by at least three expert reviewers to ensure applications meet eligibility and compare applications against evaluation criteria. Applications that advance from this first step enter a "due diligence" phase, in which NTIA may request applicants to submit additional information. NTIA will assign a rating, based on a five-point scale.

States will be provided an opportunity to make recommendations concerning the allocation of funds for qualifying projects in or affecting the individual states during step two of the BTOP application process.

Review Criteria
The four top-level evaluation criteria are basically the same for both agencies but with differences in interpretation and scoring between the categories. The table below tries to summarize the key criteria for each program. Most disappointing is that the project review criteria do not include a measure on how many jobs will be created. This was one of the main objectives of the American Recovery and Reinvestment Act (ARRA) of 2009.

RUS and NTIA will publish proposed funded service areas of each application for a 30-day period to provide existing service providers an opportunity to submit information regarding their services.

Obviously, this summary is not intended as a substitute for a complete review of the NOFA by any entity intending to apply for funds under the Act. There are many additional things to understand, not only about the application itself, but also about applicants' post-award requirements (e.g., audits, data collection etc.), which are relatively demanding as well.

Buy American
A few days earlier, the agencies had clarified what "Buy American" means under the broadband stimulus plan and what exemptions are provided. On a high level, they wanted to make sure applicants have enough choices for their product selection. If network components are available from United States facilities in sufficient quantities at reasonable conditions, then they must be produced in the United States. Items that fall under this category are fiber optic cables, coaxial cables and cell towers. Items that do not have to be produced in the United States include Broadband Switching Equipment, Broadband Routing Equipment, Broadband Transport Equipment,
Broadband Access Equipment, Broadband Customer Premises Equipment and End-User Devices, and Billing/Operation Equipment.

For any questions, please contact me at econstimulusinfo@corning.com

Sources:
• RUS and NTIA NOFA: http://www.broadbandusa.gov
• DUNS: http://www.dunandbradstreet.com or 1-866-705-5711
• CCR: http://www.ccr.gov/StartRegistration.aspx

Legal Disclaimer: This material is intended to provide general information about that portion of the American Recovery and Reinvestment Act of 2009 (the "Act") related to broadband deployments in the United States. These materials are based on information from multiple sources (e.g., USDA and USDC presentations, webinars by industry associations, the Act). Many factors, including the final provisions of the Act, any accompanying regulations and other government programs may change, delay or terminate public funds for broadband deployment. Corning Cable Systems makes no promises about, and does not assume any liability for, the accuracy or completeness of the information provided in this presentation. Corning Cable Systems does not assume any obligation to update this presentation or you about changes to the Act.