National Broadband Map

Funding Overview

The U.S. continues to suffer from a digital divide, which is a gap between urban city dwellers and rural residents’ access to broadband services. For over two decades, various U.S. government agencies have attempted to address this issue through broadband funding initiatives.

Much like the government was able to bring electricity — and later telephony — to rural parts of America, these programs effectively offer carrots to telecommunications companies to spur them to build out expensive broadband infrastructure in areas where it would be too expensive to do so otherwise.

As of 2017, 24 percent of Americans (78 million people) in rural areas lacked coverage from fixed terrestrial broadband networks offering 25 Mbps. Another 14 million lacked access to any fixed broadband service whatsoever.

In recent years, the FCC has claimed rural broadband as a top priority. In April 2019, FCC Chairman Ajit Pai announced a new fund to support the buildout of gigabit-speed broadband services to rural residents. Here’s a look at the current federal-level broadband funding programs that are helping to close the digital divide across America.

Major Broadband Funding Initiatives

USDA’s rural broadband programs

The U.S. Department of Agriculture’s Rural Utilities Service (RUS) manages three ongoing broadband funding programs: the Rural Broadband Access Loan and Loan Guarantee Program, the Community Connect Grant Program, and the ReConnect Program. RUS also manages the Telecommunications Infrastructure Loan and Loan Guarantee Program and the Distance Learning and Telemedicine (DLT) grants. The DLT grants are not specifically for broadband deployments, but instead fund equipment and software for telemedicine and distance learning applications.

The RUS broadband funds are supplied by the farm bill, which is reauthorized every five years, and the annual appropriations bill. The 2018 U.S. Farm Bill included $600 million in funds for rural broadband programs. The 2019 Consolidated Appropriations Act provided $30 million to Community Connect broadband grants, $47 million for DLT grants, an additional $5.83 million to subsidize the rural broadband loan to a level of $29.851 million, and $1.73 million in loan subsidies for a total loan level of $690 million for the Telecommunications Infrastructure Loan and Loan Guarantee Program. It also allocated $550 million for the ReConnect Program.

Rural Broadband Access Loan

This program provides loans and loan guarantees to telephone companies and cooperatives, municipalities, tribes and nonprofit organizations to deploy telecommunications infrastructure for broadband service in rural communities. Eligibility is limited to rural communities in U.S. states or territories that are not contained within an incorporated city or town with a population larger than 20,000 residents.

The RUS is prohibited from prioritizing one technology over others in broadband loan applications. That means it must weigh newer, faster technologies such as DOCSIS and fiber equally with older technologies like DSL. However, the RUS does have some latitude in setting a minimum data speed for broadband projects under the loan program. That speed is currently set at 10 Mbps downstream and 1 Mbps upstream.

Community Connect Broadband Grants

These grants provide funding for broadband services through one-time grants to tribes, cooperatives, universities and private companies. The money is used to build broadband infrastructure that can further community development and improvement. The funds can be used to support construction, acquisition (and spectrum acquisition), as well as the leasing of facilities needed to deploy broadband services to critical community facilities. The funds can also be used to offer broadband service to residents and businesses within the proposed service area. Awardees must provide “basic broadband transmission” to all critical community facilities within the proposed area for two years free of charge. Rural areas are eligible only if they lack any existing broadband speed of at least 10 Mbps downstream and 1 Mbps upstream.

ReConnect Program

Established in 2018, the ReConnect program provides loans and grants to help cover the costs of constructing, improving or acquiring facilities for broadband service in eligible rural areas. A proposed service area must have at least 90 percent of households currently lacking sufficient broadband access to speeds of 10 Mbps. The program currently offers up to $200 million in available grants.

Telecom Infrastructure Loan

This program offers long-term guaranteed loans to qualified telephone companies or cooperatives, nonprofits, limited dividend associations, mutual associations or public bodies for the purpose of providing telecommunications services in rural areas. Eligible rural areas must not be contained within the boundaries of any incorporated or unincorporated city, village or borough with a population exceeding 5,000 residents. Applications are accepted year-round and are not competitive.

Distance Learning and Telemedicine Programs

These offer loans and grants to rural community facilities such as schools, tribal offices, libraries and hospitals for specialized telecommunications systems that can support healthcare and educational applications in rural areas. The funds are only available to organizations that currently deliver or propose to deliver distance learning or telemedicine services.

FCC’s Universal Service Fund

The FCC’s “universal service” principle means that all Americans should have access to communications services.

Consequently, the Universal Service Fund is designed to promote the availability of quality telecommunications services for all consumers, including those living in low-income, rural, insular, and high-cost areas, at “just, reasonable and affordable” rates that are on par with what consumers in urban areas pay.

The fund supports eligible telecommunications companies (ETCs) in deploying broadband services in underserved or unserved areas within the U.S.

The Universal Service Fund encompasses the Connect America Fund, the Universal Service Schools and Libraries program, the Rural Healthcare program, and the just announced Rural Digital Opportunity Fund.

Loans and grants disbursed through the Universal Service Fund are paid for by contributions from wireline, wireless and cable telecommunications companies based on their revenues, who then pass those costs onto their subscribers. That means the fund is essentially paid by consumers through their phone bills. The Universal Service Administrative Company administers the loans at the direction of the FCC.

Connect America Fund (CAF)

The Connect America Fund provides funding to ETCs to help cover the costs of deploying broadband service in areas that are deemed high-cost, rural or insular, where market conditions do not favor deployment with government intervention. CAF was initially proposed in 2010 as part of the FCC’s National Broadband Plan.

The first phase of CAF involved a total of $9 billion in subsidies doled out between 2012 and 2015 to ETCs who promised to build out broadband service in underserved and unserved areas. Under Phase I of CAF, ETCs were required to offer services of at least 4 Mbps. In 2014, the FCC approved Phase II of CAF, which allocated an additional $1.8 billion in funding per year. The FCC also upped the minimum speeds to 10 Mbps. But it wasn’t until 2018 that the FCC conducted a reverse auction to allocate funds to eligible areas in the U.S. During the auction, 103 bidders were awarded a total of $1.49 billion in funds over 10 years to provide broadband service to over 700,000 locations in 45 states.

Universal Service Schools and Libraries Program

Also known as E-Rate, this program offers discounts on telecommunication and broadband services to schools and libraries. E-Rate was first launched in 1996 and has helped the U.S. achieve a near-universal rate of broadband access in schools.

The FCC updated the E-Rate program in 2014 to include Wi-Fi networks. Eligible schools must not have endowments larger than $50 million, and eligible libraries must be nonprofit and have budgets that are completely separate from a school.

Discounts range from 20 percent to90 percent, and are available to eligible entities based on the level of poverty within the community it serves, with different rates for urban and rural areas. E-rate program funding is based on demand, offering up to an annual Commission-established cap of $4.1 billion in 2019.

Rural Healthcare program

This program provides funding to eligible health care providers (HCPs) for telecommunication and broadband services in support of telemedicine applications. In the program, HCPs apply for discounts, and the USAC coordinates with telecom providers and internet service providers (ISPs) to deliver broadband service. The USAC then reimburses the ISPs. The program is capped at $400 million annually. It is currently made up of four programs: the Healthcare Connect Fund, the Telecommunications Program, the Internet Access Program, and the Rural Health Care Pilot Program.

The FCC recently announced the creation of a third broadband initiative within the Universal Service Fund: the Rural Digital Opportunity Fund (see our write-up here). The FCC hopes the fund will connect up to 4 million rural homes and businesses to gigabit-speed broadband services. It will repurpose funds to allocated $20.4 billion in subsidies over a 10-year period to telecommunications companies through an auction process.

NTIA Programs

The National Telecommunications and Information Administration (NTIA), an agency of the U.S. Department of Commerce, manages two broadband grant programs, both of which were funded by the American Recovery and Reinvestment Act: the Broadband Technology Opportunities Program (BTOP) and the State Broadband Initiative (SBI). The NTIA oversees $4.3 billion worth of broadband infrastructure projects across the country. These projects support enhancing access to broadband among residents and promoting statewide broadband planning and data collection. However, the NTIA no longer has funding available and is not accepting applications for these programs.

Broadband Technology Opportunities Program (BTOP)

This program was launched in 2010. NTIA invested $4 billion in 233 BTOP projects. As of fall 2018, only two BTOP projects remained active and have yet to be completed. The remaining projects include the Los Angeles Regional Interoperable Communications System Authority (LA-RICS) and the Executive Office of the State of Mississippi (Mississippi). The other 231 projects have been completed.

State Broadband Initiative (SBI)

The SBI was launched in 2009 to work in coordination with the Recovery Act and the Broadband Data Improvement Act. It envisioned a comprehensive, state-led effort to integrate broadband and IT solutions into local economies, with particular focus on economic development, energy efficiency, education and healthcare. NTIA awarded $293 million to 56 entities, including one in each state, across five U.S. territories and in the District of Columbia. The SBI is also responsible for the creation and maintenance of the federal government’s National Broadband Map.

Other Federal Agency Programs

The U.S. Department of Commerce’s Economic Development Administration’s Facilities and Public Works program provides funding for the construction of critical infrastructure in high-cost areas. The funds typically go towards water and sewer infrastructure, though some communications projects have received funding through the program.

The U.S. Department of Housing and Urban Development’s Community Development Block Grant Programs offer funding that can be used to promote access to broadband, including through acquiring, installing or improving broadband networks. States and cities that allocate CDBG funding decide whether to fund broadband access projects.

The Appalachian Regional Commission Project grant program is a bit of an outlier. The Appalachian Regional Commission (ARC) is a regional economic development agency that represents a partnership of federal, state, and local government. Its grant program aims to expand access to broadband in the Appalachia region by helping create community broadband networks that can be used by all sectors within the community. Its projects have included building out fiber optic rings, deploying broadband in industrial parks and business incubators, and piloting emerging broadband technologies. Most ARC project grants originate at the state level and are supported through state and federal funds.

Conclusion

Despite a variety of federal funding programs available to help close the digital divide gap, millions of U.S. residents in rural areas are still being left behind in the digital economy. Some of these programs, particularly within the Universal Service Fund, have been criticized for giving wireline broadband providers too much leeway in how and where they build out federally subsidized broadband networks.

Broadband Now has done extensive research into the digital divide: See our 2021 estimate of the number of Americans without access to broadband internet.

The latest generation of wireless technology, 5G, could help plug some of those holes. Wireless carriers have argued that the high speeds and increased capacity of 5G networks will make fixed wireless deployments a more realistic alternative to wireline broadband in rural areas in the coming years. We’ll have to wait and see if the wireless carriers make good on those promises.