Tuesday, June 7, 2022
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Universal Service Fund
The Department of the Treasury announced the first group of plans approved under the American Rescue Plan’s Coronavirus Capital Projects Fund (CPF). The CPF provides $10 billion to states, territories, freely associated states, and Tribal governments to fund critical capital projects that enable work, education, and health monitoring in response to the public health emergency. A key priority of the program is to make funding available for reliable, affordable broadband infrastructure and other digital connectivity technology projects. In addition to the $10 billion provided by the CPF, many governments are using a portion of their State and Local Fiscal Recovery Funds (SLFRF) toward meeting the Biden-Harris Administration’s goal of connecting every American household to affordable, reliable high-speed internet. Through these two programs, the American Rescue Plan is supplying among the first large waves of federal broadband funding under the Biden-Harris Administration and laying the groundwork for future funding provided in the Infrastructure Investment and Jobs Act. The state plans approved in this first group will support broadband infrastructure and are designed, upon project completion, to deliver reliable internet service that meets or exceeds symmetrical download and upload speeds of 100 megabits per second (Mbps), speeds that are needed for a household with multiple users to simultaneously access the internet to telework and access education and health monitoring. Treasury designed its guidance to prioritize connecting families and businesses with poor and inadequate service – particularly those in rural and remote areas. Treasury also requires states to explain why communities they have identified to be served with funds from the CPF have a critical need for those projects. In accordance with Treasury’s guidance, each state’s plan requires all service providers to participate in the Federal Communications Commission’s (FCC) new Affordable Connectivity Program (ACP).
- Louisiana, approved for $176.7 million (representing 100% of its available CPF funding), will provide funding to connect nearly 88,500 homes and businesses currently lacking access to internet at speeds of 25/3 Mbps through the state’s the new Granting Unserved Municipalities Broadband Opportunities (GUMBO) program, a multi-phase, broadband infrastructure competitive grant program. Louisiana estimates that projects receiving funding from this CPF award will close the digital divide for approximately 25% of all locations lacking high-speed internet access in the state.
- New Hampshire, approved for an initial award of $50 million (representing 41% of its available CPF funding), estimates it will serve 15,000 homes and businesses, in rural and remote areas, which represents approximately 50% of locations in the state that lack access to high-speed internet. The state’s new Broadband Contract Program is designed to select and support a local internet service provider (ISP) to provide internet service to the most rural parts of the state lacking internet service. The program will prioritize applicants that encourage the maximum number of locations to be served at the lowest cost, and broadband networks that will be owned, operated by, or affiliated with local governments, non-profits, and co-operatives.
- Virginia, approved for $219.8 million (representing 100% of its available CPF funding), will use funds to expand last-mile broadband access to an estimated 76,873 locations, approximately 28% of locations the state estimates lack access to high-quality broadband service. Through a competitive grant-making program overseen by the Virginia Telecommunication Initiative (VATI), local governments in partnership with internet service providers apply for funds with the goal of deploying universal coverage solutions in the localities involved.
- West Virginia, approved for $136.3 million (representing 100% of its available CPF funding), estimates that projects receiving funding from this CPF award will serve 20,000 locations, or approximately 10% of locations in the state that lack access to high-speed internet. The state will use three separate grant programs that focus funding for last-mile connections to homes and businesses currently without access to internet at speeds of at least 25/3 Mbps. The Line Extension Advancement and Development Program (LEAD) will fund the extensions of last-mile broadband networks that can be constructed quickly, the Major Broadband Projects Strategies Program (MBPS) will fund larger-scale projects designed to serve large numbers of eligible addresses, and GigReady will provide local governments with the opportunity to utilize SLFRF as matching funds for broadband infrastructure projects. Each of these three programs is designed to enable funding to reach areas that are hardest to serve due to low population density, rurality, or other factors.
On July 2, 2018, then-Governor Ralph Northam (D-VA) announced that the Commonwealth of Virginia should achieve functionally universal broadband coverage within 10 years. Reaching that goal would be no easy feat. At the time, Virginia was investing just $4 million a year into its broadband program and 660,000 Virginians did not have access to high-speed internet. This week, Virginia's efforts got a big boost when the U.S. Department of Treasury approved nearly $220 million to support broadband deployment projects in the Commonwealth.
Starry emerged a few years as a fixed wireless broadband provider targeting large multi-dwelling units (MDUs) and has had considerable success in that market, averaging 25% take rates within the first year, when the company aims to reach payback on its investment. The company developed its own technology, which is rather different from that of other fixed wireless providers in that it can use coaxial distribution infrastructure within a building to distribute service. Not surprisingly, 65% of customers cut their cable service to go to Starry. When considering whether to deploy service to a building, the company avoids MDUs where an overbuilder offers service. (A typical overbuilder would be one of the Astound companies.) The building may already have an incumbent cable provider and an incumbent telephone company. But “whether the incumbent ... has fiber is irrelevant,” said Starry CEO Chet Kanojia. His view is based, at least in part, on fiber economics and on mushrooming consumer demand. Starry is seeing consumption increase 30% per year and expects that trend to continue. As a result, he said, “it’s near impossible for a new fiber build to justify [charging] anything less than $90 in ARPU [average revenue per user] [per month] at a 40-ish percent take rate.” If the incumbent isn’t going to get a 40% take rate, it has to price the product at around $130 to $140 a month, which is considerably more than what Starry charges. And on the performance front, he said Starry offers speeds up to a gigabit per second (1 Gbps).
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