How State Grants Support Broadband Deployment

Editor’s note: This brief was updated Dec. 17 and 23, 2021, to provide more information on Massachusetts’ grant programs and to clarify that state programs rather than federal were the focus of certain research.

Overview

High-speed internet access is essential to modern life. However, millions of people across the country still lack sufficient access to broadband service, largely because they live in rural communities, which are the most difficult and expensive to serve.¹ The challenges of deploying broadband network infrastructure in rural locations, particularly low population density and difficult terrain, create high costs and low returns on investment that discourage providers from expanding into those areas.² 

For policymakers seeking to improve the availability of broadband service for their constituents, then, the task is to create a business case that will encourage internet service providers (ISPs) to extend connectivity to areas where the costs of deployment are high. One way states have sought to remedy this availability gap is by establishing grant programs that provide funding to help areas without high-speed internet service build needed infrastructure.³ Congress has also taken action by appropriating federal funds for broadband deployment, including through the American Rescue Plan’s state and local fiscal recovery and capital projects funds and the Infrastructure Investment and Jobs Act.⁴ And research indicates that state programs have been effective in increasing the availability of high-speed internet service.⁵

As of fall 2021, 44 states had established grant programs to cover the costs of broadband deployment in areas where it would otherwise not be economically feasible.⁶ Although many of these programs generally share a common focus on increasing availability and subscription rates in communities without sufficient access, they vary across states regarding the amount of funding available, specific goals, speeds standards, eligibility, and required level of community engagement.  Further, while some state programs must adhere to strict requirements for what types of projects or providers can receive funding, others have more flexibility to change and adapt. 

The Pew Charitable Trusts examined the various ways states have structured their grant program funding, eligibility, and objectives. This brief summarizes the findings of that review, looks at how different program priorities and requirements affect where and how broadband infrastructure is deployed, and highlights examples from states that are working strategically to make high-speed internet service available to more Americans.

What do state grants pay for?

Broadband grant programs generally fund “last mile” infrastructure—the segment of the network that connects the local ISP to the customer. Some states, including Minnesota and Colorado,⁷ also allow localities to use grant funds to build “middle mile” infrastructure, which connects last mile infrastructure to the internet backbone—the large fiber optic pipes that cross state and national boundaries and are the main data routes on the internet—but generally only where additional middle-mile development is necessary to make a last mile project viable. 

States typically provide broadband grants to multiple types of entities, including private ISPs, electric and telephone cooperatives, tribal and local governments, and public-private partnerships. However, some states have more restrictive eligibility rules than others. Virginia, for instance, offers grants to public-private partnerships only within a specific structure: a government entity applies for the grant, which is cosigned by an ISP that commits to own and operate the completed network.⁸ Arizona and Indiana require that ISP applicants demonstrate that they have a history of providing service in the target area and the capacity to achieve the project goals.⁹ And Massachusetts has two programs, each  with targeted but distinct eligibility: The Last Mile Infrastructure Grant program prioritizes a community-based approach by making funds available to help towns build municipally owned networks, and the Flexible Grant program provides grants to private ISPs to operate broadband networks in participating towns in western Massachusetts.¹⁰

What locations are eligible for funding?

States prioritize grant applications for projects in “unserved” areas—which in most states means places without access to internet speeds of at least 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads, typically noted at 25/3 Mbps, which is the Federal Communications Commission’s (FCC) definition of broadband. According to the FCC, 25/3 Mbps is sufficient for light or moderate use in a household with three or fewer users or devices but insufficient for high use.¹¹ 

But several states use thresholds other than 25/3 Mbps, and their choice of definition is important for determining which areas are eligible to receive funding—and which may be left behind. For example, Missouri, Florida, and Oregon define unserved areas as those without access to speeds of just 10/1 Mbps.¹² Defining unserved areas at lower speeds excludes communities where internet service exceeds the definition but is inadequate to meet modern needs and leads to funds being invested in networks that are not scalable to provide the faster speeds that people will need in the future.

Although states prioritize proposals targeting unserved areas, many, including Illinois and Minnesota, also allow funding to go to projects in “underserved” areas—those that do not meet the state’s definition for unserved but have available internet speeds that fall short of the state’s longer-term broadband targets.¹³ For instance, an underserved area may have available speeds that achieve a state minimum, such as 25/3 Mbps, but are below the state’s goal of 100/20 Mbps. However, limited funding and the emphasis states place on unserved areas mean that grant funding often runs out before underserved areas can be considered. 

Further, states often set additional eligibility criteria for proposed projects related to the target area, such as minimum or maximum population size; proportion of residents without internet access; number of providers offering broadband; or unemployment, poverty, or population-loss rates. For example, Alaska restricts funding to communities with populations of less than 20,000, unemployment rates above 19.5%, and broadband speeds below 768/200 Kbps.¹⁴ In Colorado, target areas must either be outside municipal boundaries or have fewer than 7,500 people and must not have access to at least one satellite and one nonsatellite broadband provider.¹⁵ These criteria are intended to ensure that funding goes to those areas that most need assistance with deployment of broadband infrastructure.

What kind of technology is eligible?

State grant programs also have requirements for the minimum speeds that funded projects must deliver, which in turn dictate the types of technology that can meet program criteria. But when those minimums are set very low, such as 10/1 Mbps or 25/3 Mbps, communities may get outdated technology or be excluded from opportunities to receive upgraded technology, saddling them with slow, unreliable internet service, possibly for years to come.

Outside of those requirements, most state programs are “technology neutral,” meaning they give no explicit preference to one or more technologies and will fund any option that can deliver the minimum speeds. However, they typically do give priority to proposals that promise faster speeds compared with other applications, which can implicitly favor more advanced technologies, such as fiber, and some states exclude technologies that cannot deliver required speeds. For example, Washington omits digital subscriber line service, commonly known as DSL, which typically provides slower speeds, from its list of eligible technologies; in Indiana, to qualify for grants, projects may not incur costs for satellite-based systems, which tend to be slower and offer less reliable and more expensive service.¹⁶

Affordability and adoption

Although state programs prioritize projects that can meet the service, speed, and location requirements, they also consider affordability and adoption goals when awarding grants. Several states encourage the inclusion in applications of provisions to ensure that the new service will be affordable for and utilized by lower-income communities and evaluate applicants’ proposed activities, such as special outreach, low-cost subscription plans, and digital literacy programs, when deciding which projects to fund. For example, Michigan requires that applicants demonstrate their ability to offer Lifeline subsidies—a federal program that provides discounts on monthly telephone and broadband service to eligible lowincome households—and gives preference to projects that include an affordable internet service plan for low-income and vulnerable communities.¹⁷ In Wisconsin, applicants must provide a proposed schedule of retail prices or describe any planned affordability options for low-income subscribers.¹⁸ And Virginia requires applicants to explain how they will promote customer uptake and describe their digital literacy efforts.¹⁹

Grant maximums and matching funds

All states set a cap on the amount of funding that can be awarded to a single project. These maximums, which affect the size of eligible projects, range from $1 million in Kansas and Pennsylvania, to $10 million in California.²⁰ This reflects the diverse scale of state grant programs and the amount of funding they have available for broadband expansion: In 2021, state appropriations for high-speed internet deployment ranged from $500,000 in Montana to $100 million in Iowa and Tennessee.²¹ These totals largely determine how many grants a state can award and the type and reach of the projects that can be funded. Federal funding also enables states to make more funds available for broadband projects.²²

Many grant programs also require that a certain percentage of the project cost be paid for with matching funds, that is, money provided by the grant applicant. These matching requirements extend the reach of public funds and help ensure that grant recipients have a financial stake in the project. States may give more weight to grant applications that provide matching funds beyond the minimum requirement. However, when match requirements are exceedingly high, they can be difficult to meet for communities most in need of grant funding, such as those in rural and low-income areas. To address this concern, some states use sliding scales for match percentages to ensure consideration of projects in areas that cannot raise substantial matching funds. For example, California uses a baseline of 60% grant to 40% matching funds, with a sliding scale up to 100% grant funds.²³ 

Other states use sliding scales to incentivize potential applicants to use more advanced technologies. Projects that build out higher speed capacity receive a larger percentage of grant funding. For example, Iowa funds up to 75% of projects that will result in available speeds of 100/100 Mbps or more, up to 50% for speeds from 50/5 Mbps up to 100/100 Mbps, and up to 35% for speeds of 25/3 Mbps up to 50/5 Mbps.²⁴ 

Accountability 

To ensure that grant money is spent wisely and on needed projects, many states have challenge and accountability procedures. These allow providers to contest a grant application on the grounds that they already provide adequate service in the target area or have explicit plans to do so soon, and they enable state officials to track funded project spending and results, respectively. 

In Minnesota, for instance, an ISP serving customers in or near a proposed project area has 30 days to challenge an application. These providers must attest that they either already serve the project area with speeds that meet or exceed the state goal or have begun construction to do so and will be online within 18 months of the grant award announcement. The information in the challenge is then evaluated, and if it is found to be credible, the proposed project will not receive funding. However, if the challenger does not subsequently fulfill its commitment to provide service in the target area, it is barred from submitting challenges for the next two grant cycles, unless the failure is the result of factors beyond its control, such as acts of god.²⁵ These requirements prevent established providers from using the challenge process to prevent new deployment in areas they do not have substantive plans to serve. 

Other states have implemented similar procedures, but some allow grant awards to be modified to fund only the parts of a project that do not overlap with a challenging provider.²⁶

States also ensure accountability for use of grant funds by requiring applicants to report on their progress, costs, and number of new locations served throughout the life of the grant, including the preapplication, grant closeout, and post-grant phases, as well as during the grant cycle. For example, California requires grant applicants to file biannual progress reports that include a description of project accomplishments, milestones reached, impending challenges, and subscribership information to date. Grantees must also submit completion reports containing a comparison of approved versus actual costs; description of the project, including any changes; completion dates for each milestone; date of project completion; and speed test data for the census block.²⁷ This ongoing oversight helps states ensure that grantees can meet program requirements, which typically include speed and pricing standards, net neutrality provisions, and mandatory ongoing data collection for a set period after closeout of the grant. For example, Alaska requires that providers offer subscription rates in the target area that are comparable to those available in urban centers for two years after receiving grant funds,²⁸ and Nebraska requires grantees to submit to speed testing on the completed network.²⁹

Conclusion

State broadband deployment grant programs have demonstrated success in increasing high-speed internet access by funding the development of broadband infrastructure in unserved and underserved areas. Although these programs share many similarities, they also differ in key ways that reflect states’ varying policy priorities, funding levels, and local contexts. Which areas or providers are eligible for funding, how the money is allocated, and how states incorporate priorities such as affordability and adoption determine how and where broadband gets deployed. And as policymakers look to design or update their states’ grant programs, they should consider how each of these elements will affect program outcomes and whether and how they will help the state achieve its broadband goals.

Endnotes

1. D. Dawson, “The Rural Broadband Industry” (CCG Consulting, 2021), https://www.pewtrusts.org/-/media/assets/2021/09/white_paper_rural_broadband_industry_final.pdf?utm_source=sendgrid&utm_medium=email&utm_campaign=Newsletters&mc_cid=e717b6be1c&mc_eid=5e01ec1f85.
2. Ibid.
3. The Pew Charitable Trusts, “How States Are Expanding Broadband Access: New Research Identifies Tactics for Connecting Unserved Communities” (2020), https://www.pewtrusts.org/-/media/assets/2020/03/broadband_report0320_final.pdf.
4. American Rescue Plan Act of 2021, H.R. 1319, 117^th Congress (2021), https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H50B3CAA839764CBDBC95BB7B26C0F8E8; K. de Wit, “Infrastructure Bill Passed by Senate Includes Historic, Bipartisan Broadband Provisions,” The Pew Charitable Trusts, accessed Oct. 27, 2021, https://www.pewtrusts.org/en/research-and-analysis/articles/2021/08/30/infrastructure-bill-passed-by-senate-includes-historic-bipartisan-broadband-provisions.
5. B. Whitacre and R. Gallardo, “State Broadband Policy: Impacts on Availability,” Telecommunications Policy (2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3740186.
6. A. Read and L. Gong, “Which States Have Dedicated Broadband Offices, Task Forces, Agencies, or Funds?,” The Pew Charitable Trusts, June 28, 2021, https://www.pewtrusts.org/en/research-and-analysis/articles/2021/06/28/which-states-have-dedicated-broadband-offices-task-forces-agencies-or-funds. Since the tracker was updated, Georgia, Hawaii, Louisiana, New Hampshire, and Utah have added broadband funds. See: An Act to Make and Provide Appropriations for the State Fiscal Year, H.B. 81, Georgia General Assembly (2021), https://www.legis.ga.gov/api/document/docs/default-source/house-budget-and-research-office-document-library/2022_fiscalyear/fy_2022_bill_house_version_(hb_81).pdf?sfvrsn=26d07cda_2; Appropriations Adjustments, S.B. 1001, Utah Senate (2021), https://le.utah.gov/~2021S1/bills/sbillenr/SB1001.pdf; Provides for the Disbursement of Monies Received from the American Rescue Plan Act of 2021, H.B. 642, Louisiana House of Representatives (2021), http://www.legis.la.gov/Legis/ViewDocument.aspx?d=1235808; Relating to Broadband Service Infrastructure, H.B. 1191, Hawaii House of Representatives (2021), https://www.capitol.hawaii.gov/session2021/bills/HB1191_CD1_.pdf; An Act Establishing a Broadband Matching Grant Initiative and Fund, S.B. 85, New Hampshire Senate (2021), http://www.gencourt.state.nh.us/bill_status/billText.aspx?id=817&txtFormat=html&sy=2021.
7. Minnesota Office of Broadband Development, “Broadband Grant Program,” accessed Sept. 24, 2021, https://mn.gov/deed/programs-services/broadband/grant-program/; Colorado Broadband Office, “Project Eligibility Criteria,” Colorado Governor’s Office of Information Technology, accessed Sept. 24, 2021, https://broadband.colorado.gov/broadband-deployment-board-fund/broadband-fund/apply#eligibility.
8. Commonwealth Connect, “Report on Commonwealth Connect 2.0: Governor Northam’s 2020 Plan to Connect Virginia” (2020), https://www.commonwealthconnect.virginia.gov/sites/default/files/CIT%20Documents/Commonwealth%20Connect%20Report.pdf.
9. Arizona Commerce Authority, “Arizona Broadband Office Announces Awardees for Rural Broadband Development Grants,” news release, Jan. 10, 2020, https://www.azcommerce.com/news-events/news/arizona-broadband-office-announces-awardees-for-rural-broadband-development-grants/; Indiana Office of Community and Rural Affairs, “Next Level Connections Broadband Program,” accessed Sept. 24, 2021, https://www.in.gov/ocra/nlc/.
10. Massachusetts Executive Office of Housing and Economic Development, “Last Mile Infrastructure Grant,” accessed Oct. 21, 2021, https://www.mass.gov/service-details/last-mile-infrastructure-grant.
11. Federal Communications Commission, “Household Broadband Guide,” accessed Oct. 27, 2021, https://www.fcc.gov/consumers/guides/household-broadband-guide.
12. Missouri Department of Economic Development, “Missouri’s Broadband Plan” (2019), https://ded.mo.gov/sites/default/files/Missouri%20Broadband%20Plan%20(2).pdf; Florida Broadband Deployment Act of 2021, H.B. 1239, Florida House of Representatives (2021), https://flsenate.gov/Session/Bill/2021/1239/BillText/er/PDF; Modifies Definitions Applicable for Purposes of Universal Service Surcharge, S.B. 1603, Oregon Legislative Assembly (2020), https://olis.oregonlegislature.gov/liz/2020S1/Downloads/MeasureDocument/SB1603/Introduced.
13. Illinois Office of Broadband, “Connect Illinois Broadband Strategic Plan” (Illinois Department of Commerce, 2020), https://www2.illinois.gov/dceo/ConnectIllinois/Documents/Broadband%20Strategic%20Plan%202.5.20.pdf; Minnesota Office of Broadband Development, “Broadband Grant Program.”
14. Regulatory Commission of Alaska, “Rural Alaska Broadband Internet Access Grant Program: Round Five Grant Application Guide” (Department of Commerce, Community and Economic Development, http://rca.alaska.gov/RCAWeb/Documents/Broadband/Round5GrantApplicationGuide.pdf.
15. Colorado Broadband Office, “Project Eligibility Criteria.”
16. Washington State Department of Commerce, “CERB Rural Broadband Program Overview,” accessed Sept. 24, 2021, https://www.commerce.wa.gov/building-infrastructure/community-economic-revitalization-board/rural-broadband/; Indiana Office of Community and Rural Affairs, “Next Level Connections.”
17. Michigan Department of Technology, Management, and Budget, “Connecting Michigan Communities 2.0 Grant Scoring Criteria” (2021), https://www.michigan.gov/documents/dtmb/CMIC_2.0_Grant_Criteria_706394_7.pdf; Federal Communications Commission, “Lifeline Program for Low-Income Consumers,” accessed Oct. 21, 2021, https://www.fcc.gov/general/lifeline-program-low-income-consumers.
18. Public Service Commission of Wisconsin, “Grant Application for American Rescue Plan Act Broadband Access Grants” (2021), https://psc.wi.gov/Documents/broadband/5-BF-2022%20ARPA%20Broadband%20Access%20Grant%20Application.pdf.
19. E.C. Johnston and T. Holmes, “2022 Virginia Telecommunication Initiative (VATI) Program Guidelines and Criteria” (Virginia Department of Housing and Community Development, 2021), https://www.vml.org/wp-content/uploads/pdf/FY22-vati-guidelines-criteria-final.pdf.
20. [1]  Kansas Office of Broadband Development, “Broadband Acceleration Grant,” accessed Sept. 24, 2021, https://www.kansascommerce.gov/program/community-programs/broadband-acceleration-grant/; Pennsylvania Department of Community and Economic Development, “Unserved High-Speed Broadband Funding Program,” accessed Sept. 24, 2021, https://dced.pa.gov/programs/unserved-high-speed-broadband-funding-program-uhsb/; California Public Utilities Commission, “Appendix 1: Broadband Infrastructure Account Requirements, Guidelines and Application Materials” (2018), https://www.cpuc.ca.gov/industries-and-topics/internet-and-phone/california-advanced-services-fund/casf-infrastructure-grant.
21. An Act Providing for Broadband Infrastructure Deployment Laws, S.B. 297, Montana Senate (2021), https://leg.mt.gov/bills/2021/billpdf/SB0297.pdf; A Bill for an Act Relating to and Making Appropriations and Related Statutory Changes Involving Certain State Departments, Agencies, Funds, and Certain Other Entities, Providing for Regulatory Authority, and Other Properly Related Matters, H.F. 867, Iowa General Assembly (2021), https://www.legis.iowa.gov/docs/publications/LGE/89/HF867.pdf; An Act to Make Appropriations for the Purpose of Defraying the Expenses of the State Government for the Fiscal Years Beginning July 1, 2020, and July 1, 2021, S.B. 912, Tennessee General Assembly (2021), https://publications.tnsosfiles.com/acts/112/pub/pc0454.pdf.
22. An Act Relating to Fiscal Matters, Making an Appropriation Therefor, and Declaring an Emergency, H.B. 382, Kentucky General Assembly (2021), https://apps.legislature.ky.gov/record/21rs/hb382.html. This is an example of a state allocating federal funding for broadband projects.
23. California Public Utilities Commission, “CASF Broadband Infrastructure Grant Account” (2018), https://www.cpuc.ca.gov/industries-and-topics/internet-and-phone/california-advanced-services-fund/casf-infrastructure-grant.
24. Iowa Office of the Chief Information Officer, “Empower Rural Iowa Broadband Grant Program Notice of Funding Availability #005” (2021), https://ocio.iowa.gov/empower-rural-iowa-broadband-grant-program-notice-funding-availability-005#MAP.
25. Minnesota Office of Broadband Development, “2019 Border-to-Border Broadband Grant Challenge Procedure” (2019), https://mn.gov/deed/assets/challenge-process_tcm1045-390920.pdf.
26. Alabama Broadband Accessibility Act, S.B. 90, Alabama Senate (2019), https://adeca.alabama.gov/wp-content/uploads/Alabama-Broadband-Accessibility-Act.pdf; “Broadband Accessibility Grant” (Tennessee Department of Economic and Community Development, 2020), https://www.tn.gov/content/dam/tn/ecd/documents/broadband/Grant%20Program%20Guidelines%20FY21.pdf; Johnston and Holmes, “2022 Virginia Telecommunication Initiative (VATI) Program Guidelines and Criteria.”
27. California Public Utilities Commission, “CASF Broadband Infrastructure Grant Account.”
28. Regulatory Commission of Alaska, “Rural Alaska Broadband Internet Access Grant Program.”
29. Nebraska Broadband Bridge Act, L.B. 388, Nebraska Legislature (2021), https://nebraskalegislature.gov/FloorDocs/107/PDF/Final/LB388.pdf.