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by Anne Brody, Marketing and Programs Director© Copyright April 2020

IntroductionHigh-speed internet access, commonly referred to as “broadband,” is provided by a series of technologies — cable, telephone wire, fiber, satellite, mobile and fixed wireless — that allow users to send and receive data at speeds necessary to support a wide range of applications for voice communications, entertainment, telemedicine, distance education, telework, e-commerce, civic engage-ment, public safety and energy conservation, to name a few.1 Access to reliable, high-speed internet is vital to almost every aspect of the nation’s economy, and com-munities with broadband access enjoy a wide array of benefits. Often compared to the electrification of rural America, the increasing efforts to expand broadband access in rural areas have gained momentum across the South.

While the rate of broadband adoption continues to grow, largely in urban and suburban areas, numerous studies and surveys indicate that broadband deployment in rural areas continues to lag. A May 2019 Pew Research Center survey found that approximately 63 percent of rural Americans had access to broadband at home, compared to 75 percent of urban and 79 percent of suburban Americans.2 Rural areas also tend to have fewer broadband providers, lead-ing to limited options and competition for customers, as well as slower connection speeds.3 Meanwhile, nearly one

quarter of rural adults say that access to high-speed internet is a major problem in their local community.4

There are a number of reasons why rural areas tend to lag behind urban and suburban areas when it comes to broad-band deployment, including cost, geographical barriers and the number of available customers — both residential and commercial.

State laws and policies can facilitate and encourage broad-band expansion in underserved rural areas. Building upon the 2016 SLC Regional Resource, The Role of State and Local Government in Broadband Deployment, this SLC Regional Resource explores funding mechanisms implemented by Southern states to encourage broadband expansion in rural, unserved and underserved areas.* States may fund broadband grant programs directly, providing loans to local governments in unserved and underserved areas, or indirectly, by providing tax incentives for broadband con-struction projects. Of the 15 SLC member states, 12 have implemented one or more of these funding mechanisms to encourage broadband expansion in their jurisdictions.

* A full discussion of the numerous policy options for broadband expansion, including those that encourage broadband adop-tion in public schools, mapping of internet speeds and prices, 5G deployment and federal funding is beyond the scope of this SLC Regional Resource.

2 MISSED CONNECTIONS: STATE FUNDING MECHANISMS FOR BROADBAND EXPANSION SLC REGIONAL RESOURCE

Broadband Speed and Deployment DataCapturing an accurate snapshot of broadband access and adoption is challenging. Evolving technology, merg-ers within the telecommunications industry, and the sheer diversity and size of the nation’s economy and geography make the status of broadband deployment difficult to measure. Two federal agencies — the National Telecommunications and Information Administration and the Federal Communications Commission (FCC) — collect and map data on broadband availability in the United States. The FCC’s 2019 Broadband Deployment Report was widely panned by experts, and even by some FCC commissioners, over concerns of data quality and, as such, may not present an accurate depiction of broadband access in the United States. Because of this, some states have developed their own mechanisms for collecting and mapping broadband availability within their jurisdictions, however, these mechanisms do not lend themselves to comparisons across state lines. This SLC Regional Resource utilizes data on broadband speed and deploy-ment collected by BroadbandNow, a leading provider of U.S. broadband availability data. While BroadbandNow tracks data related to access, speed and underserved pop-ulations, many states tailor their laws to address unserved populations. This variance is reflected in the text. All data from BroadbandNow is current as of January 15, 2020.

State Funding MechanismsAlabamaApproximately 86 percent of Alabama’s population has access to broadband, with 15 percent desig-nated as underserved.5 Nationally, Alabama is the 40th most connected state, with an average down-load speed of 45.7 Mbps.6 To encourage broadband expansion, the state provides grants through the Alabama Broadband Accessibility Fund.

The Alabama Broadband Accessibility Act of 2018, created by Senate Bill 90, established the Alabama Broadband Accessibility Fund for the purpose of promoting the deployment and adoption of broadband in unserved rural areas. The fund is administered by the Alabama Department of Economic and Community Affairs (ADECA) and subject to appropriations by the Legislature, but also may accept gifts, grants and other donations received by the ADECA. To date, the Legislature has appropriated $7.4 million to the fund.7

The Act defines “unserved area” as any rural area in which there is no terrestrial broadband service provider that offers a connection meeting a mini-mum service threshold of 25 Mbps for downloads and 3 Mbps for uploads, or where such a connec-tion will not be provided by March 28, 2023. All grant funds must be used in rural areas, which cannot be located within the boundaries of any incorporated city or town with a population greater than 25,000. Grants are capped at 35 percent of project costs, or $1.5 million for projects exceed-ing the minimum service threshold.8 At least 40 percent of grant awards are designated for unin-corporated areas.

State law allows current internet service providers to file objections to proposed projects, which the ADECA must address within 30 days and make changes, as needed, to grant awards based on a finding of ineligibility resulting from a protest. If a grant recipient fails to complete a project by the deadline prescribed by ADECA, grant funds may be revoked and redistributed to a new recipient.9

Percent of population with wired broadband

Percent of population

underserved

Average download

speed (Mbps)National

rank

76 20 39.5 50

Table 2 Broadband in Arkansas



underserved

Average download


rank

86 15 45.7 40

Table 1 Broadband in Alabama

SLC REGIONAL RESOURCE MISSED CONNECTIONS: STATE FUNDING MECHANISMS FOR BROADBAND EXPANSION 3

How fast is fast enough?The generally accepted benchmarks for data transmission speeds of broadband are those set by the Federal Communications Commission, an independent agency overseen by Congress. Since the passage of the Telecommunications Act of 1996, the FCC has been charged with measuring and accelerating the availability of “advanced telecommunications capability” to Americans. Although the range of technologies with advanced telecommunications capability is wider than those of broadband, the two terms often are used interchangeably. Since 2015, the FCC has used minimums of 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads to determine if a fixed service — one using physical lines or cables — provides advanced telecommunications capability; these benchmarks also serve as the generally accepted measure for qualifying data transmission speeds as broadband.

rural areas.14 The AHCF assesses charges and redis-tributes “pooled revenues” among eligible telecom-munications providers for the purpose of providing rural customers access to communications services comparable in quality and price to those enjoyed by customers in urban areas.

The state also is poised to provide $25 million in grants to encourage broadband advancement in rural communities of at least 500 residents.15 In August 2019, Governor Asa Hutchison announced the Arkansas Rural Connect (ARC) program with a goal of providing high-speed broadband to rural communities throughout the state by 2022, as out-lined in the State Broadband Plan. To be eligible, a provider must offer average speeds of at least 25 Mbps for downloads and 3 Mbps for uploads. The Arkansas Legislative Council approved $5.7 million for the program in 2019, but the remaining balance must be appropriated in 2020.

FloridaApproximately 96 percent of Florida’s population has access to broadband, with 5 percent of the popula-tion classified as underserved.16 Nationally, Florida is the 9th most connected state — the highest-ranked in the Southern region — boasting an average down-load speed of 64.7 Mbps statewide.17 Florida does not have a dedicated fund or incentive program specifically targeted at advancing broadband, but encourages broadband advancement through grants for rural infrastructure projects and tax credits for businesses that make donations toward community development.

ArkansasApproximately 76 percent of Arkansans have access to broadband, with 20 percent of the population classified as underserved.10 BroadbandNow classifies Arkansas as the least connected state in the nation, with an average download speed of 39.5 Mbps.11 To ameliorate this, and encourage broadband expansion, the state offers a tax exemption and also provides fund-ing through the Arkansas High Cost Fund (AHCF).

Under the Arkansas Broadband Infrastructure Incentive Act of 2015, created by Senate Bill 683, broadband providers in Arkansas are eligible for a tax exemption on intangible property acquired after January 1, 2015.12 Intangible property includes, but is not limited to, goodwill, trademarks and trade names, licenses, established customer base and lists, patents, franchises, rights and proprietary technology, but does not include software.13

Additionally, state law allows for the AHCF — established to provide predictable and sustainable funding to telecommunications carriers serving rural or high-cost areas of the state — to be used to accel-erate and promote the expansion of broadband to



underserved

Average download


rank

96 5 64.7 9

Table 3 Broadband in Florida


The state’s Rural Infrastructure Fund was established to facilitate the planning, preparing and financing of infrastructure projects in rural communities to encourage job creation, capital investment, and the strengthening and diversification of rural economies by promoting tourism, trade, and economic devel-opment.18 Broadband service facilities are considered “authorized infrastructure” and may be eligible for grant funding. Funds appropriated by the Legislature are distributed by the Department of Economic Opportunity through grants that maximize federal, local, and private sector resources. Grants are capped at 30 percent of the total infrastructure project cost, unless the application for funding is for a catalyst site,* for which grants are capped at 40 percent. Furthermore, projects must be tied to job creation opportunities or job retention.19

The state also incentivizes the deployment of broad-band in rural communities through the Community Contribution Tax Credit. This tax credit is avail-able to “persons† who are registered with the [Florida Department of Revenue] to collect or remit sales or use tax and who make eligible donations to eligible sponsors” for credit against their state sales and use tax liabilities.20 The credit is equal to 50 percent of the person’s annual community contribution and is capped at $200,000 per person, per year. Community contributions must be spent only on costs associ-ated with the improvement project, such as increasing broadband access in a rural community within a des-ignated enterprise zone as of May 1, 2015. Broadband expansion projects may improve communications assets that are owned by a private entity.21

* Catalyst site means a parcel or parcels of land within a rural area of opportunity that has been prioritized as a geographic site for economic development through part-nerships with state, regional and local organizations.† Person includes any individual, firm, copartnership, joint adventure, association, corporation, estate, trust, business trust, receiver, syndicate, or other group or combination acting as a unit and also includes any political subdivi-sion, municipality, state agency, bureau, or department and includes the plural as well as the singular number.

GeorgiaApproximately 93 percent of Georgia’s population has access to broadband, with 12 percent of the population classified as underserved.22,‡ Nationally, Georgia is the 21st most connected state, with an average download speed of 56.7 Mbps.23 To promote broadband expansion, the state has developed a grant program, subject to appropriation.

Codified in 2018, Senate Bill 402 directs the Depart-ment of Community Affairs to develop the Georgia Broadband Deployment Initiative to award grants and provide loans for the expansion of broadband services to unserved areas of the state.24 Grants will be awarded to public projects owned by local gov-ernment that are leased to private sector providers, while loans will be provided to projects owned by pri-vate sector providers. Awarded funds may be used for activities that are integral and necessary for the de-velopment and deployment of a broadband system, such as the provision of planning services and tech-nical assistance, purchase of equipment and software, technology infrastructure, public utilities, public fa-cilities and services, real property rehabilitation, real property acquisitions, site preparation and improve-ments, and construction.25

To be eligible, local governments and/or development authorities must partner with an approved broadband provider, identified through a competitive request for proposal process.26 Applicants must meet minimum thresholds, including, but not limited to, demon-strating that: the project will serve an unserved area; the proposed broadband system will be owned by a local government, development authority, multiple jurisdictions via an intergovernmental agreement, a private entity seeking a low-interest loan, or a pub-lic-private partnership; and that the project will result in minimum speeds of 25 Mbps for downloads and 3 Mbps for uploads.27

‡ Internal data from the Georgia Broadband Deployment Initiative indicates that approximately 92 percent of the state’s population has access to broadband, with 8 percent of the population classified as underserved.


The application process consists of two phases: pre- application and application. During the pre-application phase, applicants must demonstrate that the proposed project meets state eligibility requirements and can

meet the basic thresholds determined by the state, including minimum broadband speeds.28 If a proj-ect receives pre-application approval, applicants may proceed to the application phase and may also be eligible for interim funding prior to the receipt of a grant or loan.29 State regulations outline metrics by which grant applications are scored, and recipi-ents must provide matching funds equal to or greater than 50 percent of the total project cost. Funding is awarded based on a points system that considers social and economic impact, project capital cost and contribution, whether the project area is designated as broadband ready, and the capabilities of the private sector partner.30 The minimum amount of funding per award is set at $250,000, with the maximum capped at 15 percent of available funds.31 However, these limits can be waived by the commissioner of the Department of Community Affairs.32 Finally, fund-ing recipients must undergo annual financial audits throughout the duration of the project.33

KentuckyApproximately 91 percent of Kentucky’s popula-tion has access to broadband, with 16 percent of the population designated as underserved.34 Nationally, Kentucky is the 27th most connected state, with an average download speed of 41.4 Mbps.35 Kentucky encourages broadband expansion specifically through the provision of loans from its Broadband Deployment Account.

The Broadband Deployment Account is nested within the Infrastructure Authority’s Infrastructure Revolving Loan Fund and assists governments and private sector entities in constructing broadband infrastructure for unserved areas in the com-monwealth.36 State law directs the Infrastructure Authority to establish an incentive program that allocates funds from the Broadband Deployment Account, with the highest priority given to projects that provide broadband service to the greatest num-ber of unserved citizens at the lowest cost.37 Funding cannot be used for projects in areas where broadband service already exists and must be completed within

KentuckyWiredIn 2014, then-Governor Steve Beshear announced plans to deliver broadband to every corner of the common-wealth by 2018. Envisioned as a statewide middle-mile network with a connection point in every county and open access for local private utilities and other last-mile providers, the project — KentuckyWired — was expected to cost the state $30 million in bonds, with the remaining financing provided by the federal gov-ernment, private investment, and the reallocation of funds appropriated for executive branch network connections. However, a 2018 state audit found that KentuckyWired has been plagued by construction delays, cost overruns and unmet funding obligations. The project currently is expected to be completed in 2020 and cost taxpayers approximately $1.5 billion over 30 years, while a 2019 report from the Kentucky Legislative Research Commission’s Program Review and Investigations Committee estimates the total cost of the project may be more than $1.67 billion.96,97



underserved

Average download


rank

93 12 56.7 21

Table 4 Broadband in Georgia



underserved

Average download


rank

91 16 41.4 27

Table 5 Broadband in Kentucky


12 months of receiving funds.38 In fiscal year 2018, the Kentucky Infrastructure Authority approved a total of $4.3 million in loans for Hopkinsville Electric System, to provide broadband to 3,600 homes within the Hopkinsville city limits.39

MississippiApproximately 78 percent of Mississippi’s popula-tion has access to broadband, with 18 percent of the population classified as underserved.40 Nationally, Mississippi is the 47th most connected state, with an average download speed of 30.6 Mbps.41 Mississippi provides financial incentives to expand broadband deployment in the state through tax credits on cer-tain equipment and an industrial sales tax exemption.

State law allows for a tax credit against income and corporation franchise tax liability for telecom-munications businesses on equipment used in the deployment of broadband technology. Qualifying equipment must facilitate the transmission of infor-mation at a minimum of 384 kilobits per second and includes, but is not limited to, asynchronous transfer mode switches, digital subscriber line access multiplexers, routers, servers, fiber optics and related equipment.42

The tax credits apply only to equipment placed in service between June 30, 2003 and July 1, 2020, and extends for a period of 10 years after the date of installation. State law establishes a tiered system for tax credits based on the unemployment rate and per capita income of each county (see Table 7).43 The aggregate allowable credit is capped at 50 percent of the entity’s income and corporation franchise tax lia-bility each year. Any unused credit in a given year may be carried forward for up to 10 consecutive years.44

The state also extends an industrial sales tax exemp-tion for equipment sales to telecommunications entities, as long as the equipment is installed for the purpose of broadband deployment in specific areas.45 The industrial sales tax exemption is extended to the same qualifying equipment as the income and cor-poration franchise tax liability exemption. Using the same zones as the tax credit for broadband equipment,



underserved

Average download


rank

78 18 30.6 47

Table 6 Broadband in Mississippi

Tier Tier definition Credit

Tier One The 27 counties with the lowest unemployment rate and high-est per capita income.

5 percent

Tier Two The 27 counties with a com-bination of the next highest unemployment rate and next lowest per capita income.

10 percent

Tier Three The 28 counties in the state with a combination of the high-est unemployment rate and lowest per capita income.

15 percent

Table 7 Mississippi Tax Credit Tiers

state law allows for an exemption of 50 percent of the taxes on eligible equipment installed in Tier One zones, while equipment installed in Tier Two and Tier Three zones are fully exempt. The exemption applies only to equipment sales between June 30, 2003 and July 1, 2020.46

MissouriApproximately 85 percent of the Missouri popula-tion has access to broadband, with 14 percent of the population classified as underserved.47 Nationally, Missouri is the 41st most connected state, with an average download speed of 43.9 Mbps.48 The state provides grants to encourage broadband expansion.

Established in 2018, the Missouri Broadband Grant Program administers funding to assist providers, communities and counties in building broadband infrastructure in unserved and underserved areas that offer speeds of at least 25 Mbps for downloads and 3 Mbps for uploads.49 The program is administered by the Department of Economic Development and


subject to appropriation by the General Assembly. Grant funding is available for corporations, incor-porated businesses or partnerships, limited liability companies, local nonprofits, political subdivisions and rural electric cooperatives.50

Priority is given to applications for projects in unserved areas, with secondary priority given to appli-cations demonstrating the ability to receive matching funds for projects in unserved areas. Third priority is given to grant applications for projects in under-served areas.51 However, projects already awarded funding from the FCC’s Connect America Fund,* where high-cost support from the federal Universal Service Fund has been received or where any other federal funding has been awarded which did not require a matching fund component, are ineligible.52 Total government assistance (including other fund-ing sources) and grant awards may comprise up to 50 percent of eligible project expenses.53 In order to maximize the number of projects that can be imple-mented, projects requesting $500,000 or less in grant assistance are given higher priority, with the maxi-mum grant request capped at $5 million.54 During the 2019 legislative session, the General Assembly appropriated $5 million to the Missouri Broadband Grant Program.55

* The Connect America Fund (CAF) — also known as the Universal Service High-Cost Program — is the FCC’s pro-gram to expand access to voice and broadband services in unserved areas. The multi-year program is compara-ble to extending electricity and phone service to rural America early in the 20th century and building the inter-state highway system in the 1950s and 1960s. To ensure CAF support is used efficiently, FCC directs funding primarily toward areas that currently are unserved or underserved by unsubsidized service providers.

State law also provides a mechanism for existing broadband entities to challenge grant funding appli-cations for projects within or adjacent to their service area. Challenges must demonstrate that the entity currently provides, has begun construction to provide or commits to providing broadband internet services at speeds of at least 25 Mbps for downloads and 3 Mbps for uploads in the proposed project area. If a determination is made that the challenge is valid, the proposed project is not eligible for grant funding.56

North CarolinaApproximately 95 percent of North Carolina’s pop-ulation has access to broadband, with 6 percent of the population classified as underserved.57 Nationally, North Carolina is the 15th most connected state, with an average download speed of 42.3 Mbps.58 The state encourages broadband expansion through the provi-sion of grants under the Growing Rural Economies with Access to Technology (GREAT) program. Broadband projects also are eligible to receive fund-ing from the state’s Industrial Development Fund Utility Account.

The GREAT program was established by the General Assembly in 2018 to encourage the deploy-ment of broadband in economically distressed areas of the state. The program is administered by the Department of Information Technology’s Office of Broadband Infrastructure. Grant funding may be used for costs directly related to the construction of broadband infrastructure, including installation, acquiring or updating easements, equipment, fiber, construction, backhaul infrastructure and testing costs.59 State law outlines the metrics by which grant applications are scored and recipients are required to provide matching funds based on the score for their



underserved

Average download


rank

85 14 43.9 41

Table 8 Broadband in Missouri



underserved

Average download


rank

95 6 42.3 15

Table 9 Broadband in North Carolina


application(s). The program’s scoring system considers the number of unserved households and businesses that would receive broadband access, the proposed cost of the service, its download and upload speeds, and whether partnerships have been established to reduce the cost of project implementation.60

Grant recipients are required to provide matching funds based on the application’s score. Required matching funds range from 55 percent for appli-cations receiving the lowest score to 35 percent for applications receiving the highest score.61 Up to 50 percent of matching funds paid by the grant recipient may comprise third-party funding and other grant programs. However, grants awarded by the federal Universal Service Fund* and Connect America Phase II Fund† may not be used for matching funds. Grants are capped at $2 million, and grant recipients are required to file annual reports detailing the prog-ress of the project. If a grant recipient fails to meet its obligations, the recipient must forfeit all or some of the funds received.62

Similar to Alabama and Missouri, North Carolina law allows for broadband providers to submit a writ-ten protest if they already serve areas for which a grant application has been filed. If a protest is filed, the sec-retary of the Department of Information Technology must issue a written decision to the protesting party at least 15 days prior to approving an application.63

In addition to the GREAT program, the Rural Economic Development Division of the state’s Department of Commerce administers grants and loans to local governments for construction proj-ects and infrastructure improvements, including broadband expansion, that lead to job creation and * The FCC’s Universal Service Fund is paid for by contri-butions from providers of telecommunications based on an assessment on their interstate and international end-user revenues.† Through the Connect America Phase II Fund, the FCC provides funding to local telephone companies to subsi-dize the cost of building new network infrastructure or performing network upgrades to expand voice and broad-band service areas.

investments by private industries. Grants and loans are drawn from the Utility Account, a special account within the state’s Industrial Development Fund, and fund projects that improve or expand the publicly owned infrastructure for existing or proposed indus-trial buildings in the most economically distressed counties of the state.64 To qualify, project propos-als must demonstrate they will create new, full-time jobs. There is no maximum funding amount, nor is a local match required if the project will benefit one of the 25 most economically distressed counties in the state, as determined by the state Department of Commerce.65 Funds spent on public property are provided as a grant, while funds for private property are provided as a loan.

TennesseeApproximately 91 percent of Tennessee’s popula-tion has access to broadband with 12 percent of the population classified as underserved.66 Nationally, Tennessee is the 28th most connected state, with an average download speed of 55.5 Mbps.67 The state encourages broadband expansion through the Tennessee Broadband Accessibility Grant Program, funded by the Tennessee Broadband Accessibility Fund. The fund is subject to appropriations by the General Assembly, but also may receive gifts, grants, and other donations to the Department of Economic and Community Development. To date, $45 million has been appropriated to the program, comprising $10 million in fiscal year 2018, $15 million in fis-cal year 2019 and $20 million in fiscal year 2020.68

Grants may be awarded to political subdivisions, cor-porations, limited liability companies, partnerships or business entities that provide broadband services, and rural electric cooperatives. Funds must be used to promote the deployment and adoption of broad-band services with minimum download speeds of 10 Mbps and minimum upload speeds of 1 Mbps.69 Priority is given to projects that would serve loca-tions without access to the aforementioned minimum speeds, acquire and install infrastructure that would support faster download and upload speeds, demon-strate local community support, have not received or been designated to receive other public funding for


VirginiaApproximately 91 percent of Virginia’s population has access to broadband, with 9 percent of the popula-tion classified as underserved.73 Nationally, Virginia is the 26th most connected state, with an average download speed of 73.4 Mbps.74 The state encour-ages the expansion of broadband by providing loans and grants, primarily through the Department of Housing and Community Development and the Tobacco Region Revitalization Commission.

The Virginia Telecommunications Initiative (VATI) was established in 2016 as a state-funded program administered by the Department of Housing and Community Development to assist local communities in building, utilizing and capitalizing on telecom-munications infrastructure.75 In partnership with localities and private service providers, VATI extends grants to supplement the construction costs of private sector broadband service providers to extend broad-band service to unserved areas of the state.76 Eligible projects will be owned and operated by the private



underserved

Average download


rank

91 12 55.5 28

Table 10 Broadband in Tennessee

TexasApproximately 90 percent of the Texas population has access to broadband, with 14 percent of the state classified as underserved.98 Nationally, Texas is the 30th most connected state, with an average down-load speed of 56.0 Mbps.99 To encourage broadband expansion in the state, Texas law allows affiliated or unaffiliated entities of electric utilities to install, own and/or operate broadband over power lines (BPL).100 When an electric utility allows the installation of a BPL system on its power lines, the utility’s investment in that BPL system that supports BPL electric utility appli-cations (such as automated meter reading, real time system monitoring and meter control, remote service control, outage detection and restoration, predictive maintenance and diagnostics, and monitoring and enhancement of power quality) or other BPL services are eligible for cost recovery.101



underserved

Average download


rank

91 9 73.4 26

Table 11 Broadband in Virginia

Virginia Broadband Infrastructure Loan FundIn 2009, the General Assembly established the Virginia Broadband Infrastructure Loan Fund to provide loans to local governments to finance or refinance the cost of broadband infrastructure projects. State law tasks the Virginia Resources Authority with administering the fund and directs the authority to prioritize loans for the expansion of broadband infrastructure in unserved areas. Although statutory authorization for the fund persists, to date, appropriations from the General Assembly have not been disbursed.

broadband deployment, and/or provide faster broad-band service to the locations served.70

Grants may cover up to 50 percent of eligible proj-ect expenses, with the maximum grant request set at $2 million.71 Eligible expenses include costs asso-ciated with the installation and/or acquisition of middle-mile and last-mile broadband infrastructure that supports broadband service at the locations and speeds identified in each project application. To ensure transparency, the application process features a public comment period. Providers already serving areas for which a grant application has been filed are encouraged to submit comments and documentation supporting their claim. Where evidence exists that an area currently is served, the corresponding por-tion of the grant area is disqualified.72


sector partner; however, publicly owned networks are eligible when partnered with a private sector co-applicant that functions as the customer-facing internet service provider.77

Proposed projects are evaluated based on a demon-strated need and benefit for the community, applicant readiness and capacity, and efficient use of taxpayer dollars. Funding may be used to provide last-mile ser-vices, including middle-mile networks, equipment or other investments required to deliver last-mile service to unserved areas* of the state. To receive funding, proposed projects must provide broadband at speeds of at least 25 Mbps for downloads and 3 Mbps for uploads.78

Similar to the grant programs in Alabama, Missouri and North Carolina, VATI allows for a challenge to project proposals. To challenge a project, incum-bent providers must submit documentation verifying minimum and maximum speeds provided by the company in the project area and street level data of actual customers receiving service within the project area, among other information.79 Challenges may be made to portions of a proposed project without inval-idating the entire project.

Although there is no cap on the amount of funds that may be granted to an eligible project, state funding cannot exceed 80 percent of the total project cost. Project areas that have received Connect America Phase II funds are not eligible.80 Since 2017, $6 million has been appropriated for the program, with an addi-tional $19 million appropriated for fiscal year 2020.81,82

The commonwealth also provides funding for broadband expansion through the Virginia Tobacco * In this context, last-mile services include components of a network that provide broadband services to end-user premises or devices through an intermediate point of aggregation, while middle-mile networks include components that provide broadband service from one or more centralized facilities to an internet point of presence. Unserved areas are those with broadband speeds equal to, or less than, 10 Mbps for downloads and 1 Mbps for uploads.

Region Revitalization Commission (TRRC).† Since 1999, more than $140 million has been expended to construct broadband infrastructure in 40 tobacco farming localities (Tobacco Region) in the state.83 Among these funding mechanisms are the Revolving Loan Fund and the Last Mile Broadband Program.

Established in partnership with the Virginia Resources Authority in 2016, the TRRC Revolving Loan Fund was created to finance economic revitalization projects in the Tobacco Region that generate recurring reve-nues, then leverage loan repayments to assist future projects.84 Unlike the VATI program, no matching funds are required.85 Any economic development project that aligns with TRRC’s strategic plan (which includes broadband expansion), and has an identifi-able revenue stream to repay the loan, is eligible.86 The Virginia Resources Authority establishes interest rates and repayment terms and distributes the funds to eli-gible local governments.

In 2017, the TRRC approved a $10 million multi-year commitment to assist communities in constructing last-mile broadband infrastructure in unserved areas. Funds may be requested to design, construct, equip and install broadband infrastructure that serves residential and commercial subscribers in Tobacco Region proj-ect areas that are designated as unserved.87 Funding is provided as a grant for up to 50 percent of project costs or as a loan for up to 80 percent of project costs, and preference is given to localities applying in conjunction with private sector partners.88 There is no minimum or maximum amount for requests or total project budgets; however, grant funding cannot exceed 50 percent of total project cost. Matching funds may come from pub-lic or private sources, including state or federal funds, private provider investments or local governments.89 Like the VATI program, a challenge process exists to ensure funds are being directed to unserved areas.† In 1998, the attorneys general of 46 states signed a Master Settlement Agreement (MSA) with the four largest tobacco companies in the United States to settle state suits and recover billions of dollars in costs associated with treating smoking-related illnesses. A portion of the MSA proceeds funded the creation of the Tobacco Region Revitalization Commission.


West VirginiaApproximately 78 percent of West Virginia’s popu-lation has access to broadband, with 27 percent of the state classified as underserved.90 Nationally, West Virginia is the 46th most connected state, with an average download speed of 37.3 Mbps.91 To encour-age broadband expansion, the Legislature created a fund leveraging a portion of the proceeds derived from the state’s robust mineral extraction industry, though no funding is specifically designated for the purpose of broadband expansion.

The West Virginia Future Fund is an interest-bearing account created to conserve a portion of the state’s revenue from mineral production and other fund-ing sources the Legislature may designate in order to meet future needs. Effective July 1, 2014, 3 percent of the state’s annual severance tax revenue is deposited in the West Virginia Future Fund, but only if sev-eral conditions are met during the given fiscal year:

» The balance of the Revenue Shortfall Reserve Fund equals or exceeds 13 percent of the state’s General Revenue Fund;

» The General Revenue Fund estimate does not rely on transfers from the Revenue Shortfall Reserve Fund; and

» No mid-year spending reductions, hiring freezes, mid-year decreases in appropriations or transfers from the Revenue Shortfall Reserve Fund were required.92

Because of the conditions placed on this funding, the West Virginia Future Fund has not received any deposits to date. The lack of deposits notwithstand-ing, state law dictates that no money from the fund may be expended or appropriated until fiscal year

2020. At that time, funds permitting, the Legislature may appropriate monies in the fund for the purpose of enhancing education and workforce development; economic development and diversification; infrastruc-ture improvements (including broadband expansion); and tax relief measures.93

West Virginia also includes broadband on a list of infrastructure and economic development projects that coal-producing counties may support with the Coal County Reallocated Severance Tax Fund,94 financed by a portion of the coal severance tax. Revenue in the fund is allocated based on the tonnage of coal produced in each county.95 The percentage of severance tax originally allocated to the fund was 5 percent of total collections and set to begin in 2016. However, House Bill 3142 (2019) reduced the sever-ance tax on thermal or steam coal over three years, from 5 percent in 2018 to 3 percent in 2021. To off-set the impact this reduction would have on the Coal County Reallocated Severance Tax Fund, the bill stipulates that, beginning July 1, 2019, the amount allocated to the fund must not be less than the amount distributed in fiscal year 2019. A subsequent interpretive rule (West Virginia Code Of State Rules, § 110-13AC-7) states that the minimum amount to be distributed among the coal-producing counties each year shall not be less than $11,975,088.09.

ConclusionIn the past 20 years, access to broadband has become increasingly indispensable to every aspect of the American economy. From education to agriculture, and every service and industry in between, access to high-speed internet is imperative to modern life. Despite the importance of this vital tool, rural areas — particularly rural areas in Southern states — continue to lag the rest of the nation in broadband access. To ameliorate this, Southern state leaders have begun to implement funding mechanisms designed to encour-age the expansion of broadband in unserved and underserved areas.

Of the funding mechanisms implemented by South-ern states, grant programs are the most often used vehicle to provide funding. Several states have



underserved

Average download


rank

78 27 37.3 46

Table 12 Broadband in West Virginia


State



underserved

Average download

speed (Mbps)

National rank

Alabama 86 15 45.7 40

Arkansas 76 20 39.5 50

Florida 96 5 64.7 9

Georgia 93 12 56.7 21

Kentucky 91 16 41.4 27

Louisiana 87 13 45.6 38

Mississippi 78 18 30.6 47

Missouri 85 14 43.9 41

North Carolina 95 6 42.3 15

Oklahoma 78 24 58.2 49

South Carolina 91 14 52.0 29

Tennessee 91 12 55.5 28

Texas 90 14 56.0 30

Virginia 91 9 73.4 26

West Virginia 78 27 37.3 46

Source: BroadbandNow

Table 13 Broadband in SLC Statesrecognized that lack of appropria-tions, or stringent limitations placed upon them, render these programs ineffective. Characteristics of effective grant programs include requirements for matching funds, annual reporting and a dedicated funding stream. Many states — including Alabama, Missouri, North Carolina and Virginia — have challenge mechanisms in place to ensure funding is allocated only to projects which benefit high-need areas.

Other funding mechanisms, such as tax incentives, can encourage incum-bent providers to extend last-mile broadband services to rural areas. Of the many states that have state uni-versal service or high-cost service funds, Arkansas currently is the only Southern state to utilize this revenue stream for the purpose of broadband expansion.

Although a wide range of funding opportunities is available through the federal government, nonprofit sector and public-private partnerships to fully deploy broadband and harness its immense potential for economic growth, states must make additional investments. As states seek to further encourage this vital service, the cre-ation and/or identification of a sustainable and con-sistent revenue stream is increasingly necessary. Some creative funding solutions states may consider include

taxes on streaming services; allocation of portions of sales taxes collected from online purchases; small taxes on data centers; or the allocation of portions of revenue derived from the use of state rights-of-way. Although there is no one-size-fits-all solution for broadband expansion, the creation of sustainable funding mechanisms can increase prosperity and economic opportunity in every Southern state.


Endnotes

1. Lennard Kruger and Angele Gilroy, “Broadband Internet Access and the Digital Divide: Federal Assistance Programs,” Congressional Research Service, January 9, 2019.

2. Andrew Perrin, “Digital Gap between Rural and Nonrural America Persists,” May 31, 2019, https://www.pewresearch.org/fact-tank/2019/05/31/digital-gap-between-rural-and-nonrural-america-persists/.

3. “2019 Broadband Deployment Report,” Federal Communications Commission, May 29, 2019, https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf.

4. “For 24% of Rural Americans, High-Speed Internet Is a Major Problem,” Pew Research Center, accessed November 27, 2019, https://www.pewresearch.org/fact-tank/2018/09/10/about-a-quarter-of-rural-americans-say-access-to-high-speed-internet-is-a-major-problem/.

5. “Internet Access in Alabama: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Alabama.

6. Ibid.

7. “Alabama Broadband Accessibility Act 2018-2019 Program Year Report,” Alabama Department of Economic and Community Affairs, March 28, 2019.

8. Code of Alabama, § 41-23-213.

9. “Alabama Broadband Accessibility Act 2018-2019 Program Year Report.”

10. “Internet Access in Arkansas: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Arkansas.

11. Ibid.

12. Arkansas Code, § 23-17-404.

13. Arkansas Code, § 26-26-1607.

14. Arkansas Code, § 23-17-404.

15. “Governor Hutchinson Announces the ‘Arkansas Rural Connect’ Grant Program, $25 Million for Broadband Deployment – Arkansas Governor Asa Hutchinson,” accessed December 1, 2019, https://governor.arkansas.gov/news-media/press-releases/governor-hutchinson-announces-the-arkansas-rural-connect-grant-program.

16. “Internet Access in Florida: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Florida.

17. Ibid.

18. Florida Statutes, § 288.0655.

19. Ibid.

20. Florida Statutes, § 212.08.

21. Ibid.

22. “Internet Access in Georgia: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Georgia.

23. Ibid.

24. Official Code of Georgia Annotated, § 50-40-81.

25. Rules and Regulations of the State of Georgia, r. 413-9-1-.05.



28. Rules and Regulations of the State of Georgia, r. 413-9-1-.06,” n.d.

29. Ibid.



32. Ibid.



34. “Kentucky Internet Service Providers: Availability & Coverage,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Kentucky.

35. Ibid.

36. Kentucky Revised Statutes, § 224A.112.

37. Kentucky Revised Statutes, § 224A.1121.

38. Ibid.

39. Kentucky Infrastructure Authority, “Board Meeting Booklet for June 12, 2018,” June 12, 2018, https://kia.ky.gov/kia-board/Archived%20Board%20Books/06-12-18_boardbook.pdf.

40. “Internet Access in Mississippi: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Mississippi.

41. Ibid.

42. Mississippi Code Annotated, § 57-87-7.


44. Ibid.


46. Ibid.

47. “Missouri Internet Service Providers: Availability & Coverage,” Broadband Now, accessed December 12, 2019, https://broadbandnow.com/Missouri.

48. Ibid.

49. Missouri Revised Statutes, § 620.2451.




53. “Missouri Broadband Grant Program Guidelines,” n.d., https://ded.mo.gov/sites/default/files/programs/program-documents/FY20%20Missouri%20Broadband%20Grant%20Guidelines_0.pdf.

54. Ibid.

55. “Opinion: Broadband Still Elusive 50 Years after Internet’s Birth,” Springfield Business Journal, accessed December 11, 2019, http://sbj.net/stories/broadband-still-elusive-50-years-after-internets-birth,66368.


57. “Internet Access in North Carolina: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/North-Carolina.

58. Ibid.

59. North Carolina General Statutes, § 143B-1373.

60. “GREAT Program to Increase Rural Access to Broadband in North Carolina,” May 25, 2018, http://speakermoore.com/legislative-leaders-announce-great-program-increase-rural-access-broadband/.

61. North Carolina General Statutes § 143B-1373.

62. Ibid.

63. Ibid.

64. North Carolina General Statutes, § 143B-437.01.

65. Ibid.

66. “Internet Access in Tennessee: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Tennessee.

67. Ibid.

68. Bob Rolfe, “Broadband Accessibility Grant Report FY2018-2019,” Department of Economic and Community Development, April 30, 2019, https://www.tn.gov/content/dam/tn/ecd/documents/broadband/BroadbandAccessibility-Grants---FY19-Annual-Report.pdf.

69. Tennessee Code Annotated, § 4-3-708.

70. Ibid.

71. “Broadband Accessibility Grant Program Guidelines,” n.d., https://www.tn.gov/content/dam/tn/ecd/documents/broadband/FY20%20Grant%20Program%20Guidelines%20Revised.pdf.


72. Ibid.

73. “Internet Access in Virginia: Stats & Figures,” BroadbandNow, accessed December 12, 2019, https://broadbandnow.com/Virginia.

74. Ibid.

75. “Report on Commonwealth Connect: Governor Northam’s Plan to Connect Virginia,” Commonwealth Connect, 2019, https://www.commonwealthconnect.virginia.gov/sites/default/files/CIT%20Documents/Commonwealth%20Connect%20Report.pdf.

76. “2020 Virginia Telecommunication Initiative Program Guidelines and Criteria,” n.d., https://www.dhcd.virginia.gov/sites/default/files/Docx/vati/2020-finalized-guidelines-rfp-questions-foia-062119.pdf.

77. Ibid.

78. Ibid.

79. Ibid.

80. Ibid.

81. “Report on Commonwealth Connect: Governor Northam’s Plan to Connect Virginia.”

82. “2020 Virginia Telecommunication Initiative Program Guidelines and Criteria.”

83. “TRRC Last-Mile Broadband Call for Proposals & Program Guidelines,” November 2019, https://www.revitalizeva.org/wp-content/uploads/2018/11/Last-Mile-Program-Guidelines-Nov2018.pdf.

84. “TRRC Loan Fund – Virginia Tobacco Region Revitalization Commission,” accessed December 11, 2019, https://www.revitalizeva.org/grant-loan-program/loan-programs/.

85. Ibid.

86. “TRRC Revolving Loan Fund,” July 2019, https://www.revitalizeva.org/wp-content/uploads/2019/07/TRRC-Revolving-Loan-Fund-July2019.pdf.

87. “TRRC Last-Mile Broadband Call for Proposals & Program Guidelines.”

88. “Report on Commonwealth Connect: Governor Northam’s Plan to Connect Virginia.”

89. “TRRC Last-Mile Broadband Call for Proposals & Program Guidelines.”

90. “West Virginia Internet Service Providers: Availability & Coverage,” Broadband Now, accessed December 12, 2019, https://broadbandnow.com/West-Virginia.

91. Ibid.

92. West Virginia Code, § 11-13A-5b.

93. Ibid.

94. West Virginia Code § 11-13A-6a.

95. West Virginia Code Of State Rules, § 110-13AC-7.

96. Mike Harmon, “Examination of Certain Contracts, Operations, and Activities of the Kentucky Communications Network Authority,” September 2018, http://apps.auditor.ky.gov/Public/Audit_Reports/Archive/2018kentuckywiredreport.pdf.

97. Van Knowles et al., “Procurement and Financing of KentuckyWired,” Kentucky Legislative Research Commission, November 22, 2019, https://apps.legislature.ky.gov/CommitteeDocuments/14/11941/KentuckyWired_Program%20Review%20Draft%20Report_2019%2011%2022.pdf.

98. “Texas Internet Service Providers: Availability & Coverage,” Broadband Now, accessed December 12, 2019, https://broadbandnow.com/Texas.

99. Ibid.

100. Texas Utilities Code, § 43.001.

101. Texas Utilities Code, § 43.102.

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