Understand how to finance the deployment, maintenance, and renovation of broadband infrastructure towards the creation of a regional network or extension to specific properties by leveraging multiple funding streams focused on expanding broadband access and advancing socio-economic objectives.
Rural networks can leverage a combination of funding streams addressing capital and operational costs to achieve sustainability and offer service at competitive and affordable rates. Local development districts with grant writing capacity are well-equipped to both apply and help partners apply for government and non-profit funding opportunities. LDDs can also access low-interest public financing to construct broadband infrastructure that enables market entry by private internet service providers. Broadband development programs can leverage funding sources that develop community networks, connect specific properties, and subsidize the cost of purchasing service.
Broadband development costs are composed of both capital and operational expenditures. A majority of state and federal financing programs address capital expenditures, with more limited funding available to address operational expenditures.
- Capital expenditures finance infrastructure expansion, including laying fiber optic cable for middle-mile networks, extending fiber to the premises, and the construction of fixed wireless towers.
- Operational expenditures finance network operations, including equipping homes with the equipment to connect to wired and wireless infrastructure, network maintenance and upgrades, and connecting new service providers to the network.
The primary barrier to broadband development in unserved areas is population density. Internet service providers are unwilling to expand to Census Blocks with low population densities because they are unable to make a profitable business case for expansion. Fiber infrastructure can cost anywhere from $18,000 to $22,000 per square mile and extending fiber to the premises can cost an additional $600 per property. With a reduced return on investment as the population density increases, internet service providers are less willing to serve areas with a low population density.
Further, counties often enter service requirements with ISPs to serve population areas above a set housing density. For example, Baltimore County requires ISPs to serve all areas with at least 30 homes per square mile. With these contracts in place, ISPs are not obligated to expand service to areas with a lower housing density.
The Role of the Local Development District
Local Development Districts (LDD) can not only serve as the lead applicant for broadband development funding opportunities, but also leverage their grant writing experience to help non-profit and private partners access related funding. LDDs are the primary recipient of ARC funding opportunities and, in the case that they are a non-profit, are eligible for most federal funding opportunities for broadband development. LDDs may also employ professional grant writers able to help partners access state and federal grants for development that the LDD is not eligible to receive.
While LDDs may not have direct experience applying for broadband development funds, LDDs are typically equipped with the grant writing experience and GIS mapping capacity to access state and federal grant opportunities. Additionally, LDDs can leverage partnerships with stakeholders in broadband development to identify and address gaps in funding. Stakeholders in expanded and improved access to broadband include private industry and ancillary organizations, community anchor institutions, healthcare, education, and economic, workforce, transportation, and utilities assets. LDDs can partner with these organizations to map existing levels of broadband development, with this data able to inform discussion with Internet Service Providers targeting expansion into unserved areas. As the knowledge center, LDDs can then convene these partners to identify gaps in coverage and pursue funding opportunities that facilitate expansion by ISPs into unserved areas.
- Map current networks and infrastructure
- Identify partners that can leverage broadband to achieve outcomes
- Survey how community members can benefit from and utilize broadband
When exploring funding opportunities, it is important to build an understanding of regional assets and deficiencies and to do preliminary research in support of funding opportunities, such as identifying areas of need and developing a bench of contributing organizations. Regions can map current networks and infrastructure, identify partners that can leverage broadband to achieve outcomes, and survey how community members can benefit from and utilize broadband. These steps will help identify what broadband funding opportunities to target, where to deploy that funding, and opportunities to leverage broadband to achieve social and economic outcomes.
By mapping current network infrastructure, LDDs can determine unserved areas and assets, which can determine what funding sources to access. This allows LDDs to determine the exact problem and identify steps to remedy the situation. Ammon, Idaho officials used multiple layers of funding to first deploy a fiber network connecting government buildings, libraries, and schools, before expanding that fiber ring into a community network using a form of tax-increment financing.
Community surveys can facilitate any broadband mapping conducted with the intent to secure funding or drive private investment. Community surveys can demonstrate demand for broadband that attracts investment by internet service providers and helps community officials target publicly secured funding. Surveys that identify current, potential, and underutilized use cases for broadband by community members and businesses can identify opportunities for broadband technology training that create employment or advance other social outcomes. A more advanced understanding of unserved areas and potential use cases for broadband will result in more competitive funding applications and create new funding opportunities that leverage broadband as a tool to advance economic and social outcomes.
Case Study: ConnectedNation
By identifying partners that can leverage broadband to advance their mission, LDDs can find new avenues for connecting economic outcomes to broadband. Broadband development efforts that are associated with improved service delivery by government, education, healthcare, and business actors are eligible for a broader set of financing than isolated broadband development. Broadband infrastructure is a tool, and not the end goal of any broadband development effort. Unlocking opportunities made possible by broadband will increase the community take-rate, increasing the sustainability of any expansion and growing demand that will encourage entry by additional ISPs.
Case Study: North Carolina Broadband Infrastructure Office
When asked about what roles they have seen local development districts play that have been the most valuable to local broadband initiatives, the North Carolina Broadband Infrastructure Office pointed to LDDs that have provided guidance on grant applications to broadband initiative stakeholders seeking for grant funding. Due to LDDs’ experience managing grants and communicating with all levels of government, LDDs are well-equipped to guide those who are applying for broadband-related grants to understand the process and eligibility requirements associated with the grant. In North Carolina, local LDDs such as the Southwestern Commission and the Land of Sky Council of Governments have excelled in this role, helping private broadband providers understand eligibility requirements when filing applications for the state’s Growing Rural Economies with Access to Technology (GREAT) grant program that provides public dollars to private broadband providers to expand access in certain underserved rural areas in North Carolina.
LDDs in North Carolina have also taken a more active role in project fund management by serving as fiscal agents for broadband initiative grant money. In some cases, broadband grant programs require a non-profit organization be the applying entity for an initiative’s grant. Broadband programs may have identified a non-profit organization that is willing to apply for the grant on behalf of the larger broadband project but may not have the capacity to manage the funds themselves or meet stipulations set by the grantor. In these cases, a local development district may be able to step in and act as the grant’s fiscal agent, serving as the manager and oversight entity for the grant funds. Given LDDs’ experience managing grants for water lines, sewer systems, and other infrastructure, they often already have the expertise to fill this role exceptionally well.
Identify funding for each stage of the broadband development process. Unfortunately, there is not an unlimited account for communities to access for broadband development efforts. Once communities have identified the state of the problem, they should look to utilize every available funding opportunity to grow their network. This might include funding to connect specific properties or anchor institutions, or to build out a larger community network. Available funding opportunities might be limited to digital inclusion or broadband subsidy programs, with both demonstrating demand to ISPs. Each stage of development provides a learning opportunity for LDD officials and can serve as a node for a larger network.
Understanding Eligibility for Programs that Rely on FCC Mapping
At the federal level, the Appalachian Regional Commission, Department of Agriculture, Department of Commerce, Department of Housing and Urban Development, Department of Interior, Department of Education, and the Federal Communications Commission all manage programs that invest in broadband infrastructure. The primary determinant of funding eligibility for these programs is the Federal Communications Commission’s Fixed Broadband Deployment Map, which is informed by internet service providers’ responses to FCC Form 477. Several state-level programs that are available in Appalachia also rely on FCC Form 477 data, including the Alabama Broadband Accessibility Fund; the Tennessee Broadband Accessibility Grant; New NY Broadband Program; and the North Carolina GREAT Grant. Other federal programs exist to specifically extend broadband infrastructure to schools, libraries, community facilities, government buildings, and other anchor institutions that do not rely on FCC data.
Communities face major barriers to accessing funds as a result of the Form 477 data reporting methods — a Census Block is considered “served” if a provider is “providing [broadband] or could …without an extraordinary commitment of resources provide broadband service to an area.” Census Blocks range in size from 8,500 square miles to a tenth of a square mile and in many areas, physical features, such as forest cover and topography, limit the feasibility of wireless broadband service solutions within Blocks.
As such, wired and wireless broadband service is not widely available in a significant number of Census Blocks that are considered “served,” and thus are ineligible for funding from many of these programs. Communities can challenge FCC Form 477 data when requesting funding through a combination of public notice and service area filings, and community mapping efforts. However, this additional effort does not guarantee success, and can require time, effort, and funds that communities may not be able to access.
Identifying Programs that Do Not Rely on FCC Mapping
Communities can access state and federal funding programs that do not rely on FCC data by attaching broadband development to community, economic, and workforce development outcomes. Communities can finance broadband infrastructure, related software and hardware, and digital literacy training through the Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG). Any broadband development financed with CDBG funds must meet one of HUD’s three national objectives:
- Benefitting low- and moderate- income (LMI) persons;
- Aiding in the prevention or elimination of slums or blight; or
- Addressing an urgent community need.
Communities can satisfy this need by justifying any infrastructure expansion as a necessary tool to facilitate access to public services, healthcare resources, job training, education, or employment opportunities. Attaching broadband development to economic and social outcomes solves a funding gap and grows demand for broadband service through clear demonstration of the benefits from access.
Similarly, attaching broadband development to economic outcomes unlocks numerous funding sources that can be used to extend broadband infrastructure to businesses and industrial parks. Property renovation, rehabilitation, and development activities (including the extension of broadband infrastructure) is generally an eligible cost under state and federal financing programs that are intended to create jobs. Some of these programs include the Georgia Employment Incentive Program, the Mississippi Site Grant Development Program, and the Ohio Minority Business Bonding Program.
Businesses and industrial parks can leverage public funding sources to extend broadband infrastructure to their property if the extension results in the agreed upon economic benefits. Broadband access facilitates matches between jobs and workers, supply chain management, and access to resources and information.  A study of the USDA Broadband Loan Program found that broadband access is associated with a 3% increase in farm profits. By helping businesses implement new services and process improvements that leverage broadband access to create jobs and facilitate growth, communities can extend broadband infrastructure to key properties and industrial parks.
Communities can collaborate with private developers to leverage tax-increment financing, New Market Tax Credits, and Opportunity Zones to direct investments into broadband infrastructure in underserved areas. The City Builder, a free tool developed by Citi Ventures, allows communities to identify Census Tracts where developers are eligible to leverage Opportunity Zone or New Market Tax Credit financing to develop properties for residential and commercial use. Tax-increment financing allows municipalities to divert future property tax revenue increases towards financing loans used for development. Municipalities are eligible to establish TIFs in Alabama, Kentucky, Maryland, Mississippi, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.
Case Study: Alleghenies Broadband
As a non-profit subsidiary of the Southern Alleghenies Planning & Development Commission (SAP&DC), Alleghenies Broadband Incorporated (ABI) leverages a mix of state and federal funds to support capital investments at favorable rates. SAP&DC can both apply for ARC funds and support ABI projects, and ABI’s board can also apply for a range of federal awards available to private and governmental entities. ABI then utilizes a public-private partnership model to lease middle-mile infrastructure to private partners in exchange for revenue sharing that supports further network expansion.
In 2020, ABI received a $250,000 ARC grant to install several fixed wireless broadband towers across Huntington and Bedford counties in Pennsylvania. ABI leases existing vertical assets to install fixed wireless transmitters, and an RFP solicited proposals from incumbent ISPs to utilize the transmitters to provide last mile service. ABI plans to work with the partnering ISP to locate the equipment, market the service, and share revenue, and expects to offer service by October 2021. The RFP identified a level of service and price point using data it received during the regional assessment.
Case Study: Ammon, Idaho
Local broadband development efforts need to leverage multiple revenue streams to sustain the network and finance capital and operational expenditures. Ammon Fiber Optics generates operational revenue from its investments in broadband infrastructure by providing service as an ISP, charging a maintenance fee, and leasing bandwidth to other ISPs that provide service on the network. Ammon financed capital investments in broadband infrastructure in stages. The Township financed initial construction of a town center fiber ring with municipal funds; leveraged the E-Rate program to extend service to schools and libraries; and secured infrastructure bonds to extend fiber-to-the-premises that the Township finances with Local Improvement District property assessments.
After a review by the Ammon IT Department of sustainable models for regional networks, the Township began to view broadband as a utility, where the municipality could own and operate the infrastructure, which allows for private service. This financing model was reviewed by Strategic Networks Group. Private ISPs were unwilling to invest in communities like Ammon because the risk outweighed the potential rate of return. A dark fiber community-owned network provides private ISPs with a profitable business model to expand service to rural communities. Community ownership over the infrastructure ensures that usage fees remain directed towards network improvements. Providers with unused bandwidth are willing to offer service in an area if there is no associated capital cost. The virtualization technology used by Ammon means that any capital costs associated with connecting to the network are non-existent and operational costs minimized. Network connection usually requires the physical connection of hardware between separate network infrastructure. ISPs both offer service on Ammon’s network and use the network to connect fiber rings.
Support partners in grant writing. In the case that an LDD is ineligible to apply for a specific broadband funding opportunity, LDD staff can leverage their experience in grant writing to help private ISPs, non-profits, education and healthcare organizations, and businesses apply for funding. Small, regional ISPs, and education and healthcare organizations typically lack the staff capacity and skillset to successfully apply for grant opportunities available for these specific organizations to develop broadband. LDDs can cooperate with businesses, real estate developers, and industrial parks to help them apply for and leverage broadband development opportunities for business growth. These sites can be used as connection nodes for future broadband development opportunities and can create workforce opportunities.
Broadband infrastructure is a tool to accomplish economic and social outcomes. Local Development Districts should explore opportunities to utilize broadband infrastructure as a method to improve program delivery and provide community impacts. By focusing on the utility broadband provides, LDDs can apply for a broader range of funding programs, increase demand for broadband, and make more competitive applications for infrastructure development. Increasing demand for broadband by helping community members realize its related benefits increases the take-rate and sustainability of any network. Rural communities can face barriers to housing, employment, and healthcare. Funding for broadband development can address these challenges and provide community benefits beyond infrastructure development itself.
Leveraging Multiple Institutions and Funding Streams to Meet Needs
The public sector and non-profits can access financing tools, such as grants and loans, which are more flexible than private sector offerings and offer low (or no) interest rates. Public financing options, such as industrial revenue bonds, tax-increment financing, and state and federal grants allow the public sector to make large investments over the lifespan of broadband infrastructure — fiber optic cable has an equipment life of 20 years, while wireless transmitters have an equipment life of 10 years.
Additionally, the public sector does not face as many barriers to expansion in low population density areas as private ISPs. Public investments only need to finance the loan principal and any interest. Investments by private ISPs are obligated to produce a profit and can be accountable to a corporate board or shareholders. The ability of the public sector to access favorable financing and make riskier investments creates an opportunity for partnership between public infrastructure and private service providers.
Leverage multiple funding streams to address capital and operational costs. Internet service providers are less willing to serve areas as the population density, and their potential profit, declines. Local Development Districts can partner with private ISPs to expand service to rural communities, leveraging public funds to construct infrastructure that ISPs can lease to provide service. The public sector can access funding at rates and schedules far more generous than those offered by private capital, and ISPs have more experience operating a broadband network than public officials. Public-private partnerships can leverage these comparative advantages to maximize communities’ ability to expand infrastructure and service to unserved areas.
Promote digital inclusion to increase broadband use and increase profitability. LDDs can leverage relationships with county and municipal government officials and anchor institutions to encourage community residents to display interest in and sign up for any broadband network and any corresponding funding opportunities. By displaying demand, such as participation in community surveys, LDDs can help internet service providers identify opportunities for broadband expansion.
Digital inclusion activities that result in participants understanding the benefit of broadband can increase the take-rate of any network, increasing its sustainability and reducing its reliance on subsidies. Additionally, LDD staff can work with community members to identify social programs that enable them to more affordably purchase broadband and broadband enabled devices. LDDs can use their ability to connect with community members and community intermediaries to increase demand for broadband, and its affordability.
Facilitating Access to Provider and Consumer Cost Subsidy Programs
Operational costs provide a serious barrier to broadband development by private ISPs in rural areas. Networks that cover large, low-density areas use more poles and more fiber optic cable per subscriber, which substantially increases maintenance costs associated with operation.
The Federal Communications Commission’s Connect America Fund (High Cost Program) subsidizes the cost of delivering service to qualified unserved and underserved Census Blocks. Through the program, internet service providers bid to expand service to designated unserved/underserved Census Blocks at affordable prices in exchange for monetary support from the FCC. This is a similar model as the Rural Digital Opportunity Fund, which provides monthly payments to participating internet service providers that expand service at agreed upon service levels and prices.
The FCC also provides direct to consumer subsidies to increase the affordability of broadband service by education and healthcare providers. The FCC E-Rate program subsidizes the purchase of internet service and related equipment to enable internet access and provide broadband service throughout eligible primary and secondary schools, libraries, and other qualified educational administration and adult learning facilities.
The Rural Health Care program subsidizes the cost of internet and telecommunications services according to the difference in rural and urban rates for service for qualified healthcare facilities and networks. The Rural Health Care program also provides a flat 65% discount on eligible purchases of broadband access and network equipment.
While both programs do not finance community broadband development, they can serve as a tool to connect education and healthcare facilities that can be used as an access node for future expansions to neighborhoods, businesses, and other unserved areas.
Case Study: The People’s Rural Telephone Cooperative, Kentucky
Rural ISPs and telecommunications providers often rely on a three-legged revenue model to sustain operations utilizing public funding to finance capital costs associated with infrastructure expansion, FCC high-cost programs to finance operational costs, and revenue from subscribers.
The People’s Rural Telephone Cooperative (PRTC) in McKee, Kentucky provides an example of how small ISPs can leverage digital training efforts to create new funding streams and sustain rural networks. PRTC is a classic example of the three-legged stool model of revenue for small, rural ISPs: public ARRA funds offset initial costs to deploy infrastructure, FCC Universal Service Funds help sustain rural networks, and PRTC collects revenue as a service provider.
As a result of the network’s success, Teleworks USA partnered with PRTC and McKee to create a training program for telework customer service positions at Facebook, Google, and other Fortune 500 companies. So far, the training center has created 300-400 broadband-dependent jobs in Mckee, and 3,100 jobs across 23 counties and $70 million in economic activity, that were only made possible by PRTC’s investment in the community. PRTC has also tapped into Department of Veteran’s Affairs funding stream to expand broadband infrastructure and provide free telehealth access to Veterans.