Funding Broadband by Turning Users Into Investors

Let’s explore a different strategic approach to funding.

In 2009 I came across National Community Development Services, Inc. (NCDS), which specializes in boosting the economic health of communities through a process they term economic development fundraising. The concept is simple, really, and can be applied to broadband projects where one of the main goals is to use the network to improve economic development. Build a financial sustainability strategy based on a campaign to recruit investors for the network.

As I find interesting guests to invite to be on my radio show, Gigabit Nation, I’m finding a theme that keeps recurring in slightly different forms, but with the same bottom line – fund a network by convincing local businesses, not-for-profits and other organizations to underwrite the costs. One variation to that are co-ops, such as the Mountain Area Information Network (MAIN) that I’m highlighting on tomorrow’s show.

We’re not talking investors as a euphemism for “subscribers,” but people who invest more than the price of service in exchange for a piece of the action. This aligns with my position that communities need to treat broadband networks as a business venture.

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Eliminate Weeks from Your NOFA 2 Prep Time!

Promotional Announcement

Some of you have followed my blog for months and know I’m pretty spot-on with my assessment of the broadband stimulus terrain, and broadband strategy in general. I bring this expertise to my evaluations of the few 3rd-party services I select to complement mine. Here are two that pass the test.

Eliminate weeks of the most time consuming and tedious work needed to complete the roughest part of the NOFA application with ID Insight and RidgeviewTel services. These services also increase the accuracy and impact of your application plus help you build a sustainable broadband network after you receive funding.

ID Insight’s BroadBand ScoutSM pulls details from millions of online retail transactions nationwide to enable you to determine broadband penetration down to the census block on connection type (broadband, dsl, cable, dial-up, etc.), data speeds and carriers. Give us the names of counties in your proposed service area, and we deliver the data for you to create or verify broadband coverage maps.

RidgeviewTel adds your BroadBand Scout data to their dBOSS Broadband Network Management Platform to:

  • aggregate the majority of necessary data NOFA 2 requires; 
  • format the data for GIS systems to visually render locations on a map;
  • apply the data through imaging and layering of the various data to create maps of broadband usage, unserved areas, RF propagation and the number of potential customers per mile for fiber networks; and
  • return the NOFA-required data to you in the formats needed to upload these files directly to NTIA’s and RUS’ NOFA application servers facilitates the logistics between you and both companies, provides valuable analysis services if needed and ensures that everything is in order when you submit your application. You can purchase our services together or a la carte.

E-mail or call us today (510-536-4522) for more details. March 15 isn’t that far away.

Handicapping NOFA 2

The good news is that the new NOFA rules are out. The bad news, if you have Attention Deficit Disorder, is that there are two of them and each one seems as long as the first NOFA rules. But at least there are welcome changes. Here’s an overview and a look at who does well as a result of these. 

First, I think it’s wise to let each group have its own rules. Many of the frustration people have had with the NOFA, Round 1 stem from the rules being a quick blending of procedures from agencies with two different purposes and ways of doing business. That led to the rules contradicting each other in places, or otherwise breeding confusion.

In terms of focus, NTIA is addressing middle mile primarily and this makes sense because it gives NTIA a bigger bang for their buck, allowing them to bring broadband to large geographical areas through each award. Rather than spend time reviewing 30 proposals for $1 million each, better to review one proposal for $30 million. There’s less administrative hassle on the backend where NTIA has to manage each funded project to completion.

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Taking Action on the New NOFA Rules

Welcome to NOFA 2 and the 60-day march through hell (for some) to $4 billion. After Friday afternoon’s sudden delivery of the preliminary set of NOFA rules, I made the comment that it is good that the agencies are going their separate ways. Trying to keep the NTIA/RUS marriage together for the sake of the kids didn’t make sense

Then I looked at draft of the NOFA for NTIA and RUS. That’s nearly 200 pages! My brain glazed over. No wonder they waited until Friday before a 3-day weekend! Then at midnight, I got an e-mail from the New America Foundation with incredibly thorough summaries of NOFA 2 highlighting changes from NOFA 1 and other valuable details condensed into 85% fewer pages. Read the summaries before the actual NOFAs.

Heartfelt thanks to New America are very much in order from all of us trying to slog through all this info. Dudes and dudettes – thank you!!

For my part, since New America breaks down what NOFA 2 is all about, I’m giving you some tips on what to do about these rules so you can get a good proposal across the finish line. There’s barely two months to the March 15 deadline for your proposal, so I’m not prettying this post up. This train’s leaving the station. You can complain to the Fed’s conductors later about whatever injustices you spot.  

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Want Better NOFA Rules? Here’s Your Chance.

Yesterday NTIA and RUS announced the release of their Request for Information (RFI) to get feedback on the rules that will govern this last funding round(that’s right, only one funding round). This RFI is actually a straightforward, logical document. That’s good. If you’re short on time you can get to those points that concern you most.

Ok, here’s my first recommendation to overarch all the rest I have. The next NOFA should be as concise and clearly presented as this RFI. Seriously. That’s the one takeaway from most people’s complaints. Simplify! Do that and a lot of folks around the country might nominate Strickling (responsible for NTIA) and Adelstein (heads RUS) for sainthood.

I’m going to run through many of the RFI points in order (sort of), and give you a couple of thoughts on where I feel we should go with these. Some of the questions here are so logical or obviously rhetorical they speak for themselves. 

I. The Application and Review Process

A. Streamlining the Applications

  • RUS and NTIA need to create criteria for what kind of projects they want to fund, or not fund, describe the funding options (grants, loans, both) and tell people to apply to one agency or the other. Period.
  • Create, in editable PDF file, format one application form in four parts, one for each category of broadband project: middle mile infrastructure, last mile infrastructure, public computing center and broadband adoption. People reviewing all four categories of projects need the same data: 
  1. background info on the applicant to prove they are a viable (i.e. not fly-by-night) fiscally solvent and responsible public, commercial or nonprofit entity;
  2. demonstration of constituent need;
  3. demonstration of ability to meet constituent need;
  4. what do applicants plan to do with the grant money; and
  5. how to applicants plan to financially sustain the project after the grant money runs out. For the infrastructure projects, you probably want a section to address the technological viability of the proposed project.
  • Regarding new entities, consortia and public-private partnerships, yes you want different information from a nonprofit consortium than a telecom company. But you can gather this in how you word or assign questions in the form (e.g. in lieu of P & L statements for prior three years, ask for specific details on how a new nonprofit’s management team  has proven in the past an ability to run successful projects). 
  • Good luck on the specifications of what is a Service Area. It’s tricky meeting the need to have some uniform delineation of an area where you plan to deliver service that makes everyone happy, particularly when you talk about wireless. However, the specifications NTIA/RUS use should be applied to incumbent carriers that provide data for broadband maps, submit challenges to proposals, etc. If an applicant has to bust their chops presenting data down to the census block or city block, so should anyone who challenges their proposal.

B. Transparency

  • Details on an applicant’s proposal should all be out there for the public to read, including some level of breakdown of the proposed costs, though it makes sense to present it in a “drill down” fashion starting with the executive summary. 
  • Details on the organizations’tech patents/secrets should not be out there.
  • Exposing finances is a tricky issue. Private companies don’t have to disclose a lot of that information in general, but in this case they’re taking public money. I’m going to punt on this one.
  • Where I’m most concerned about transparency is with the procedures used by the agencies in managing the grant process. Volunteers who are reviewing these grants should not be anonymous. This incumbent challenge process needs to be spelled out in detail when the NOFA first comes out. Everyone should be able to follow – and comment on – an incumbent’s challenge from initiation to final determination to grant or deny the challenge. Applicants should be able to easily find out where they stand as the NoFA process moves along.

D. Expert review process  Kill it. Follow RUS’ lead and contract with a company that can get the job done with a maximum of efficiency.

II. Policy issues

A. Funding Priorities and Objectives

This reflects one of the biggest problems with the broadband stimulus program: NTIA and RUS are caught between the competing forces of politics, good public policy and sound technology implementation process. The politics demand quick money distribution and signs that expenditures equal feet on the street working. Sound public policy demands attention to long-term results. Sound tech procedure was turned on its head from the get go, so accept that this is relegated to the backseat.

You should probably accept that the number of jobs created to building these networks is not going to be overwhelming in the big picture, nor will many of them get into full swing before March or April, so pay lip service to the political forces and move on. That leaves you with the good public policy approach.

Broadband’s biggest economic impact is its ability to accelerate the economic development of a community. Therefore NTIA/RUS should structure its NOFA  policies to reflect this. Set the rules so applicants have to present broadband proposals in any of the four categories suggested above in the context of how their respective proposals enable economic development goals. How will proposals:

  1. improve local businesses’ability to generate new business and new jobs,
  2. increase the number of new businesses that move to an area,
  3. improve current and/or future workers’ ability to contribute to their personal and their community’s economic development, and
  4. impact the overall economic viability of the community.

This is a more opened-ended approach than government types may be used to dealing with, and it makes strict numerical calculations of a proposal’s worthiness difficult. But put the right people on the job of reviewing these applications and you can make this work. Also, in the application form, demand that applicants present a detailed cost-benefit analysis that independent economic development or community development groups chosen by the agencies can verify. I’ll come back to this further down.

B. Program definitions

The use of the term “remote” needs to go. By the amount of criticism the agencies have received on this, it’s apparent that using it is a no-win situation.

Un-served, underserved and broadband need to be consolidated into a criteria that embodies the concept “either a community has enough broadband coverage at a speed sufficient to improve personal and community economic development, or it doesn’t.” A community doing its needs analysis correctly will determine what constituents need to accomplish with broadband to impact economic development (e.g. distance learning, job hunting for unemployed workers, telemedicine applications for seniors). They should likewise be able to prove there is enough broadband available or there isn’t.

To say that having the bare minimum amount of speed is better than having nothing is a false argument. For any network to be able to have a meaningful impact on many of the economic development goals I mentioned, the bare minimum is nothing.

If the agencies require applicants to tie speed to need and balance cost with impact, you will address the truly underserved areas. Un-served, if you’re going to keep this category, needs to include in its definition actual speeds received – or not. Allowing advertised speeds to count is a travesty. 

E. Sale of Project Assets

The question posed here, should NTIA/RUS be more flexible in determine whether an applicant can sell or merge their business, is so obvious, I have to comment. Hell yes, be more flexible!! Jiminy Cricket on a crutch, this is the high tech industry! Stuff happens, usually as an insane and totally unpredictable pace. You don’t want applicants using grant money as a wildcat investment fund, but you also have to be real about the nature of the data communication business.

F. Cost Effectiveness

If you want to know if a project application presents reasonable costs, this is where a panel of experts makes sense. Get a handful of people on a panel who are in the business of building networks, but don’t have proposals in the queue, and have them review the basic information regarding a questionable application’s proposed features and costs. The panel needs to be diverse in terms of the type of organizations they work for, and should include people who’ve specifically built community broadband networks.

Trying to establish standard criteria to measure cost effectiveness when there are so many variables that affect cost is difficult. Getting people who’ve done this type of work directly, or were involved with managing companies that built these types of networks, gives you the best ability to make accurate assessments.

There are some elements not covered in the RFI that have caused everyone involved heartburn, such as the question of open access and net neutrality requirements. In my next post I’ll suggest a few things to add when you file your comments that aren’t addressed in the RFI .

Planning for Round 2 NOFA Funding?

If you’re considering taking a shot at broadband stimulus funding in Round 2, I can help you put your best proposal forward. Contact me today to get your plan in the winner’s circle!

Gates Foundation Proposal – Linchpin to National Broadband Strategy?

A few days ago the Bill & Melinda Gates Foundation sent analysis data to the FCC postulating that $5 – $10 billion could install fiber networks in most of the anchor institutions (hospitals, medical facilities, schools) in the U.S. The FCC quickly issued a public request for comment to validate the financial and technology assumptions in the Foundation’s analysis.

My strategic mind scooted past the numbers to ponder a question that should always be near the top of people’s thinking on broadband: does wiring 98,400, or 80% of all U.S. anchor institutions, that lack Net access make good business sense?

The premise behind the Foundation’s report – wire of all these institutions first and great things will happen – in my view is a great strategic approach to reap broadband’s promised benefits. It should be the core for our national strategy plan, as well as a central strategic objective for those applying for stimulus grants. In one fell swoop you resolve three critical issues: financially sustaining the network, fostering economic development and generating widespread broadband adoption.

Financial sustainability

The Foundation’s analysis estimates the cost to install fiber in every institution but doesn’t include the costs of keeping it operational. In my assessment, I’m taking their premise and assuming you’re going to build a network business, not just create little islands of fiber access. For one thing, money for ongoing  operations has to come from somewhere. To make that money, communities will do best by integrating their institutions’ fiber cabling into one network if possible.

If your ultimate objective is to create a communitywide broadband network, then these institutions have to become anchor tenants that actually pay for network services, with libraries being the one possible exception (more on their role in a bit). In many underserved rural and urban areas, low population density and/or low income make it difficult to get enough individual subscribers to pay for a network’s operating expenses (OpEx,) even when the network is built mainly on grant money.

If you look at successful networks already in place, anchor tenants collectively produce most of the revenue because each one spends more per month for services (maybe $1,000, $2,000/month or more) to replace older slower communication technologies, and capitalize on new computing technologies. Extrapolating the Gates premise, you boost communities’ main institutions over the big hurdle of broadband buildout with financing, and thus make it easy for them to become anchor tenants. 

It’s important you include local government since it is the mother of all anchor tenants. Some are burdened with so much ancient legacy communication technology, a small town of 84,000 people can justify the network costs because they save $700,000 or $800,000/year replacing that old technology with fiber. You shouldn’t have much trouble building an ROI case here.

Furthermore, local government can build a wireless network on top of the fiber that produces an even greater financial bang for the buck. New York City, Minneapolis, Providence, RI and Oklahoma City are major cities that built or subscribed to citywide wireless networks to run hundreds of mobile government workforce applications and reduce government operating costs.

While it’s true that adding local governments would add to the cost projected in the Foundation report, governments can show a significant return on investment to underwrite their portion of the buildout and the OpEx.

Economic development

Once you have your anchor institutions wired and wireless, they become a catalyst to drive economic development. Santa Monica proved that once a local government and other anchors have a network that’s saving or generating money, it’s less expensive to extend that network to your largest 10 – 12 businesses. Word of mouth sells services.

This network extension builds on itself. As infrastructure goes out to the biggest companies, you attract new businesses looking to move or expand to small towns and rural areas. Network costs stay reasonable so small businesses in rural and urban areas can afford to tap into the infrastructure. Each anchor tenant can build a wireless hub that attracts shoppers and tourists, which impacts the neighborhood’s economic picture.

Broadband adoption

Anchor institutions, particularly when you include libraries in the mix, address one of the more vexing challenges of broadband – getting individuals to subscribe. It can cost hundreds of dollars to win and keep an individual as a subscriber. It’s months before each subscriber becomes profitable. Many people have no interest at all in getting on the Internet.

Rather than bust your rump and your budget chasing after these individuals, leverage the anchor institutions. If each institution provides content, services and applications that enable their constituents to benefit without having to fight traffic, stand in line or sit for hours with a phone locked to their ears, individuals will subscribe to the network.

As part of the strategy for broadband adoption, anchor institutions hold the key, so be creative in structuring relationships with them. Libraries especially hold promise in this area because they already are a central point within communities for people who want to use the Net to do research or hunt for jobs. 

This discussion, of course, may all be for naught if no one can figure out where the $10 billion is coming from to invest in the anchor institutions. I was hoping Bill and Melinda would round up 9 or 10 of their similarly heeled golfing buddies and put together a broadband investment group. But none of the press articles indicated any such luck. It may be hard to get a second chunk of change out of Congress on the heels of this $7 billion, but stranger things have happened.

For the moment, we can speculate as to the possible sources of funding, but at least this is a strategic path that shows promise. What are your thoughts?

Round 1 and 2 NOFA Applicants

Fine-tuning your business plan as you move to next stage of the Round 1 funding process? Getting you plans in order so you can pursue funding in Round 2? I can help you put your best proposal forward. Contact me today (510-536-4522) to get your plan in the winner’s circle!

NTIA Awards First Four Grants for Broadband Mapping

I was almost too giddy to speak. The first four stimulus grant awards for broadband mapping were announced yesterday for the states of California, Indiana, N. Carolina and Vermont. If a majority of the remaining states that receive grants employ similar mapping procedures of these four, NTIA and taxpayers stand to get plenty of bang for their stimulus buck.   

The California Public Utilities Commission (CPUC) gets approximately $1.8 million to collect and verify the availability, speed, and location of broadband across the state, plus $500,000 for the cost of statewide broadband planning activities over four years. The Indiana Office of Technology (IOT) receives approximately $1.3 million.

In N. Carolina the Rural Economic Development Center, Inc. (e-NC Authority) is awarded approximately $1.6 million plus about $435,000 for the cost for broadband planning activities in that state over five years. The Vermont Center for Geographic Information (VCGI) is awarded approximately $1.2 million.

This is a victory of sound mapping processes over the straightjacket of the  conventional wisdom regarding mapping that makes broadband advocates ill. These four awardees were selected because their proposals met or exceeded program requirements in three key areas: data collection, verification and collaboration. In a minute I’ll show how this leads to greater ROI for broadband investments.

The conventional wisdom, driven in large part by incumbent telcos and cable companies, is that you can’t get good broadband mapping data unless service providers (incumbents) give it to you. And because incumbents don’t want to give you the data you need, this mapping process has to be tedious, expensive and nearly void of independent verification. Indeed, when some critics said $50 million is adequate, $350 million was set aside for states to do mapping because of the expense of prying the data loose.   

For seven months, community broadband supporters watched with increasing trepidation as the embodiment of this flawed conventional wisdom, Connected Nation, secured deals to pursue mapping on behalf of states such as Texas, Florida and Minnesota. NTIA’s announcement today indicates that the agency is going to, as much as is possible, fund states that do mapping right.

 Why these award winners matter to community broadband 

I believe that, by selecting these particular four states for initial awards, NTIA establishes the benchmark by which future applications will be reviewed and grants awarded. Other states can view these winning procedures to modify their own proposals. And I believe NTIA will actually push back on those applications that follow the conventional wisdom, again, using the first awardees as the models for what should be.

California and N. Carolina have been at this game longer than most states (I assume the same for Indiana and Vermont as I learn more about them). Early on they rejected the notion of relying solely on service providers and have been collecting data from other sources, including directly from constituents through telephoning and in-the-field surveys. You cannot collect more accurate data than when you go straight to the people who do or don’t have broadband. N. Carolina plans to use Web and GIS tools to collect additional extensive data in a process they expect to be effective and surprisingly inexpensive.

Verification is critical to a superior mapping strategy and subsequent broadband deployment. The lack of independent verification leads to situations such as you have in West Virginia. Connect West Virginia (Connected Nation) produced a map showing 90%, 95% broadband penetration while the state ranks nearly last among U.S. states for broadband adoption. NTIA’s awardees will use multiple methods and independent verifiers to conduct data verification work. 

Collaboration is the third important ingredient for mapping success. The four awardees are pulling together state and local partners to execute the mapping exercise with maximum efficiency and minimizing some of the process implementation costs. Unlike the incumbents that shroud all of their data in non-disclosure agreements, these collaborative efforts create for the public a true, comprehensive picture of broadband availability.

When states use what e-NC Authority’s Ex. Dir. Jane Smith Patterson refers to as a multi-modal broadband data collection, you get better-detailed, accurate maps. This in turn enables you to make decisions that lead to (hopefully) the most appropriate broadband technologies going into appropriate communities in a way that yields the best results for your broadband investment. 

Ultimately, these state maps will be woven into a national broadband map that should be the cornerstone for the FCC’s national broadband strategy. I don’t expect that all state maps will be perfect, though I may bet you beer that my state’s map (CA) will be better than your state map. I’m sure some mapping awards will make me want to wretch. But I do have greater confidence in getting a decent number of high-quality maps than I did a couple of months ago. 

 Shout out

I have to send a special shout out to e-NC Authority. Here is a state agency that in July of this year was sold down the river in favor of Connected Nation by some of its own state legislators (at the behest of AT&T). You can read the ugly details here. Luckily for the good guys and gals, the state’s governor wasn’t swayed. She gave the nod to e-NC to represent and go after the NTIA grant.

I talked to Ms. Jane on the phone soon after I heard the news about the award and my office lit up from her smile. She and her team’s worked hard since 2001 developing good broadband maps. They had to fight naysayers, AT&T obstruction, serious budget cuts and treacherous political hacks (but I repeat myself), yet they came out on top. Karma rocks! e-NC won’t be gloating, though. They’re already working towards making their stimulus fueled project a model for the nation, then having NTIA and RUS come on down for some southern hospitality and technology showcasing.

I’ll be writing more about these states and their respective efforts in a week or so. Stay tuned.

A Little Self-Promotion Always Helps

If you’re planning to build a community broadband network, call me (510-536-4522) or e-mail. I have a ton of knowledge that can help you create a great plan, write a great NOFA app and implement your plan.

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