Federal Pandemic Rules Enhance State Flexibility in Deploying Broadband Funds

A new era of unprecedented broadband investment is underway across the United States. While many communities await the rollout of the $42 billion Broadband Equity, Access, and Deployment (BEAD) program, another major program, enacted in response to the COVID-19 pandemic, is already being put into use.

Under the American Rescue Plan Act of 2021 (ARPA), Congress allocated $10 billion to states as part of the Capital Projects Fund (CPF). Managed by the U.S. Department of the Treasury, the fund allows states, territories, and Tribal governments to, as the law describes, “carry out critical capital projects that directly enable work, education, and health monitoring, including remote options, in response to the public health emergency.” Given the need to rapidly respond to the digital inequities observed during the pandemic, the Treasury Department granted states flexibility in designing their CPF programs.

In May 2023, the Pew Charitable Trusts analyzed how states planned to use the first half of CPF funding. One year later, most of the money—nearly $9.4 billion—had been released to states. Thus, while a few proposals remain under review, the picture of how states’ CPF funding aligns with their strategies for expanding critical broadband access has become more clear.

Where CPF awards are going

In Pew’s analysis of funding decisions made to date through data collected by the government affairs consulting firm Stateside Associates, $5.3 billion has been awarded to nearly 1,400 projects in 37 states to connect over 1.5 million locations to broadband services, as of July 2024. (The data is based on the information released by state agencies, which varies based on the level of detail publicly available and may include some awards from programs that were using a combination of state and federal funding.)

Interestingly, several investments are being made in cooperatives or local providers, continuing a trend of state grant program spending. Of these, nearly $900 million has been awarded across 75 rural electric cooperatives for 150 projects. Similarly, more than $520 million has been awarded across 84 different local governments for either the expansion of locally owned networks or deployments in partnership with a local provider. That’s a noteworthy investment, given evidence that such networks can play a critical role in addressing affordability and adoption barriers. More of these types of awards are expected as the remaining $4 billion is dispersed.

Two states, Vermont and Washington, structured their CPF programs to prioritize funding regional, community-owned projects. Washington awarded 48 projects a combined $190 million in CPF funding  to public utility districts, electric cooperatives, counties, and Tribes. Vermont awarded most of the $167 million from both state and federal funds to projects managed by the state’s communications union districts, which allow several towns or municipalities to band together to ensure the availability of high-speed internet services.

Increasing at-home connectivity

Forty-six states are utilizing a combined $6.9 billion of their CPF funding for last-mile broadband infrastructure programs, which will allow an estimated 2.1 million households to connect to a new high-speed internet service. Many states are scaling up their pre-pandemic grant models with this funding. Minnesota, for example, directed $82.7 million of its allocation to the state’s preexisting Border-to-Border Broadband Development Grant Program.

States have also designed their CPF programs to target the precise needs of individual communities. Six states dedicated a combined $180 million for line extension programs to cover the cost of the final connection from the street to the house. Such a focus can have a major impact in rural areas where reaching the network that is available at the end of a long driveway or access road can represent a significant cost barrier.

Expanding connectivity in multidwelling unit (MDU) buildings, particularly in affordable housing units, is another priority for states. Now equipped with CPF funding, Hawaii ($8 million), Maryland ($45 million), Massachusetts ($22 million), and New York ($100 million) have created dedicated programs to increase connectivity in apartments and MDUs.

In addition, New York and Maryland expressly set aside a portion of their last-mile funding to support community-owned networks. Notably, New York’s $228 million Municipal Infrastructure Program has already announced more than $70 million in awards to support the development of existing and new open access and publicly owned last-mile fiber networks.

Building communitywide digital supports

The pandemic underscored the importance of at-home connectivity, but it also elevated the significance of community “hubs”—centralized buildings or spaces that can provide an array of services to the entire community. In response, 30 states have dedicated $1.4 billion of their CPF allocations to constructing or improving facilities that provide communitywide connectivity services. In Ohio, this includes an $85 million program for educational campus facilities in Appalachia and a $7 million program for school district buildings statewide. Relatedly, Utah and Connecticut have dedicated more than $19 million and $71 million, respectively, to the statewide networks connecting their educational institutions and other community anchor institutions.

In addition to funding a $50 million last-mile grant program with the its $195 million CPF allocation, New Jersey has set aside $15 million to provide free Wi-Fi on NJ Transit buses, $5 million to provide “easier access to devices and the internet at public-facing state agencies,” and a combined $105 million for community facilities projects. That includes funding for connections related to library improvements and new health care and educational facilities.

Although most CPF funding is for physical infrastructure projects, digital literacy programs and device distribution—including increased public Wi-Fi—have also received dedicated funding, with seven states allocating a combined $108 million. Wisconsin dedicated $33 million of its $190 million CPF allocation to a device deployment and digital navigator program. The initiative allows nonprofit and other entities to loan connected devices to households while also providing wraparound digital literacy training services and support. Awards can also be used to purchase the equipment necessary to deploy Wi-Fi in qualifying locations.

Driving toward BEAD deployment

The $9.4 billion released to date under CPF represents a fraction of the $65 billion in funding now available for broadband deployment and digital equity efforts from the Infrastructure Investment and Jobs Act. However, the awards being made today by CPF programs should not be overlooked, not only because they will make significant progress in connecting unserved communities with high-speed service, but because the CPF design intentionally gave states significant flexibility to pursue their unique priorities. States have responded by customizing their programs to meet the needs of their communities.

States have until the end of 2024 to finalize their project selections, and construction must be completed on those projects by the end of 2026. Given the overlapping timelines with the federal BEAD program, CPF investments will have an impact on how states structure their broader broadband deployment strategies. The Pew Charitable Trusts will continue to monitor these programs and their progress toward state and federal goals of closing the digital divide.

Jake Varn is an associate manager and Colby Humphrey is an officer with The Pew Charitable Trusts’ broadband access initiative.