Heather Mills, V.P. for Grant & Funding Strategies

With the October 25 release of a Notice of Funding Availability (NOFA), the USDA’s Rural Utilities Service (RUS) has made important changes for Round 3 of its Rural eConnectivity Program (commonly known as ReConnect).

Significant new scoring considerations include a preference for local governments

The NOFA includes a significant shift in application scoring metrics. RUS has included a preference for local governments, non-profits, and cooperatives as applicants and additional points to those applications (“including for projects involving public-private partnerships where the local government, non-profit, or cooperative is the applicant”).

Further, RUS includes metrics to score the affordability of the services being offered; whether wholesale services at non-discriminatory rates will be offered; compliance with net neutrality requirements; and willingness to include strong labor standards.

RUS has also included points for applications with service areas that encompass Socially Vulnerable Communities and those that address areas with defined economic need. (Our grants team is still evaluating these issues and will post a deep dive soon.)

However, don’t forget that this is a rural program and rurality still matters. Available speeds also matter. As such, points are awarded for serving the least dense rural areas as well as serving areas that lack 25/3 Mbps.

Any areas with less than 100/20 Mbps, even those with DSL or fixed wireless, are eligible

RUS is expanding eligible areas beyond the FCC’s 25/3 definition of broadband. The RUS’ definition of an eligible Proposed Funded Service Area (PFSA) is now one that is not currently receiving speeds of 100 Mbps download and 20 Mbps upload, a considerable and welcome change from its previous definition of 10/1. Further, in the scoring process, extra points (25) will be awarded to those applications that will serve areas that currently have less than 25/3 Mbps available. This includes the service areas of existing RUS borrowers without sufficient access to broadband.

This new approach follows the policies of the Biden Administration and the Commerce Department in moving away from the FCC’s longtime definition of broadband as 25/3 Mbps, essentially eliminating any claims from DSL and fixed wireless providers—which can generally not reach those speeds—that their services qualify as broadband. Going forward, the Administration appears to be saying, only cable and fiber can deliver the speeds necessary for communities to compete in the post-pandemic world.

RDOF areas are eligible for inclusion in PFSAs

After being shut out of Round 2 due to the need to coordinate with the FCC’s auction, RDOF areas will be included in PFSAs for Round 3. The NOFA explains that this is because “RDOF funds both operational expenses and capital expenses, while ReConnect funds only capital expenses.” Another rationale given is that the six-year timeline for RDOF funds is not sufficiently fast enough to respond to the needs created by the pandemic. The goal is to get communities wired as fast as possible.

There are some nuances to those applicants applying for funding in areas where they have also received – or expect to receive – RDOF awards. Expect a lot of questions to be asked and answered regarding the nuances, but generally, those applications including RDOF areas will need to provide additional insight into why that additional funding is needed. And if applicants are RDOF awardees, they must commit to keeping RDOF and ReConnect funding separate for tracking and reporting purposes.

This also means that those Round 2 applications that were left to die due to the sudden rule change in the curing process could resubmit in Round 3 if discussion is included on why the RDOF-awarded areas should be included in light of the pandemic.

As for existing USDA grantees or borrowers, they’re also protected as long as their protection hasn’t run out.

New Tribal/socially vulnerable set aside is a big deal – but there are strings!

New to the program is a separate funding option in which applicants can seek up to $35 million for Tribal and socially vulnerable areas. Socially vulnerable areas are those with “100 percent of locations within areas classified by the USDA Economic Research Service as FAR Level 4.” Criteria for Frontier and Remote (FAR) Level 4 areas are extremely rural or remote areas that are:

“15 minutes or more from an urban area of 2,500-9,999 people; 30 minutes or more from an urban area of 10,000-24,999 people; 45 minutes or more from an urban area of 25,000-49,999 people; and 60 minutes or more from an urban area of 50,000 or more people”[1].

Take the time to consult ReConnect’s mapping tools to confirm eligibility for these areas. And remember: It is essential to include discussion in the narrative on how the pandemic has further effected those areas and how the project will help address those issues.

It doesn’t matter what the Form 477s say, so long as the applicant can demonstrate that geographic eligibility

The NOFA includes a very clear statement that should guide your thinking on defining eligible areas:

“Applicants are not required to treat the publicly available FCC current Form 477 data as dispositive of what speed service currently exists.”

In other words, communities need to know that they’re not excluded from consideration just because Form 477 data indicates connectivity. But they need to show that they are under the 100/20 threshold.

Although the burden is on them, it’s a huge opportunity for those areas that have had bad fixed wireless networks to now participate in federal grant programs.

How should applicants prove their PFSA(s) is/are eligible if the Form 477 data isn’t “dispositive?” Use of existing mapping from NTIA (the NBAM) is an option, but is possibly limiting (because it, too, relies to some extent on the Form 477 data). Our recommendation is to act quickly (before the end of December) to do one or two essential data collection tasks:

1. Have the potential PFSA(s) surveyed by a qualified outside plant engineer to determine:
   • Availability of services
   • Status of need for make-ready (for potential aerial installations)
2.  Issue an online speed test survey to collect:
   • Information about those with service and real-time speeds
   • Information from those who wish to report they do not have service

These efforts would immediately provide your application with the necessary backup required to validate the efficacy and eligibility of your PFSA. It will also help the RUS application reviewers make easy work of your application.

Like other broadband funding programs, the application should be pandemic-centric

Applicants should focus their narratives on not only the need for broadband, but the need for broadband in light of lessons learned from the Covid-19 pandemic. Be sure to include discussion and reference to the need to “build back better.”

Additional considerations as you prepare to prepare your application:

Don’t underestimate the effort required to complete and submit your application. As we mentioned in our previous blog posts on the ReConnect program: it’s never too early to start planning and, even if your eventual application is not selected for an award, the planning will not be wasted. There are more funding opportunities for broadband infrastructure coming soon!

The ReConnect application resides on the USDA’s application portal (not grants.gov) and requires a second Level E-Authentication for all users. This means users may have to make in-person appointments at USDA field offices if an online verification is not possible. Additionally, many applicants had significant trouble setting up their accounts for Round 1 and Round 2 due to technical issues. Make account and user set-up a priority task.

It’s time to start preparing!

While we await the comprehensive application guide to be posted on the ReConnect website, here are some strategic thoughts on starting the planning process:

1. Develop a grant strategy. Your goal is to maximize your application’s scoring given USDA’s stated criteria. Every element of your application should speak to those criteria. Start by developing a comprehensive strategy that aligns your approach (with respect to technology, partnerships, business plan, and service levels) with what USDA is seeking to fund.
2. Gather the many types of information and support materials required. You’ll need a range of data and numbers—such as population statistics—to establish eligibility under the program rules and to provide content for the grant narrative. You’ll also need a wide range of supporting materials, ranging from letters from your governor to documents that demonstrate the support of the local government, prospective customers, and the business community. Our recommendation here is to go over and above; additional letters (such as from your congressional delegation, the Chamber of Commerce, and so on) can only help to demonstrate the breadth of support in the community for your initiative.
3. Define and refine your proposed funded service area (PFSA). Define the PFSA with a count of the number of rural premises to be connected, including homes, farms, schools, libraries, healthcare facilities, and businesses (which are important because they confer additional points in the application). Then, document the engineering methodology used to demonstrate that the PFSA lacks service and is therefore eligible for funding.
4. Develop and review your project’s engineering plans and cost estimates. The critical engineering task after you have defined the PFSA is to develop a conceptual design for your network—including project plan, buildout timeline, design, and diagram—and cost estimates for materials and construction. The cost estimates will become a critical input to your business plan and pro forma financials and will need to be certified by a licensed Professional Engineer under the RUS rules.
5. Develop a financial pro forma and business plan. The pro forma is perhaps the most important (and arduous) part of your application—it should be prepared in the format provided by USDA (which will hopefully be available soon) and should include subscriber projections and descriptions of service and pricing. To support the pro forma revenue projections, you’ll need very compelling data, ideally in the form of statistically valid market research, as well as empirical data about your or your partner’s historical success in achieving comparable market share. This is possibly the most critical item in the application, given USDA’s interest in funding projects it considers sustainable and low-risk.
6. Develop a market narrative, including discussion and data regarding service in the region. You’ll need to demonstrate that your services will be better and no more expensive than other services offered nearby—and present a narrative discussion of why the proposed services will be both marketable and affordable.

The recently regulated program will make available $350 million for grants (25 percent match required); $250 million for 50/50 grant-loans; $200 million for loans; and $350 million for new 100 percent grants (no match required) for Tribal and socially vulnerable communities.

The funding application window/portal will open on November 24,2021, and will close on February 22, 2022.

CTC’s grant writing and broadband strategies team are ready to assist with your grant writing and strategy needs. Please contact us if you have questions or would like to discuss how CTC can assist you.

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[1] See https://www.ers.usda.gov/data-products/frontier-and-remote-area-codes/documentation/ accessed October 24, 2021.