While the BEAD Program continues to garner most of the attention when it comes to federal funding for broadband infrastructure deployment programs, in this blog we have consistently underscored that (1) there are other sources of funding available and (2) the BEAD Program may not be the best fit for every entity and project. The recent publication of the Notice of Funding Opportunity (NOFO) for the fifth round of the ReConnect Loan and Grant Program (the “ReConnect Program”) highlights the opportunities beyond the BEAD Program and the importance of investigating other opportunities. The application window for the ReConnect Program, which opens on March 22, 2024, was extended to May 21, 2024.

What is ReConnect?

The ReConnect Program is administered by the Rural Utilities Service (RUS), an agency of the Department of Agriculture. It provides loans, grants, and loan/grant combinations for broadband infrastructure deployment projects in rural areas. Funds may be used to construct, improve or acquire facilities and equipment needed to provide broadband internet access service.

Rural areas[1] without “sufficient access to broadband service” are eligible under the program. For-profit entities, state and local government entities (including those in the U.S. territories), cooperatives, Indian tribes, and non-profit entities can submit proposals for projects in eligible areas.

What funding is being made available in the ReConnect Program’s fifth round?

RUS issued the NOFO on February 21, 2024, outlining the details of the ReConnect Program’s fifth round of funding. Below are the highlights.

Funding

RUS has allocated up to $700 million for the ReConnect Program’s fifth round.

• $200 million is available for loan-only awards (with a fixed 2% interest rate);
• $150 million is available for loan/grant combinations;
• $150 million is available for grant-only awards; and
• $150 million is available for grant-only awards to Alaska Native Corporations, Tribal Governments, Colonias, and Socially Vulnerable Communities.

Maximum grant amounts are $25 million, while maximum loan amounts are $50 million. Grant-only awards require a match of 25% of overall project costs (except for grants awarded to Alaska Native Corporations, Tribal Governments, Colonias, and Socially Vulnerable Communities).

Eligibility Requirements

• A rural area without “sufficient access to broadband service” is one where 90% or more of households lack broadband internet access service of at least 25/3 Mbps.
• Qualifying projects must deliver broadband internet access service at symmetrical speeds of 100 Mbps.
• Rural areas where there is an “enforceable commitment” at the time of publication of the NOFO are ineligible. An “enforceable commitment” includes any legally enforceable obligation by any federal, state, or local agency utilizing federal funds to provide broadband service with speeds of at least 100/20 Mbps. It includes Universal Service obligations made by the Federal Communications Commission (e.g., the Rural Development Opportunity Fund) and obligations made by states under National Telecommunications and Information Administration (NTIA) programs such as the Broadband Equity, Access, and Deployment (BEAD) Program.
• Rural areas receiving funds under the FCC’s Enhanced Alternative Connect America Cost Model (E–ACAM) are only eligible for loan-only ReConnect awards, not grants.

How does the ReConnect Program Differ from the BEAD Program?

The threshold difference between the programs is the definition of an eligible area. The ReConnect Program is available to serve only rural areas with insufficient broadband internet access service (less than 25/3 Mbps). The BEAD Program is available to serve all areas (including rural areas) if they are unserved or underserved. Rural areas eligible for the ReConnect Program should thus also be eligible for the BEAD Program.

But the timing, evaluation criteria, and funding alternatives of the ReConnect Program should make it particularly attractive to entities already focused on broadband infrastructure deployment projects in rural areas. A few considerations:

• Stakeholders have been warning that the funding allocated to the BEAD Program is likely insufficient to serve every location in the U.S. with fiber. Rural areas are more susceptible to that risk, particularly with the significant uncertainty surrounding the implementation of the BEAD Program’s Extremely High Cost Per Location Threshold (likely to apply to many rural areas) and its effect on the overall allocation of funds by states.
• The BEAD Program’s evaluation criteria strongly reward proposals that minimize per-location subsidies, which will likely apply downward pressure on the federal funding component of winning proposals. The ReConnect Program does not take that approach.
• The ReConnect Program will be a better fit in many areas to maximize per-location funding. While the BEAD Program exempts “high-cost” areas from the matching requirement, proposals in those areas still will face pressure to lower their requested per-location subsidy. The ReConnect Program has a 25% matching requirement for grant-only awards but without an evaluation criterion rewarding lowering the requested per-location subsidy. It also exempts projects in Socially Vulnerable Communities from the matching requirement.
• In contrast with the BEAD Program, the ReConnect Program’s evaluation criteria do not favor fiber over fixed wireless (except for unlicensed fixed wireless projects).
• Loan-only proposals under the ReConnect Program are not scored competitively and will be evaluated on a rolling basis.

Is there an overlap or conflict between the BEAD Program and the ReConnect Program?

Yes. As mentioned above, the rural areas eligible for the ReConnect Program should also be eligible for the BEAD Program. However, an aspect of the interplay that is not receiving much attention is the potential overlap in application windows and the potential conflicts that could be created when each program’s “enforceable commitment” rules are applied simultaneously (or at least in close proximity).

The ReConnect Program excludes from eligibility any area with an “enforceable commitment” (which includes NTIA funding under the BEAD Program) when the NOFO was issued, i.e., February 21, 2024. Because states have not yet selected BEAD Program proposals (much less obtained NTIA final approval for individual BEAD Program awards), the BEAD Program today does not affect the eligibility of any rural area under the ReConnect Program. The BEAD Program excludes from eligibility any unserved or underserved area that has received a ReConnect Program award (whether a grant or a loan) by the time the state challenge processes conclude. But the challenge processes have not yet concluded (in most states they have not started), and it is unlikely that any ReConnect Program awards will be finalized before the challenge processes conclude. As such, the risk of conflict today is low.

But the risk of conflict—and at least uncertainty—increases dramatically as the BEAD Program and the ReConnect Program enter the proposal evaluation stage.

First, RUS can select a loan-only award under the ReConnect Program before the BEAD challenge process has concluded in some states. That is because RUS will be evaluating and granting loan-only awards on a rolling basis after March 21, 2024. Entities considering a ReConnect Program loan for a rural area project should consider submitting their proposal to RUS early in the application window.

Second, there is a significant risk of overlap and conflict if RUS and some states evaluate and select proposals in parallel. The ReConnect Program application window closes on May 22, 2024, with RUS expected to make awards by the end of 2024. The BEAD Program’s schedule will vary from state to state, but it is reasonable to assume that at least some states will evaluate proposals during the last two quarters of 2024. The NOFO purports to address the possibility of conflict (and the desire to avoid duplication of funding) by stating that it will notify states 30 days before making an award in the state and invite any objections to the proposed ReConnect Program award. The NOFO does not declare which award would prevail in such a case. It warns, however, that “if the objection is not resolved, it may result in the rejection of the ReConnect application to avoid duplication of funding.”

The Bottom Line

• Entities targeting loan-only awards under the ReConnect Program should seriously submit their application to RUS in the early stages of the application window.
• Because the filing window for ReConnect will likely close before the BEAD Program application window opens in many states, entities targeting broadband infrastructure deployment projects in rural areas should seriously consider applying for the ReConnect Program. Entities targeting Socially Vulnerable Communities have an even stronger incentive, given the exemption from the matching grant requirement.
• Cities and local governments considering their own broadband infrastructure deployment projects in eligible rural areas should seriously consider the ReConnect Program. Their proposals would receive additional points under the program evaluation criteria and may be better positioned to receive higher per-location subsidies, particularly for fiber-based projects.
• Stakeholders eyeing fixed wireless deployments in rural areas should not let the opportunity to apply under the ReConnect slip away.
• Unfortunately, the risk of overlap and duplicative efforts between the BEAD Program and the ReConnect Program is elevated. That means entities targeting projects in rural areas eligible for ReConnect may have little option but to apply to both programs in such situations, it may be to their advantage to apply for ReConnect as early as possible.

[1] A rural area is any area that is not located in a city, town, or incorporated area that has a population of greater than 20,000 inhabitants or an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 inhabitants.