In March 2021, Congress approved $1.9 trillion under the American Rescue Plan Act (“Act”), which included emergency funding to respond to the pandemic and its economic impact. In May 2021, the Treasury Department released the Interim Final Rule[1] (“IFR”) for the disbursement of approximately $350 billion in state and local funding, including funding for necessary investments for broadband infrastructure and expansion.
Eligible Areas and Project Focus
Recipients must identify specific areas or locations in their communities to be served and design the broadband projects accordingly. The projects should focus on unserved or underserved locations, which are those areas lacking access to wireline connection capable of reliably delivering 25 megabits per second (Mbps) download and 3 Mbps upload internet speeds.
To avoid duplicative efforts and resources, the IFR encourages recipients to avoid investment in areas where there are existing agreements to build reliable wireline internet service of 100 Mbps download and 10 Mbps upload by December 31, 2024. It’s noteworthy that those agreements beyond the specified date or below the speed threshold may also be eligible. Further, given the IFR’s use of “encourage,” it appears that even those areas with such commitments may still be eligible for the funding.
The IFR prioritizes those broadband projects that can achieve last-mile connections in order to encourage recipients to focus on projects that deliver a physical broadband connection. It appears that middle-mile projects may be eligible but are not prioritized.
Network Speeds
The IFR provides that eligible broadband projects, upon completion, are expected to deliver internet service that reliably meets or exceeds 100 Mbps for upload and download speeds. However, given potential geographical, topographical, and financial constraints, the IFR permits projects with expected upload speeds between 20 Mbps and 100 Mbps so long as the networks are designed in such a way that they are scalable to 100 Mbps upload/download speeds.
Encouraged Priorities
The IFR encourages recipients to prioritize investments in fiber optic infrastructure. The IFR also encourages recipients to determine how to integrate affordability into their programs, but it is important to note that “affordability” is not defined. Finally, the IFR encourages recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and cooperatives. Essentially, the IFR is prioritizing those providers that are more focused on serving entire communities than on making a profit.
Restrictions:
The Act prohibits States and territories from using the funds, either directly or indirectly, to offset a reduction in tax revenue and prohibits recipients from depositing the funds into any pension fund. The IFR provides that the funds cannot be used as matching funds for other federal broadband programs.
The funds must be used only for costs incurred during the covered period, which is March 3, 2021 to December 31, 2024. The definition of “incurred” is not clear. Further, it appears the covered period applies to those funds spent or obligated by state and local governments. Thus, it not clear if this covered period applies to any cooperative awarded the funds for deploying broadband.
Approximately $19.53 billion in payments will be made to States and territories for the purpose of distributing the funds to nonentitlement units (NEUs) and local governments with populations below 50,000 people. States and territories may not place conditions or requirements on these distributions in addition to those required under the Act and Treasury regulations and guidance. Some cooperatives may be considered a NEU. Large telecommunications companies and cable interests have advocated for restrictions on these funds to NEUs, and it is likely that they may seek to alter this part of the IFR.
Comments are currently solicited from interested members of the public and local governments on all aspects of this IFR. Thus, changes may be made in the final rule.
[1] The National Rural Electric Cooperative Association provides a detailed summary of the Interim Final Rule.