Early State Broadband Spending Shows Policy Evolution

Planning is well underway for states to start distributing $42.5 billion in federal funds to expand broadband access, and recent efforts give a preview of what is to come.

Researchers at the Pew Charitable Trusts this month found that states are using dollars from the U.S. Treasury’s Capital Projects Fund—paid for through the Biden administration’s American Rescue Plan Act—for a variety of initiatives to expand broadband access.

The flexibility in how those dollars can be spent means that states are using CPF to address some of their most complex and long-standing broadband expansion challenges, including last-mile connections to underserved areas and delivering service to affordable-housing communities.

With money from the Broadband Equity, Access, and Deployment (BEAD) program likely to be dispersed this year, and another $2.75 billion available through Digital Equity Act (DEA) programs, the use of CPF provides a lesson in how states can deploy federal funds in new ways to solve some of their most difficult connectivity challenges.

“What we're seeing happening right now, and really over the last two years in particular, are a lot of necessary changes to federal broadband policy that are all now being implemented at once,” said Kathryn de Wit, project director at Pew’s Broadband Access Initiative and an author of the report.

One CPF requirement is crucial, and that’s scalability, de Wit said. The program shows an “implicit preference for fiber” as that can be most easily scaled to allow for faster connections in the future, she added.

As it stands now, states can only fund providers that participate in the Federal Communications Commission’s Affordable Connectivity Program (ACP), and projects must provide minimum speeds of 100 megabits per second (Mbps) for downloads and 20 Mbps for uploads and scale to 100/100 Mbps.

For states currently involved in building out broadband infrastructure, Treasury’s CPF has been essential. Vermont is building out a fiber network, coordinated in part by 10 Communications Union Districts (CUDs) established under law that bring together multiple jurisdictions to work together to find common solutions.

But given the financial pressures, Vermont needed help from above. The combined CPF funds and the expected BEAD allocation will only cover around 60% of the cost of building out the fiber network, with the rest provided by other state funds, telecommunications companies and other sources.

“It just wouldn't happen without federal funds,” said Christine Hallquist, executive director of the Vermont Community Broadband Board (VCBB), which is responsible for broadband deployment in the state.

Federal funds helped take the profitability pressure off Vermont’s fiber network, which must serve a small number of households in some of its rural areas. Generally, serving more than 20 households per mile makes a network profitable. The private sector can serve 12 per mile with federal help, but Hallquist said Vermont is looking to serve eight households per mile, which “requires significant grant funding.”

In addition to the challenge of getting a network built, Hallquist said it is also important to get people using it, especially those who have been on the “wrong side of the digital divide.” To do that, VCBB kicked off planning for its digital equity strategy earlier this month as part of the BEAD grant requirements. 

VCBB is looking for input from traditionally marginalized groups like the aging, those with incomes below 150% of the federal poverty level, rural residents, veterans and other disadvantaged residents.

“Everybody has something to say about their internet connection and what the problems are,” Hallquist said. But the needs on the ground are broader and include “providing training, providing devices, all the things that it takes for someone to be well equipped to get online; it's not just the connection,” she said.

That struggle to not just fund building network infrastructure but also help people access it is widespread, Pew found. States have used CPF money to purchase devices to distribute or to fund improvements to public facilities like libraries where local residents can access the internet.

“What we're seeing are states being very targeted in their spending and thinking about how to maximize the flexibility to reach communities and households that are both expensive to serve, and challenging to serve,” de Wit said.

Plenty of work lies ahead, both as the federal government continues to disburse CPF grants and starts giving out BEAD and DEA money later this year. The FCC released a new version of its much-maligned broadband availability map in late May, which will likely be the one used to determine BEAD funding allocations, according to broadband analyst Mike Conlow.

Vermont will be reliant on BEAD funding to keep building out its network and funding its CUDs, with construction likely to stall if funds are further delayed or paused, Hallquist said. And while she acknowledged it will be a challenge for Vermont’s small municipalities to comply with BEAD’s other requirements, like the 25% matching requirement for funds, VCBB has several waiver requests in and hopes it will be granted given the state’s “unicorn” status with its CUD model and preference for fiber.

States should take the planning process seriously, de Wit recommended, as their blueprints will help set goals for deployment and uptake among residents and be critical in measuring their progress.

“As significant as these funds are, it's not going to be enough,” she said. “That plan will help states demonstrate where they were, where they're going, and how they're measuring success along the way.”