Arkansas Uses Capital Projects Fund to Connect Rural Areas

Benton Institute for Broadband & Society

Wednesday, September 7, 2022

Digital Beat

Arkansas Uses Capital Projects Fund to Connect Rural Areas

Grace Tepper

In 2019, Governor Asa Hutchinson (R-AR) laid out a goal of 25 Megabits per second (Mbps) download and 3 Mbps upload broadband deployed to population centers of 500 or more by 2022. This goal was to be realized with the help of both state and federal funding programs and the newly minted Arkansas State Broadband Office. Then came the COVID-19 pandemic and its wave of federal funding for broadband, which furthered the state's connectivity efforts. Approaching the end of 2022 and the time Arkansas set to achieve its original broadband goals, the state has received new funds through the U.S. Department of Treasury's Capital Projects Fund to help achieve universal connectivity.

The Digital Divide in Arkansas

Seventy-seven percent of Arkansas households had a broadband internet subscription as of 2018. The state ranked the third-lowest out of all 50 states and the District of Columbia on this measure. Overall, 85 percent of households in the United States in 2018 had a broadband internet connection. In urban areas in Arkansas, 79 percent of households reported having a broadband internet subscription compared to 74 percent in rural areas.

Arkansas reported in June 2019 that it was 50th of the 50 states for broadband coverage, 50th for broadband competition, and 50th for high-speed coverage at 100 Mbps download or more. Arkansas is the only state that is in the bottom 10 for broadband coverage by all three wireline technologies—DSL, cable, and fiber—and also because, unlike some other states that are poorly served by wired broadband technologies, Arkansas is below average in fixed wireless deployment, too. A "full explanation for why Arkansas lags the nation in broadband deployment is somewhat elusive," state policymakers concluded.

By 2022, Arkansas had about 210,000 households lacking adequate broadband access—then defined as at least 100 Mbps download—totaling 21 percent of all households. The April 2022 Arkansas Broadband Master Plan, compiled by the Broadband Development Group (BDG), reported that 100,000 of these homes will be covered under current federal funding programs. To connect the remaining 110,000 homes, BDG estimated it will cost $550 million. The Master Plan recommends that Arkansas fund this through American Rescue Plan Act (ARPA) and Infrastructure Investment and Jobs Act (IIJA) grants as well as through the Arkansas Rural Connect Program.

Arkansas Broadband Programs

The Arkansas State Broadband Office was founded on July 23, 2019. Shortly after, Arkansas Rural Connect was created. The goal of the Arkansas Rural Connect (ARC) Program is to provide infrastructure grants to internet service providers partnering with communities to deploy high-speed broadband of at least 25/3 Mbps to their residents by 2022, fulfilling the objectives outlined in the 2019 Arkansas State Broadband Plan. The first round of the ARC Program launched on April 28, 2020, with an initial state budget of $4.7 million.

To be eligible for the ARC Program, a municipality, unincorporated community, or county must have:

  • At least 500 people.
  • At least 20 percent of its population currently lacking broadband coverage.
  • At least 200 people lacking broadband coverage.

Internet service providers may be eligible for the ARC Program if they:

  • Have a one-year track record of providing broadband service (meaning at least 25/3 Mbps speeds, at least 150 gigabits of data usage per month without throttling, and no more than 100 milliseconds latency) to at least 500 retail customers.
  • Have enough working capital to carry on construction activities in pursuit of project goals in advance of quarterly reimbursement from the Arkansas Economic Development Commission, as demonstrated by appropriate financial statements.

When the COVID-19 pandemic hit in early 2020, Arkansas decided to revise the ARC Program rules to capitalize on the Coronavirus Aid, Relief, and Economic Security (CARES) Act funding given to the state. The program was designed to be a medium- to longer-term investment program with the goal of broadband deployments to be completed by late 2022 at the earliest. Due to the urgent need for broadband services exacerbated by the pandemic, Arkansas adopted an ARC Coronavirus Rule to disburse funds for the program immediately and accelerate the deployment process.

Through the CARES Act, the ARC Program received over $119.3 million for broadband infrastructure deployment grants for Round 1 of the ARC program, which is ongoing. Half of all Round 1 funding went to fixed wireless projects, while slightly less than half went to fiber projects, with the balance going to other technologies. As of 2022, the ARC Program has distributed over $300 million in funds since its inception. The program has also created hundreds of jobs as a result of its deployment needs.

While the 2022 Arkansas Broadband Master Plan asserts that 100 Mbps download is the new standard for high-speed internet, the ARC Program's minimum requirements remain at 25/3 Mbps service.

Another program bolstered by the pandemic funding boom was Gov Hutchinson's Hotspots for Education Initiative. Through this program, the Arkansas Department of Education signed agreements with AT&T and T-Mobile to purchase Wi-Fi access points and data plans at a reduced cost for every school district in the state. Students received the devices and internet access based on need and at no cost. Arkansas funded the project with $10 million from the Governor’s Emergency Education Relief (GEER) Fund, provided through the CARES Act. Devices were allocated to each school district based on enrollment, with over 20,000 distributed in total. This program was prepaid through the 2021-2022 school year.

A separate state program awarded through the State of Arkansas and managed by the University of Arkansas for Medical Sciences (UAMS) Institute for Digital Health & Innovation is the Rural Broadband I.D. Trust Fund. The Rural Broadband I.D. Trust Fund is designed to help cover the costs of applying for broadband deployment funds in rural areas. Due diligence business studies are the first step toward applying for federal grants and loans for broadband deployment; however, the cost of these studies can be a barrier for local applicants. The Rural Broadband I.D. Trust Fund has an overall budget of $2 million and an applicant can be awarded up to $75,000. This program is set to run until all funds are exhausted.

The Arkansas High Cost Fund (AHCF) is the successor of the Arkansas Universal Service Fund, which was established in 1997, shortly after the passage of the federal Telecommunications Act of 1996, and renamed as part of a slight reform in 2007. Funded by charges on phone bills, the AHCF reallocates almost $40 million annually to support the maintenance of rural telecommunications. While broadband is mentioned as a goal in the statutes governing the AHCF, there are no specific requirements for broadband deployment in connection with receiving AHCF support. Nonetheless, AHCF funds often do support broadband investment because the telephone companies that receive AHCF support understand that broadband is their future as landline telephony becomes obsolete.

Capital Projects Fund Support

On August 30, 2022, The U.S. Department of Treasury announced Capital Projects Fund awards for five states including $47.5 million in broadband infrastructure funding for the un- and underserved in Arkansas. This funding will go right into the Arkansas Rural Connect Program to support its efforts to close the state's digital divide. With the Capital Projects Fund support, Arkansas is aiming to provide 5,500 locations with reliable internet of at least 100/20 Mbps but with the goal of achieving 100/100 Mbps symmetrical service. Each provider funded by the program is also required to participate in the Federal Communications Commission's Affordable Connectivity Program.

"I appreciate the Treasury Department's approval of this funding as we continue our work toward expanding broadband access in Arkansas," Governor Hutchinson said. "Ensuring access to high-speed internet presents a challenge in rural states, and this funding will provide us an opportunity to build on the work we've already done through the Arkansas Rural Connect Program."

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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