The BIP/BTOP Dance:
Prologue to a National Broadband Policy, or A One-Time Shot in the Arm

In 1928, Herbert Hoover’s campaign famously promised “a chicken in every pot and a car in every garage.” Should today’s campaign include “a broadband connection in every home?”

Everyone agrees that broadband access to the Internet is important and useful. But is it an “essential service?” Even if the answer is “yes,” how much should the Federal Government, and the general public, pay for it?

Two new broadband funding programs established by the American Recovery and Reinvestment Act (a/k/a the “Economic Stimulus bill”) will provide valuable information that can help to answer these questions. The ARRA allocated $7.2 billion in taxpayer funds for the construction of broadband networks and to promote broadband adoption. NTIA (the National Telecommunications and Information Administration), an arm of the Department of Commerce, was given authority to award $4.5 billion in grants through the Broadband Technology Opportunities Program (BTOP). RUS (Rural Utility Service), an arm of the Department of Agriculture, was given authority to award $2.7 billion in loans, grants, loan guarantees, or any combination thereof through the Broadband Initiatives Program (BIP). While these sums are far larger than any previous telecommunications funding program, they pale in comparison to the hundreds of billions of dollars that may be necessary to bring broadband to every home, business and public institution.

The direction of our broadband communications policy may well depend on how well these agencies implement their respective programs. Both agencies face a severely compressed timeline; the ARRA stipulates that these funds must be completely awarded through a competitive process by September 30, 2010. The amount of staffing and review work is enormous, particularly for NTIA. The $2.5 billion in RUS funding is about 100 times larger than its existing broadband programs, and it is seeking to hire 47 additional staff. NTIA has had to start almost from scratch, and will seek 70 additional staff. (both figures according to GAO)

While the staffing and oversight challenges are significant, their funding decisions are likely to generate even more controversy. Existing telecom providers do not want government subsidies flowing to competitors in areas where they have already built broadband facilities. On the other hand, public interest organizations, consumers and large users believe the industry has been slow to invest in next-generation broadband services and are hoping that NTIA and RUS will create the kind of high-capacity broadband networks already available in parts of Asia and Europe. While Members of Congress are clamoring for investments made in rural areas, it is not clear that such investments will be sustainable.

Interpreting the statutory language presents its own challenges. As is often the case, Congress included several overlapping and sometimes conflicting priorities in the ARRA. NTIA is charged with meeting the broadband needs of 1) unserved and 2) underserved residential consumers, 3) anchor institutions (e.g. schools, libraries, community colleges and health care providers) and vulnerable populations (e.g. unemployed, low-income), 4) public safety and 5) promoting sustainable broadband demand. NTIA also must give priority to health care delivery, education, and children, and it must promote the highest possible speeds to the greatest population of users in the area. In addition, the statute requires grant award winners to abide by non-discrimination and network interconnection obligations (often called the “net neutrality conditions”).

The RUS/BIP program has fewer statutory restrictions, but must still balance several competing objectives. The statute requires that each application must cover a service area that is at least 75% rural, and priority will be given to applicants that will provide broadband service to the highest proportion of rural residents that do not currently have broadband service. The statute also requires RUS to give preference to applicants that “will deliver to end users a choice of more than one service provider.” Borrowers under the Title II rural loan program (primarily small local telephone companies) also have a preference.

NTIA and RUS released their joint rules on July 1 in a public press event in Pennsylvania. Vice President Joe Biden declared that the new programs would be the first step in the Obama Administration’s “investment for the entire United States.” He said that the nation “can’t function and can’t compete” without ubiquitous broadband access. He stressed that broadband would provide everyone an equal opportunity, especially in rural areas.

While goals are lofty, the practicalities of the application process are quite complex. Without going into all the details here, suffice it to say that NTIA and RUS asked for detailed financial information and encouraged applicants to meet as many of the priorities in the ARRA as possible, even when they are inconsistent. They also asked applicants to identify which of their census blocks were unserved or underserved, even though most states do not have such maps available.

NTIA established four sub-programs under the BTOP banner and identified the amount of funding it would award in the first round:

1. The Infrastructure program is designed to provide up-front funding for the construction of broadband facilities. ($1.2 Billion in first round/about $3.75 billion overall)
 
2. The Public Computer Center program is designed for libraries, community colleges and other public access providers to fund the costs of increasing public computer center capacity. ($50 Million in first round/at least $200 Million overall)
 
3. The Sustainable Broadband Demand program is designed to encourage broadband adoption ($150 Million in first round/ at least $250 Million overall)
 
4. Broadband mapping (no more than $350 Million overall).

Both NTIA and RUS have taken some heat from policy-makers concerning the first round rules. The most common complaint is with the RUS’s narrow definition of “remote” rural areas as those that are outside of a 50 mile radius of an urban area. Senator Rockefeller (Chairman of the Senate Committee on Commerce, Science and Transportation) alleged in an October hearing that the standard would exclude almost the entire state of West Virginia. In addition, Senator Kerry and others have expressed concern that the first round rules do not provide enough priority for anchor institutions (schools, libraries and health-care providers.) Both NTIA and RUS have promised to address these issues in the next round of rules.

NTIA and RUS received about 2,200 applications requesting about $28 Billion in funding, or about 7 times more than the total amount of funding. As a result, the application review process has been somewhat chaotic. At first, the NTIA database did not capture all the applicants in each state. Then the states complained that they did not have enough time and information to evaluate the applications for their states. (The statute requires NTIA to “consult” with each state before making its funding decisions.) Each state developed its own processes for evaluating applicants, and their letters of recommendations (submitted on Oct. 14) varied considerably in the depth of their analysis. Some states chose not to review multi-state applications at all. In addition, commercial broadband providers were given an opportunity to “challenge” applications seeking to build facilities in areas where broadband already exists. The broadband providers’ challenges, however, have not been made public, which means that many applicants do not know whether or not their applications are being challenged using accurate information or not.

Not surprisingly, the process for announcing awards has been delayed somewhat. The agencies now expect to announce their first funding decisions in December and will continue to make awards on a rolling basis for the following few months.

The plan for future rounds of funding has also changed. At first, the agencies planned a total of three rounds of funding. They now indicate there will be only one more round. NTIA and RUS will soon issue a Public Notice requesting comment on the rules for the second (and probably final) round of funding. The agencies are sure to be flooded with comments from parties who found the first round too complicated or skewed against them.

NTIA and RUS are both doing yeoman’s work in implementing these funding programs under impossibly tight time constraints. While critics may complain about perceived missteps along the way, it will be extremely important to remember the big picture. The successes and failures of these funding programs will say a lot about the future direction of our national broadband policies. The Federal Communications Commission is watching closely as it drafts its national broadband plan (due on Feb. 17, 2010). NTIA and RUS are to be commended for their energy and discipline. Whether their results will send the U.S. down the road of treating broadband as an essential service, or whether the funding programs turn out to be a one-time boost, is as yet unknown.
   

John Windhausen, Jr., through his firm Telepoly Consulting, provides legal and regulatory consulting services for a variety of telecommunications firms and non-profit associations. He began his career at the FCC as a staff attorney and then served as Senior Counsel to the U.S. Senate Commerce Committee, where he helped draft the Telecommunications Act of 1996. From 1999 to 2004, he served as President of the Association for Local Telecommunications Services. Mr. Windhausen graduated from Yale University and the UCLA School of Law.
 
 

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