NOFA 2 Lessons from a Round 1 Winner

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As everyone scrambles to make one last charge into broadband stimulus history – for better or worse – here’s a hopefully helpful post to give you at least a tiny edge in your pursuit of the gold.

I decided to profile stimulus grant winner Tad Deriso, President & CEO of the Mid-Atlantic Broadband Cooperative in Virginia, in part, because his group is the self-proclaimed “square peg in a round hole.” MBC is a co-op of private-sector-only companies, they didn’t form a public-private partnership, they’re a middle mile project not targeted to all the usual suspects and they challenged NTIA/RUS’ definition of underserved. Yet they still come out ahead.

Let’s see what we can learn from this slightly odd duck in the winner’s circle. Many of Tad’s comments pertain to the due diligence process, but understanding how they navigated this process offers some insights on where to tighten up your proposal.

What are the main elements of the project you proposed?

We wanted to expand our existing four-county network which consists of 1,700 miles of fiber in one area, and another 800 miles supporting an open-access network offering wholesale services. We proposed to add 465 miles of additional fiber specifically for K-12 public schools. Because we already have a network, we didn’t have to do partnerships since hospitals and colleges are already connected. MBS doesn’t do networks for the state or local governments.

What do you view as the strength of you proposal?

The big part was sustainability. We’re a proven network operator, we have a business model up and running. In the first due diligence meeting, right off they said “tell us why you think this is a viable proposal.” We replied, “if you want a project you can be proud of, we’re that group. We know how to run a network, we’re in the open access business and people seek us out for advice in how to do broadband right.” This made them comfortable because this project was no different than we’ve done before except it’s on a little larger scale.

Describe some of the greatest challenges getting the application completed? 

Trying not to drink so much.

Actually, one really big challenge was how to put a square peg into round hole. A number of questions on the application forms didn’t apply to us. For example, in our project we don’t need to know the number of businesses passed.

Probably the biggest challenge was trying to resolve how we defined “served” and “underserved,” and how what we said was different from what NTIA and RUS wanted. It was a very painful process. We know data from DSL providers says 80% of the population has access, whether or not they’re subscribing. However, this doesn’t account for the schools, which is our proposal’s only focus.

Furthermore, DSL is unreliable for school use. The DSL providers said their areas are served, but we asked how? We contended that if you look at the speed you’re actually getting, you don’t get consistent or fast enough speed. We went on to define who lacked “adequate” service based on the poor speeds of DSL. We set terms for what rated as real broadband speed as defined by schools’ needs, and then had to prove area-by-area which was underserved based on our benchmark. That required a lot of staff time. We often were up to 2:00 in the morning.

To further strengthen our effort to re-define underserved, we pushed the case that it doesn’t matter if you have fiber to every home in an area. If you don’t have highspeed access at the hub from where the fiber feeds into the Internet, then all’s for naught and you have an underserved area. Even if we built an 800-mile fiber network, that’s fantastic for business-to-business communication within the community, but what people need is fast access to the public Internet that’s made possible at the hub. That’s what determines if your area is properly served, and reveals the weaknesses of current providers.

What are some tips on how to effectively navigate the process?

The due diligence process itself was a little more difficult than preparing the grant application, not for the type of information they wanted, but the timing of requests. It was Friday after Thanksgiving and we got a call. “Here’s all this data we need. You have 30 days for due diligence, but we want it next Tuesday.” Then questions beget more questions. We were called 18 times! Usually with grants, there are one or two rounds of questions and you’re done.

From the financial side, we did a pro forma and they’d asked for extensive calculations and unreasonable what-if scenarios. Sometimes we’d get in a conversation that was like saying, “I can’t afford buy a Volkswagon,” and the other person asks “why can’t you afford a Mercedes” For mapping, we did what’s required, but they wanted to know about wetlands. We knew there’s no wetlands in our proposed area because we do work here. They kept wanting us to prove it in the map. How do we show on the map something doesn’t exist if something doesn’t exist?

Recommendations

1. It’s hard to say how many applicants cannot have relationships with local governments and still be considered financially viable if you don’t have partnerships with other community stakeholders. In MBS’ case, they have relationships with stakeholders on their current networks, though none were partners in the application process. Given the 30-day window for NOFA 2 apps, MBS’s philosophy that trying to get local governments to agree to work together is only going to bog down any attempt to get a proposal done quickly.

2. MDS’ emphasizing the coop’s past track record running this kind of business specifically within the proposed service area was a strong plus. More than anything else, NTIA/RUS want projects that succeed, and theoretically nothing breeds success like past success. It ain’t necessarily so, but the agencies will take the chance.

Though there’s just only 30 days left, your project team really needs to explore in a brutally honest way how well it can sell the agencies on its prior experience. If that’s looking a little shaky, better find a private sector partner that can fit the bill before the week is out.

3. There aren’t enough projects funded to show credible patterns, other than the deep love for middle mile and fiber, applications that focus exclusively on schools/education seem to be doing well. Besides MBC, it was announced today that a group in Pennsylvania won a whopping $99 million just to wire colleges and universities in the state. Besides proposals to connect just libraries, schools are the only other single-audience networks winning grants. Just saying.

4. I believe several doors are potentially open in NOFA 2 for applicants willing to risk becoming the square peg in the round circle. Specifically, in the areas of addressing un-served, underserved, extreme poverty, economic development and advertised speeds (“Form 10” is becoming a euphemism for “dumb rules bearing no relevance to broadband”). This applies to any applicant, but particularly more populated communities.

Cities can play this round because technically NOFA 2 rules allow proposals for areas other than those un-served and underserved to be considered. But rather than trying to prove your area is a noble exception to the un/underserved requirement, force NTIA/RUS to accept your area as underserved by conforming the definition of underserved to meet your community. Tad’s team did a wonderful job of conforming the definition, though it did force many extra hours to prove their case by using MBC rules.

Better still, re-define underserved to meet your needs by heavily playing the “extreme poverty” and/or “economic development” card. Let’s face it. In terms of having people in need, or communities that need an economic development boost, this is not the zero-sum game the rules imply. We don’t have to deny urban areas because rural areas are the only ones with needs. Insufficient broadband is a plague upon both our rural and our urban houses.

And similar to how MBC convinced the agencies that you can still be underserved even with DSL availability, attack head on this blatantly ridiculous request to prove an area underserved by using advertised speeds. Advertised speeds are horse crap in terms of proving the real presence of meaningful broadband.  One of the reasons I partnered with ID Insight was their database service shows real speeds received by real people. Spending time collecting advertised prices is questionably valuable given how easily this info can be manipulated.

For RUS applicants, there is no due diligence process. So you have to do in your written application what MBC did in their actual gauntlet run, though I’m guessing that even without formal due diligence, you’ll likely get some calls with questions asking for clarifications. Be ready.

As for surviving due diligence on the NTIA side, I have to go with Tad’s advice. Try not to drink too much. But more on surviving the perils of due dili later.

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