Established State Broadband Offices Offer Models

Given their tight time frame, the agencies need to learn from sound models in place now, ConnectedNation CEO Brian Mefford said. “California is a great example. Virginia is another. We need to have a critical mass of states that are far enough along using proven models that can work across all the states,” he said. “If it was just about the mapping, any organization could figure that out. But it’s not just the maps. It’s like a political campaign, and your candidate is more and better technology for the people.”

Among the models are programs in North Carolina, in California and in several states working with non-profit ConnectedNation. The first calls itself a public/private “hybrid,” the second was set up by the state utility commission and the third is a non-profit that hires on with states to tailor its template to their needs.

North Carolina

The broadband authority in North Carolina, e-NC, functions under the non-profit Rural Economic Development Center, which is e-NC’s contracting and fiscal entity as well as the nominal employer of the e-NC staff. The authority began as the Rural Internet Access Authority, created in 2000 by the legislature. Its stake was $30 million repaid to North Carolina by a high-tech company spun off from a non- profit gestated with state funds. Between 2001 and 2006, authority funds went mainly for grants improving connectivity, public Internet access sites and networks and computer training, officials said.

At the end of 2003, the authority’s sunset provision brought e-NC into being. The state began funding grants for what e-NC calls Business & Technology Telecenters, which now number seven. “They've generated $221 million in revenue for their communities and $14.5 million in tax revenue for the state,” e-NC Director Jane Smith Patterson said. Since 2005 the state has contributed about $500,000 a year toward e-NC costs. From a high of 13, the e-NC staff is now five. Its 2006 legislative sunset has been reset to 2011.

“E-NC is a good example of a broadband authority,” said Patterson. She calls e-NC a “hybrid,” the first of its kind in the U.S. “You can have a fully governmental body or, like ours, something outside government,” she said. “We're paid by the state of North Carolina, but e-NC isn’t a government entity. We can give private money to non-profits across the spectrum. Some states, like Arizona, ban giving money to the private sector. We don’t have to worry about that.”

As broadband expansion gained urgency, e-NC evolved into the state’s advocate for the technology. “We're a catalytic element,” Patterson said. “We do pilots, we work to get the best possible projects going, we coordinate technology-based development with Internet platforms. We do a lot of research and planning and once we implement we get a third party audit so we can see our warts. We don’t take things over. We strive to avoid becoming a bureaucracy.”

One much-used authority creation is a broadband toolkit. Counties employ it to map broadband access and define local broadband needs and desires by consulting businesses and community groups. Telcos participating in mapping can augment the database, keeping it current.

E-NC also funds networks, like one in rural Rutherford and Polk counties that has grown to 120 miles of fiber linking schools, firehouses, businesses and communities. A program begun to train small farmers in e-commerce spawned a market serving big-city restaurants, which generates $25,000 to $30,000 a week on inventory ranging from squash blossoms at $1 apiece to a 28-lb. turkey for $100.

The e-NC path has not been bump-free. “We've seen tension arise over mapping and non-disclosure. Right now we're at odds with AT&T. We asked for information, they don’t want to provide it,” Patterson said. “It’s in a legislative committee that will resolve it one way or another. But in an operation that’s been going on for eight years, tensions are inevitable. Overall we have good relationships with the carriers.” A representative of Embarq sits on the e-NC board.

Most states could do what North Carolina does -- without the eight-year running start, Patterson said. “Our program’s structure, technique and partnerships are easily translatable to other states,” she said. Patterson strongly endorsed her state’s approach. “If a state decides to go for outside help, that’s okay,” she said. “But I think they shouldn’t. They wouldn’t outsource their utility commission, would they?” The stimulus law’s tight schedule would seem to discourage states starting at square one from taking North Carolina’s route, but Patterson has a solution: Federal funding for planning and state oversight.

“The NTIA should give each state a planning grant and two months to come up with a plan,” Patterson said. “States are used to deadlines. And if NTIA were to give each state $1 million for oversight for two years, that would be $500,000 a year, and with the three territories it would cost $53 million. That would assure there wouldn’t be a lot of audit exceptions. States would feel responsible, you'd have a greater chance of good proposals -- and you'd only have to defer for a couple of months. That’s doable.”

Patterson has little good to say about the Rural Utility Service or its broadband role. New York, South Carolina, North Carolina and other states opposed giving RUS broadband grant authority on grounds that the agency is biased against big states, she said. “We need to watch RUS carefully. Their application process is horrendous. NTIA’s is tough, also, but RUS is slow,” Patterson said. “I'd tell the Secretary of Agriculture, ‘You need to change out RUS.'”

Patterson acknowledged the pragmatism of considering ConnectedNation, which as a third party non-profit can hold as confidential proprietary information a state entity cannot keep private. “ConnectedNation has an arrangement under which it won’t disclose information,” she said. “Companies feel confidence in ConnectedNation. But ConnectedNation is not neutral territory. Look at their board of directors,” she said, referring to the non-profit’s telecom industry ties.

Native familiarity is another factor for Patterson. “You have to have the map, and how can someone from outside come into a state and do that, especially under the NTIA time constraints? You need that state knowledge,” she said.

Opportunities presented by the Recovery Act broadband programs may not recur, Patterson said. “It’s like in the 30s, with the Rural Electrification Act,” she said. “It’s time to spend the money and move our country forward. If we screw it up on our first effort, we'll lose credibility. A lot of us in the states want this to succeed, and we will, if we can just open up a little.”

California

Before creating a broadband authority, California set up a task force to do a quick but granular -- street-address level -- broadband map. It found 96 percent of the state to have broadband access at 500 kbps -- and many Californians with very slow or no broadband. Unserved areas include 2,000 communities and 1.4 million people, according to the map.

In December 2007, the Public Utility Commission authorized the California Advanced Services Fund (CASF) to give broadband grants. In its expected two-year life span, the fund has power to spend $100 million. Certificated carriers can seek grants for projects bringing broadband to areas without it and, if funds remain, to build out in underserved areas, defined as localities without a broadband provider that achieves speeds of 3 Mbps downstream and 1 Mbps upstream. The money comes from a surcharge on intrastate calls, with carriers billing and collecting a nickel a month from the average phone user. Grant recipients must contribute 60 percent of funding. The fund has distributed $9.1 million in grants for work in unserved and underserved communities.

According to CPUC member Rachelle Chong, a state with no broadband authority can gear up to pursue NTIA or RUS grants or loans most quickly by executive order, with the governor declaring an agency, such as the utility regulator, the state’s chief information or technology officer or a special task force, to have broadband authority. “Some state utility commissions do have some measure of broadband authority,” Chong told us, citing limited authority legislators gave California’s commission over video franchises in 2006.

California’s 2006 video franchise law “set the regulatory table” for advanced communications and strong partnerships with broadband providers, as did a “new, less regulatory framework” for traditional phone companies, Chong said. “In return for this more enlightened view of the competitive landscape, our phone and cable carriers have been competing fiercely to bring California fiber systems for blazing fast broadband and bundles of services,” she said. “They were willing to provide data for our broadband mapping exercise voluntarily. This is a win for the broadband companies, the state, and consumers. The providers get new customers and the state achieves its goals of closing the digital divide.”

If she were setting up CASF now, Chong would make it “100 percent technology neutral, consistent with ARRA,” she said. “Also, I don’t know if a 40 percent infrastructure match was high enough in the unserved areas,” she added. “Some of them are very expensive to serve, because they are geographically remote or far from the nearest Internet point of presence.” A few ILECs say CASF’s 40 percent match doesn’t overcome the “difficult business case” of high operating and maintenance costs in some sparsely populated unserved areas, she said. And unregulated providers are “leery” of the strings attached to government programs, such as some net neutrality-type obligations, she said.

Chong said she sees advantages and disadvantages in a utility commission-driven mechanism. “The advantage of a utility commission model is, the companies you regulate have to pay attention to you,” she said. “This means you have the wherewithal to get something done. But the fact that you are a regulatory body may well scare off some innovative, non- regulated market players.” A less-structured, task force- style approach offers flexibility and speed compared with a bureaucracy’s procedural rules and delays, she said.

In the “unserved/underserved” equation being worked out by the NTIA, the RUS and the FCC, priority should go to unserved areas, Chong said. “The focus could be put on communities with schools, health care centers, libraries, and government centers,” she said. “But I strongly believe that even the underserved communities deserve concurrent work. Would it be fair if half the state had regular phone service, but your other half of rural areas had only shared party line service? No one would think that was right or fair. So I do think the first priority of a state is properly unserved areas, but I would not delay projects for underserved areas.”

Connected Nation

Connected Nation, which helps states assess and improve their broadband status, emerged from ConnectKentucky, the first link in a lengthening chain of state partnerships with the non-profit. ConnectTennessee followed, then efforts in Ohio and Minnesota. Each has helped hone Connected Nation’s methods, said CEO Brian Mefford. Mapping and research are the “tip of the spear” at Connected Nation, he said.

“We start with the supply side and broadband inventory, gathering information from all providers and mapping it,” Mefford said. As a third party, the non-profit can hold those data as confidential, eliminating the risk of proprietary information slipping out, he said. “That in turn encourages providers to give us fuller portraits of what they're doing, because they can rely on us not to give out that information.” The non-profit has no turf issues, and can look clearly at a situation at the state and the community level, Mefford said.

The assets that legislatures, governor’s offices and utility regulators bring to broadband work are enhanced when a state works with Connected Nation, Mefford said. Legislators get things moving, he said. “Governors’ offices are set up to identify needs by looking through the community development lens and to pursue and distribute federal money to satisfy those needs,” he said. “Because of that, governors’ offices have much more significance in the stimulus effort, in which many objectives boil down to community development. They're generally familiar with the mechanics of grant seeking and grant distribution.”

Utility commissions “have unmatched knowledge and understanding of technology like telecom, with experience in consumer inquiries and working with providers, which also positions them for the broadband stimulus effort,” Mefford said. Commissions are wanting where governors’ offices are strong -- in evaluating and executing programs aimed at community development, he said.

That’s where Connection Nation comes in, the CEO said. “It sounds self-serving but it’s pragmatic to observe that a third-party entity like Connected Nation can be the means of aligning those two elements to make the most of the NTIA and RUS grant programs,” Mefford said. ConnectedKentucky tilted more toward government, with a strong economic development slant, Mefford said. “But in Tennessee it made more sense to partner with both the community development arm and the commission,” he said, adding that the legislature was a key player was well. He cited the Tennessee effort and its “stable triangle of interests” -- legislative, gubernatorial, and regulatory -- interacting to advance the broadband agenda.

In 2007 Gov. Phil Bredesen created a broadband task force that included members of the Tennessee Senate and House. Tennessee Regulatory Commission Chairman Pat Miller chaired the task force. Other members included the state’s chief information officer and comptroller. “The idea was to see where Tennessee was, where it wanted to be and how to get it there,” said Michael Ramage of ConnectedTennessee, which geared up as the task force went to work. “The first thing the task force decided was that it didn’t know where Tennessee was in regard to broadband. The private sector feared leaks of confidential material if the state government was holding it, so it was withholding information. The task force recommended that Tennessee copy what Kentucky had done and the governor awarded ConnectedTennessee a grant to start the work.”

Tennessee’s tack on broadband merits study by other states, said state Rep. Mark Maddox (D), who was on the task force. “Before we started in with the task force, you could draw circles around Nashville and Knoxville and Memphis and Chattanooga, and that was broadband in Tennessee,” he said. The ConnectedTennessee approach “lets you know where you're weak in terms of broadband and it enables you to boost awareness of the service,” Maddox said. “It has us on a continuous path of creating demand in unexpected areas. We're pulling a lot of fiber. The only thing we should have done was start earlier and go bigger.”

States will have to push to get plans in order and meet grant program deadlines, Maddox said. “The first thing you have to do is know where your state is with broadband, who’s unserved and who’s underserved. You need a public/private partnership. Unless you have that the companies won’t be forthcoming with their data. The one drawback to our model is that it’s slow,” he said. Even so, a state could emulate Tennessee’s approach in as little as three months, he added.

Though he urges states not to dally, Maddox is not as vexed as some by the NTIA and RUS deadlines, he said. “You don’t need to apply for X amount of money until you know the Y of what you need,” he said. “And there are going to be several filing periods. I see a small surge in the first wave, and less of a surge in the second wave, and that third wave is going to be much larger. I just don’t think states are ready to file. But if they could use some of the money for planning, you'd see that second surge be much larger.”

Only half of those who could subscribe to broadband in the U.S. do so, Mefford said. “When we ask why, the overwhelming response is, ‘I don’t need it,'” he said. “There’s an underperception of broadband’s value. We have to add education and opportunity to experience the service to the mix of needs that the states are examining. The question is, who has the structures to do that?”

NTIA and RUS have a legislative mandate to educate and raise awareness of broadband, with $350 million stipulated for that purpose and $250 million more for education and adoption, Mefford said. “These elements of the program aren’t getting a lot of attention, and I'm afraid that such programs will be left on the drawing board, with the money either not spent or directed elsewhere.”