Landmark Federal Guidance Affirms State Leadership Role in Bridging Digital Divide

Interim Treasury rule for allocating American Rescue Plan money signals shift in broadband priorities

Landmark Federal Guidance Affirms State Leadership Role in Bridging Digital Divide
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The American Rescue Plan Act (ARPA), which President Joe Biden signed into law March 11, includes more than $362 billion that state and local governments can use to expand access to broadband services, with $350 billion from the Coronavirus State and Local Fiscal Recovery Funds and $10 billion from the Capital Projects Fund. The stimulus package represents a tremendous opportunity for state leaders to act to shrink the digital divide.

On May 10, the Treasury Department released the interim final rule for the Coronavirus State and Local Fiscal Recovery Funds, clarifying how state and local governments can use the funds for broadband deployment. The interim designation allows Treasury to get the rule in place quickly while seeking final comments.

Much of the news coverage about ARPA has focused on the amount of spending, but the language in the rule denotes a shift in the federal stance on broadband expansion. Notably, the government’s approach offers states needed flexibility with federal funds, prioritizes community-based solutions, and embraces higher technology standards.

For example, the rule includes:

Historic broadband funding to states and localities. ARPA is the first federal program that provides funds to these governments for broadband deployment. Importantly, the interim rule defines standards for state and local programs that use federal funds but does not include words such as “shall” and “require.” The absence of such imperatives allows recipients to determine funding priorities based on their understanding of the problem, not the federal government’s. This represents a historic moment in broadband policy and affirms the role of states in closing broadband gaps.

Flexibility to define the target areas. The rule says states and localities should spend federal funds on unserved or underserved communities that lack “reliable” access to wireline connections of 25 megabits per second (Mbps) download and 3 Mbps upload. That’s the current Federal Communication Commission (FCC) definition for broadband. Use of the word “reliable” is notable as well, indicating Treasury’s acknowledgement that available technologies may technically provide certain speeds but may not be able to deliver them consistently. Federal policymakers are giving states ample flexibility but remain committed to setting high standards for service.

Additionally, in discussing how ARPA funds can be allocated, the rule focuses on the word “communities” rather than “census blocks.” This is a shift from how federal broadband funds have been distributed in the past. Previously, most federal dollars for broadband had been based on FCC data that was organized by census block, an approach widely seen as flawed because it can overstate the availability of broadband connections. The use of the term “communities” represents a significant change in defining eligibility and allows states and localities—many of which have invested in data collection efforts to supplement the FCC’s—the flexibility to define targeted service areas in their own way.

Preference for community-based solutions. Treasury recommends that recipients of federal ARPA funds prioritize support for projects that are “owned, operated by, or affiliated with local governments, non-profits, and co-operatives.” This recommendation reflects findings from The Pew Charitable Trusts and other organizations that the most successful and effective broadband initiatives are those that put community needs first when planning and implementing expansion projects. These projects can include partnerships with small community-based providers that are, by virtue of their location, often well-positioned to serve rural, unserved areas.

A new federal speed standard. Treasury’s interim final rule states that, unless it is otherwise impractical, eligible projects should deliver service that reliably “meets or exceeds symmetrical upload and download” speeds of 100 Mbps. If that speed is impractical because of topography, geography, or cost, Treasury recommends that federal funds support technology delivering speeds of 100/20 Mbps and scalable to higher speeds. Treasury also states a preference for fiber optic technology. Collectively, this speed guidance surpasses standards used by other federal agencies, including the FCC, the Department of Agriculture, and the Department of Commerce. With this rule, Treasury joins states such as Illinois, Washington, and Vermont in setting requirements ensuring that public dollars for broadband are invested in solutions that reflect the rapidly evolving ways in which Americans use the internet and that will continue to meet those changing needs well into the future.

Although the guidance provides a historic amount of leeway to states and localities, it could prove challenging to implement, especially for states with newer broadband programs and jurisdictions with less experience administering such deployment efforts. Pressure from lawmakers and external interest groups could also complicate state efforts to use the federal funding effectively. Still, research shows that state decision-makers can achieve goals similar to the ones outlined in the rule by focusing on three key steps: developing clear funding requirements, administering competitive grant programs, and supporting community engagement.

State efforts to close the digital divide have expanded in recent years—and Treasury’s ARPA guidance confirms the critical role that states and localities play in ensuring access for all. As state policymakers consider how to allocate these new federal resources, they should be mindful of this shift in the federal stance on broadband expansion and the opportunity it affords them. Final guidance for ARPA funds is forthcoming, but the interim rule represents an important step forward in ensuring that America will have the connectivity it needs to thrive in tomorrow’s economy.

Kathryn de Wit directs The Pew Charitable Trusts’ broadband access initiative.

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