How to harness federal funds to begin closing the digital divide

Over the next decade, federal funding for these broadband and connectivity initiatives is expected to continue growing. Federal funds allocated to broadband are expected to increase four times 2019 levels by 2024. State and local government agencies have a historic opportunity to make their communities more equitable and modern. Many states, counties and cities chose to use part of their ARPA allocation to conduct the necessary planning for access to the much larger IIJA pools of funds.

States will need to submit detailed plans to obtain the IIJA funds that are available to them on a formula basis and will also have the ability to compete for other pools of money. Cities and counties see a clear benefit in providing “their” plan to the state, so that it is included in the state’s request, in addition to competing for funding of their own. Those proactive entities also anticipate a supply chain shortage — of staff, of advisors, of construction capacity, even of fiber optics — that will unfold when states start to deploy the $65 billion of IIJA. They are seeking to get to the head of the line for funding and for delivery.

Tangible benefits of digital divide programs

Recent federal funding initiatives for broadband infrastructure comes out of an acknowledgement of the growing digital divide between those who have broadband access, connected devices and digital literacy foundations, and those who do not. The divide indicates that many American households will not be able to participate equitably in the future of our society. While this has historically been treated as a rural-America issue, it is increasingly apparent that there are challenges at the local level regardless of whether the environment is rural, suburban or urban.

The rapid implementation of stay-at-home orders in 2020 showcased the inequity of access to basic broadband resources. It is currently clear that state and local governments cannot claim to have a high-performing economy or healthy community if portions of their populations and businesses are being left behind — especially as this divide continues to accelerate.

The economic benefits of closing the digital divide through thoughtful programs can be a significant boon to the community. For example, one city became a top destination for technology companies and entrepreneurs to invest in businesses, create new jobs, and further economic and social development after it made a high-speed, city-owned, community-wide, fiber-optic network (up to one gigabyte per second) available to residents and businesses. 

Other governments are beginning to adopt similar infrastructure upgrades. For example, one state has dedicated $2.17 billion from various government funding streams to expand broadband projects. Another is developing an open-access network that will let internet service providers connect to a state-built fiber-optic grid.

One East Coast state is investing $1.2 billion in ARPA funds over the next four years toward bringing high-speed internet access to all homes with children. Another state government established a broadband council to deliver “Broadband for All,” including difficult-to-reach rural regions — and led a large-scale campaign to promote the low-cost options.

The number of efforts is proliferating, and the demand-based, privately and publicly funded virtuous cycle is beginning. States and municipalities are showcasing different paths to close the digital divide. Federal funding is aligned with these areas of success. Funding can incentivize broadband providers by creating a public-private partnership (P3) that creates viable private sector business cases through funding that achieves public sector goals.

In areas where the business case is challenging even with public funding, the state or municipality can build its own network. Going forward, federal funding will also address affordability by incentivizing low-cost operators to overbuild established broadband providers by providing grants for construction or offering subsidies through digital divide programs such as the Enhanced Broadband Benefit from the FCC.

Overall, broadband has become a utility and is increasingly inequitable. Thankfully, the digital divide is receiving the national and local attention it deserves so that social and economic challenges can be overcome. The private and public sectors will require a thoughtful market understanding, identification of issue areas, clear solutions and novel approaches, such as P3s, to effectively address the digital divide.

Enabling infrastructure programs, usually through P3, has advantages of making service cost effective in hard-to-reach areas and, if conditions are right (such as availability of state-owned rights-of-way), can be realized at low cost through P3 structures. Grant programs have the advantage of speed to market but present more complexity in terms of tracking success and benefits. Many states choose hybrid programs, targeting the best of both worlds.

Best practice in broadband program implementation

Putting together an effective plan requires commercial, operational and technical knowledge: it will need to include a market assessment, geospatial mapping, strategic analysis and planning, financing, program structuring, procurement, technical deployment, IT deployment, program management, post-construction support, compliance, impact tracking and reporting.

Those that are successful will need to execute three main phases of program implementation.

1. Complete a needs assessment to create a baseline for which broadband deficiencies can be identified. This would be analyzed on a local, geospatial basis and serves as the foundation for developing thoughtful and practical solutions on which the public and private sector can act.
2. In addition, a solid understanding of the commercial opportunity associated with each of the identified areas, the cost to enable that opportunity and the potential subsidies required to address any private sector shortfalls is critical to engaging realistic solutioning between the private and public sectors and generating the most value for each funding dollar.
3. Finally, the planning phase often creates a market-tested approach to address those deficiencies and create value with processes that can lead to stronger grant program evaluation and allocation, better tracking and reporting, and tangible outcomes.

Never has so much discretionary funding been available to state  and local governments in such a short period of time. While state governments have grant allocation systems designed for steadier and smaller flows of funds, most do not have teams and structures that can scale appropriately to manage the influx of one-time funding while still meeting additional federal compliance and reporting requirements. Although each state’s program will differ based on its needs, all federal funding is accompanied by strict rules, processes, procedures and oversight, making a solid implementation plan critical to program success.