Where's The Funding? Episode 2: BEAD Matching Funds Deep Dive with BEAD Director Evan Feinman

Gary Bolton: Welcome to Where’s the Fiber, a series designed to help you understand, navigate and obtain matching funds for broadband grants. The NTIA bead program requires a broadband grant applicants come to the table with a minimum of a 25% matching funds and a letter of credit upfront with the application. For many smaller non-traditional providers and communities, this may sound daunting, but it doesn't have to be. This 12 part series is designed to help you understand how and why meeting these requirements can be straightforward. Each episode is 30 minutes and is every month, and you'll be hearing from the top industry experts on different aspects of funding. We'll dig into the nuances of matching fund contribution requirements to help you navigate the complexities. Here are the tips and tricks, and meet the people who can help you secure your matching funds. Last month we kicked off our series, the Deep Dive discussion with matching funds with the broadband.money founders Jase Wilson and Mike Faloon.

Gary: Jase and Mike provided their insights on matching funds and discussed tools to help smaller, non-traditional broadband grant applicants build complete applications, including matching funds from many providers. For our a second episode, we are doing a deep dive into BEAD, which is arguably the most important and with arguably the most important person in broadband funding. Yeah, Evan Feinman, the director of the $42.45 billion NTIA broadband equity access and deployment program, AKA BEAD. Evan leads the BEAD program, which provides the money to expand high speed internet access by funding planning, infrastructure deployment and adoption programs to all 56 states and territories. In his previous post, he was the chief broadband advisor to Governor Northam, and Feinman developed and funded projects to put Virginia on track to be one of the first states with universal broadband infrastructure.

Gary: So, welcome Evan, and as many of us have been saying, we're at the beginning of a historic time for our nation and we have a real opportunity to build the critical infrastructure to every American closing the digital divide once and for all. And you are in charge of this $42.45 billion BEAD program that is the kingpin to achieving this lofty and critical national objective. For our audience, please type in your questions as we go, and we'll work those into discussion. So let's start out with Evan. Can we start out with how you got here? You have a long history of public service and a stellar track record. As a kid did you ever imagine that you would be the tip of the spear leading this seismic effort to enable digital equity across our nation? 

Evan Feinman: Thanks Gary and I really appreciate everybody joining today and the opportunity to talk to y'all about the program. No, as a kid, I think I was a little baffled by all governmental structures and I certainly didn't have my arms around the complexity of federal grant programs if I do today. The thing I would say is I very early in my life found that occupation without a service component just didn't make a lot of sense to me. I'm very happy to work hard when there is something bigger than me and my bank account at stake. It felt a lot harder to just kind of toil in service to making somebody else wealthy. And so as I found my way through undergrad and did some fellowships and then law school and spent some time in some think tanks and then political campaigns and Diamond State government, federal government at private sector a little bit, it all kind of wound up pushing me in the direction of seeing if I could help folks out.

Evan: And where I really gravitated to, as I've gotten to the point in my career when I had some say, right, when you're early on, you see an opportunity you grab it. But economic development and infrastructure are the two places that I've spent the bulk of my the last decade of my career. And I find those to be incredibly fruitful places to work because they are two areas of public policy that are, nothing is untainted by our current partisan divide, but they are far less tainted by that divide. And I take great inspiration from the idea that this is still a country that can do really big amazing things when we don't get in our own way. And this is a space where that's not happening. And so I'm really excited to be, as you say at at the tip of the spear.

Gary: Yeah, no, great Evan. And it's, I can't imagine anybody in a better position to have the impact. I mean, I think of this as an FDR moment. I was talking to my dad who's 88 and the... He lived part of the FDR and he was born at one of the dams that was funded through the FDR with programs in the '30s and the opportunities that he got. And I can just imagine for generations to come that the things that you're doing now, how, what impact they're gonna have. So let's just kick things off and start with the current status of BEAD. Last July we saw that all 56 states and territories opted in with their letters of intent, and that then now everybody's got updated their $5 million of planning funds, they're working on their five year plans. So what's the next big milestone? What is, what are you focused on? 

Evan: Well, a number of different things. First, yeah, we've got all 56 states and territories participating. We've gotten planning funds out to everybody, but I have to have an asterisk there. The Virgin Islands is a little behind, but we're working with them every day and we're gonna get the cross the finish line there as well. We are nearly at full staff, so folks may recall that our model for the the BEAD program is very different. It's one that envisions far less top-down government dictating to the rest of the world how things are gonna work, and much more partnership with, between the federal government and states and then states and local and tribal governments. And in support of that new model we've staffed up around the country. And so we are very close to full staff now. The, our state program officers, our federal program officers are out in, or representing nearly every state. We have a couple of folks who are not yet, landed their way all the way through the thicket of federal hiring and security clearances. But we're getting there. And that.

Evan: Achieving full staff will be a major milestone for us. The next big public facing milestone is on June 30th when Assistant Secretary Alan Davidson will be making allocation to the states. That is, you may recall, when we take our $42.5 billion, I think we're fair rounding up, and divide that up among the states based on their relative need. There is a lot of angst around the FCC map that we're gonna use to do that. One, I will say to folks that the map is continuing to improve significantly. And two, I will say to folks that for the purposes of establishing roughly the relative need among the states, the maps will be in good enough shape for that to be a good allocation on June 30th. And then after that, the sprint to generate initial proposals, which are the heart of the plan, begins. And so there'll be some states that are gonna come in very shortly thereafter with their initial proposal, and others that won't come in until the end of the calendar year.

Evan: For folks background there, that initial proposal is the rule set by which the state will conduct the challenge process, its own challenge process to update and improve the FCC maps. It will create gatekeeping criteria for who is bringing a project properly before them, and then scoring criteria for both deployment activities, which is to, say, infrastructure, and non-deployment activities, which is digital equity programming. All of that has to come into us. States that want to push the envelope on time, will be able to run their... Get their challenge process approved early, and then run their challenge process concurrent to our review of the rest of their initial proposal. But we're gonna be in all three phases. We're gonna be in post-award, we're gonna be in review, and we're gonna be in pre-award technical assistance on different parts of the country administering this program all at once, everywhere starting in July. So that'll be very exciting. And we're working on making sure our staff is well positioned and well trained to offer the support to states and ISPs as we sort of go on this journey together.

Gary: Well, and certainly the staffing up, we've certainly enjoyed having your regional folks at our regional events. They're super high quality and everybody we've met maybe unfortunately some of the state broadband offices lost great people to NTIA, but you're definitely getting great staff. So when you mention the maps, so June 30th, everybody's kind of wringing their hands worried about the maps, good, bad, ugly, that's for the allocation. But NTIA, we've heard you guys say that you're gonna correct the issues with the map. So it's one thing to do the allocation and The other thing is to rely on these maps as to who's really unserved.

Evan: Yeah.

Gary: And you're gonna correct this to some different process. So what is that and how, I mean, how do you see it happening after that allocation? 

Evan: So states will be able to design, and we will put out a model that will have a little bit of choose your own adventure. So there may be different sections they can put in depending on which direction they want to go and how much juice I can squeeze out of our technical assistance team between now and when we need to release the thing. But states will effectively have the opportunity to conduct their own challenge process that will be similar to the one the FCC has been running. It will begin with the FCC's map, so that is the baseline. But states will have the opportunity to apply their own policy lenses as well as their own data sets and means of evaluating that evidence that are not currently all contemplated by the FCC. And I don't want that to be heard as taking shots at the FCC, both because it's a tremendously challenging undertaking to construct the map of every location in the United States and her territories.

Evan: But secondarily, FCC is set about creating this map according to the statutory requirements that the Congress set before it, which pre date the infrastructure law. And so the map wasn't built to serve BEAD, it was built to be the map. And then the map has a role in the infrastructure law, in the BEAD implementation. But then what we wanted to do was make sure we could get closer to the ground, get in dialogue with communities, and figure out what the reality of connectivity at all these different locations was. And that'll mean ISPs will be able to bring additional data forward because things will also have changed, by the way, since the most recent version of the map. It will mean that communities will be able to bring forward not individual speed tests, but large numbers of aggregated speed tests that follow good methodologies.

Evan: They'll be able to go out and test receive signal strength on wireless provision of service. They'll be able to use existing state maps and say, "Well, these are constructed based on this information, and if it's sufficiently recent we can use that evidence," all to come together and say... They'll be able to use scraped data from ISP websites saying, "We don't actually serve these locations." Great. Good to know. And so there'll be an opportunity to... The way Courtney Dozier, our deputy director, describes it as sort of ground truth, those FCC maps in various communities. That's gonna be a high effort exercise. We anticipate going to do stand-ups with blow-ups of the maps in as many communities as we possibly can. I would promise every county in the country, but the Midwest has just too many counties. There's like 200 in Iowa alone. And so we're gonna... We'll probably do some regional meetings, but we're gonna get there. And one of the things that's really important is that both the ISP community and...

Evan: Local elected and community leaders join us in that exercise. Y'all know where your networks are and communities know where their houses are and we don't. And so the only way we're actually gonna make that work is if people buy into that process and engage.

Gary: Yeah, the maps, it drives me crazy because I look at like I have a lake house in North Carolina that I can't go and work from because our incumbent service provider is providing 200 kilobits, through DSL. And when I looked at the map, of course CenturyLink says they're providing 200 kilobits to me, and they're honest as that's all they're getting. Yet I had all these satellite guys Starlink and Viasat and Hughes all say they're giving me a 100 by 20. And all of a sudden I had, UScellular saying they're giving me fixed wireless at a 100 by 20. And I know that's a bunch of BS. So I ping UScellular and say, well here's my address. Are you gonna give me your fixed wireless with all those a 100 megabits? And they're like, "well, we can't really do your address, even though they say it on the map but we can give you a 3G." And so every time you put a circle, anytime you put an antenna and draw a circle, you're going to relegate everybody in that circle or some locations in that circle to the wrong side of the digital divide, forever by having this check mark saying you're served. So it's a really big issue.

Evan: Yeah. And this is the... That states challenge the exercise by which we undo that. And I think with these circles, you know that somebody has been inadequately rigorous. If somebody gets out there and they've got a really well informed propagation map based on excellent topographic understanding and what their signal is and what the foliage looks like, that's a wireless provider who's being a good actor. And so they're being honest about or at least doing at their best to be honest about where signal is and is not from that tower. It's very rare, right, that that it actually propagates in a perfect circle.

Gary: Well, you got foliage, you got topology buildings, everything's trees. So Hey, let's get into one of the questions that comes up is where and when you can't use other government funding to use for matching requirements.

Evan: Yes. So One of the really nice things about this program is that there's a long list of federal funds that can be used as match for BEAD projects. Especially we should call out the, the Recovery Act Funds. There is still exists significant state and local fiscal recovery fund balances out in the world. A lot of CPF will not still be operative, but though there will still be some, the treasury hasn't come to an accord with folks on. And I would encourage folks to look at the notice funding opportunity for the exhaustive list. But the one to keep the most, the closest eye on there is the Recovery Act. One of the best things that can happen here is a locality uses some of its Recovery Act Funds to support an ISP in generating match for a project because there will be places where the economics are simply not good. And there are very few, if any ISPs that are charitable enterprises. And as some of my friends in the nonprofit sector like to remind me, not for profit is not synonymous with for loss. And as a result we're still gonna need funds sometimes above and beyond the totality of the capital expenditure. That'll be needed to build network to a place so that we can make the OpEx side make sense. And those funds along with any state funds, any local funds, any charitable funds, any foundation funds, and any funds provided by the provider themselves will all be eligible to match the BEAD dollars.

Gary: Great. So also the program allows in-kind contributions for that. So What are examples like State Highway, right aways right of ways? What, would people look at for in-kind? 

Evan: Anything that has a capturable value in the marketplace? Don't donate a Picasso to the billing office. But, if you've got fiber that you want to donate, if you've got labor that you can donate, if you've got access to rights of way that have a regular pricing schedule, that's easy to capture. If there a great opportunity would be for folks who own polls to join together with an ISP or be the ISP and wave make ready or poll attachment fees as an in-kind contribution to support the match for the project. There are a lot of different ways to get to an in-kind donation or match. I will point folks to the uniform guidance. There are also some pretty good strict rules around what is and is not an appropriate in-kind match. And we are in the process of looking at where we can make some changes to the uniform guidance to make it easier for our sub grantees in the future. But, I can't say for certain 'cause we haven't come to finality on what's changing and what's not in that guidance, but I think it's unlikely that we're gonna muck around much with the in-kind categorization rules.

Gary: Well, great. So Evan, can you talk a little bit about the scenarios such as projects and in high cost areas where NTIA will waive the matching grant? 

Evan: Sure. And we should be clear right? Like match expectation in the states is gonna range pretty broadly. 25% is a general target, but we are gonna be giving state Broadband offices a lot of information about the underlying economic value of a given area. And they'll be able to set targeted match based on the expected revenue return, to a provider for serving that area. In areas where it... The underlying economics are such that it's not gonna make sense for a provider to pony up any dough, right? Like that it's just, it's simply a 25% match, a 20% match. Even a 5% match doesn't work economically, we can waive the match all the way down to zero. And in fact, anywhere that's above our, high cost threshold will automatically be eligible for both a 0% match requirement and a heightened ACP contribution level of $75 rather than the standard 30. Both of which will serve to sweeten the pot as it were, make that side of the ledger work better for the private party that's gonna be providing service to that area.

Gary: Great. I mean, there's a lot of great stuff in the chat here, but when you look at letter of credit, that seems to be a big issue for many potential applicants. Has NTIA reconsidered the letter of credit requirement, feedback from small local providers, including those owned by women and people of color, is that the letter of credit requirement will negatively impact their ability to participate in the program? Can you provide some further insights in the thought process behind that requirement? 

Evan: Yeah, so we have two values that are in tension. We want the broadest universe of people and entities possible that can take on these projects and build them out. At the same time. It's very important for the program, for the people that each of these projects is going to serve. And for the state Broadband officers who are gonna have their hands quite full with successful projects that are moving forward, that we minimize the failure rate, right? Because every project that's undertaken will expend some funds prior to failing and then have to start back at square one with a new provider. If it turns out that a provider is not, doesn't have the wherewithal to undertake a project, a shorthand for that is, can, does this entity have the, have adequate means to go command a letter of credit to undertake this scale project? 

Evan: Right, it would be tough for us to justify giving a $100 million sub-grant to a three person shop that has, a handful of customers and, is otherwise a going concern, but quite small. There will be opportunities for folks to seek waivers to that requirement, but those waivers are gonna be pretty tightly controlled. Anytime it is impossible for someone to get a letter of credit, like say a local government that's precluded by a state law or constitution, an entity that has a long standing, by-laws based problem related to that, we'll consider those on a case by case basis. But I hear you. We know that when we narrow the aperture, we're gonna lose the opportunity to get into partnership with some high quality small outfits. But we had to error on one side or the other. There was no way to hit it right on the nose.

Gary: Hey, Evan just kinda sticking back with the matching. I believe when I saw that the average grant application for the middle mile had over a 40% match, is that what you saw? And do you anticipate that we're gonna see something like that in the order or assuming the last mile application, the BEAD applications? 

Evan: Yeah, I think we're gonna see... I would hesitate to put a figure on it, right? 'Cause we haven't met the market yet, but I think we're gonna see a pretty healthy level of match, particularly in the projects that succeed. Recall that the while the states have significant latitude to create their scoring rubrics, the mandatory number one consideration in scoring must be, minimizing cost to the taxpayer. And a great way for two projects that are otherwise, equivalent projects for one to distinguish itself is to just bring more match to the table, which reduces the cost of the taxpayer per location lit. That, what we saw across Virginia when I was doing it there was closer to about a 55% match. The folks who are committed to winning these things are gonna bring, more match to the table than the minimum requirement.

Gary: Well, it seems to me like when I look at Art Off and others the level of match in, private capital is going to be really contingent on, the makeup of the territories they're going across. For example, on BEAD you're supposed to, correct me if I'm wrong, right? But you're supposed to address all the unserved first before you go to the underserved. And what I saw in Art Off is that if you were going to a hard to reach high cost area and you're the, everything you pass between your current footprint getting to that the area, you might as well serve as well. And so that might not, that might be more underserved than unserved and so therefore you can have a higher match because you're serving areas along the way. So are you guys gonna, do you anticipate applications that have a mix of unserved and underserved...

Evan: 100%. Yeah, so that prioritization is in order of priority, not in order of time.

Gary: Okay.

Evan: So you do not have to serve physically all of the underserved locations prior in time to funding projects that serve underserved locations. It should all happen at once. What is necessary however, is that all unserved in the totality of the plan. You not be expending funds on underserved locations if your plan fails to address all of the unserved locations. So as a state Broadband office considers how it's gonna bring projects to us. They have to show before they start spending on unserved locations, how they're gonna get to all the, under all the, rather before they start spending on underserved locations, they have to show us how they're gonna get to all of the unserved locations.

Evan: And then in fact, after that, if there are remain funds in the allocation, money can be spent on connecting community anchor institutions and then other broad digital equity work. That's gonna vary pretty dramatically among the states. Some states are not gonna be able to get everybody who is underserved or unserved online at Broadband speeds without additional funding sources beyond BEAD. Other states will be able to do that comfortably and will then be able to spend on digital equity.

Evan: In the states where BEAD is not enough, what we're gonna do is braid together other funding sources. And so this is a very well titled, webinar today, right? Because what we can talk about is pulling in those other sources of match. And, we wanna get really creative here. I mean, it shouldn't just be other federal funding sources. It should be local general funds. It should be state general funds. It should be, corporate social responsibility spending and foundation spending. It should be, ISPs kicking in a match above and beyond, maybe through their own foundations where it makes more sense, for funds to come in from another source that then are a tax write off. But, further support deployment in an area where it might not otherwise work. We know that's just gonna be the case, but we also are confident that you can, cobble together a capital stack that will reach high enough to get everybody online.

Gary: Well, Evan, there's a bunch of questions about buy America. So you got the whole build America, buy America. It seems to be really confusing to our members and everybody at large, but, we heard President Biden State of the Union, and they see the OMB's guidance now proposing the classified fiber, and the final fiber optic cable as, two different categories of building materials and now holding manufactured products to the 55%. We also heard, that we shouldn't expect that the Middle Mile waiver to be a template for BEAD. So what guidance or insights can you provide on this really confusing topic? 

Evan: Sure. The first thing to say, and I know this is a little unsatisfying, is, we're gonna be getting much more concrete guidance out to folks. Well, prior to anyone's need to begin to, engineer potential projects, we again, here have a couple values that are intention. We all want, I think, as Americans to see taxpayer dollars, if they're going to the private sector, go to American businesses that supports American jobs and American communities. That is something that we all want to see to the greatest extent possible. That extent, is probably not enough, right, to buy and build all of the things that we need to do. And so what we are seeking to do is make sure that we have both some de minimis flexibility so that folks don't need to track down the source for every nut bolt and screw that they've got working on a project, as well as some specific categories of situations and products that can be sourced from outside the United States, either on the basis of cost or non-availability. We are still working out exactly what that's gonna look like, but you know, we are gonna reach, as good an accommodation between those values as we possibly can, and then we'll be able to, support folks in, following the rules as they construct their projects.

Gary: So we're running short of time, but I have to sneak in this last question here. So, there's newly introduced legislation in Texas that precludes the Broadband development office from having any technology preference for funding. I imagine we'll probably see a lot of this, so-called neutrality and state bills this session. How does NTIA gonna handle such state legislation with respect to approving BEAD plans given the conflict with the federal preference for fiber? 

Evan: So, without speaking directly to that legislation, what I would say is states undertake significant risk when they create state rules that set their office in opposition to the notice of funding opportunity. There is a scenario wherein a state Broadband office is paralyzed between those two rule sets, right? To follow the federal rule set is to violate state law, which a state employee can't do, but to follow state law is to violate the federal rules, which we can't permit. And what'll happen is nothing in that state. And so there is, when lawmakers approach this question, it is our hope that they will take a, broad non-prescriptive approach to conforming to our guidelines, because that's the safest way to make sure that hundreds of millions, or in fact billions of dollars, are not imperilled in that state.

Gary: Yeah, you'd hate to see that $3 billion for Texas go back in the bucket for everybody else. So... Well, Evan...

Evan: Put them out, but yes, we don't wanna see anybody left out.

Gary: Exactly. Well, I mean, the whole goal is to get everybody connected and raise the quality of life for all Americans. So Evan, what you're doing is so critically important and we really appreciate, I know the whole nation appreciates it, and I can imagine for generations to come, people thinking about the work that you do here in the next few years. So thank you so much and I wanna thank our audience for joining us today. And look forward to getting back together on March 15th for our next episode of Where's the Funding? We're gonna be discussing the introduction to the capital stack, so you're not gonna wanna miss that. And we'll see you guys again next March or in March. Thanks, Evan.