Writing an Effective Public Interest Rule for NTIA Broadband Grant Eligibility

By Charles Benton
This blog became the basis for a Benton filing

The Recovery Act identifies two types of entities eligible to apply for and win National Telecommunications and Information Administration broadband grants -- 1) state and local governments and 2) non-profit organizations. But the Act includes an opening for any other entity to become eligible. Specifically the Recovery Act says "any other entity, including a broadband service or infrastructure provider, that the [NTIA] finds by rule to be in the public interest. In establishing such rule, the [NTIA] shall to the extent practicable promote the purposes of this section in a technologically neutral manner."

To be clear, the law does not require that private entities be awarded grants -- it requires that their eligibility be bounded by the public interest.

The Recovery Act's conference report, although it is not governing, indicates an intent to create a broad definition of eligible entities -- "as many entities as possible," in fact -- including wireless carriers, wireline carriers, backhaul providers, satellite carriers, public-private partnerships, and tower companies. Obviously, these are the private entities that could contribute to the Recovery Act's buildout goals, but not all the goals of the Act.

This language means that the NTIA is required to determine by rule whether it is in the public interest and in line with the overall purposes of the grants to open-up eligibility. And, so, the NTIA asks what standard to apply to determine if it is in the public interest for entities to be eligible.

One might ask why, if Congress wanted as many entities as possible competing for and winning awards, it limited eligibility at all. I think we can only assume that the phrase "in the public interest" is paramount here. Congress wanted to expand the class of recipients, but only on terms that serve the public interest. This means that NTIA must, I feel, set conditions, not merely provide a blanket approval or disapproval for a class of entities. To be clear, the law does not require that private entities be awarded grants -- it requires that their eligibility be bounded by the public interest. There's a fundamental difference between the public missions of governments and non-profits and the commercial interests of for-profit companies.

The law clearly favors publicly-accountable entities in the creation of the NTIA grant program. My friend Harold Feld points out a fundamental shift in philosophy here -- one that should not be underestimated. It is a 180 degree turn from the previous philosophy that only the private sector should be involved, and that the government and non-profits should only become involved in the event of "market failure." Private broadband providers argue that in areas in the US that are unserved or undeserved for broadband, economies do not exist to make service sustainable. The Recovery Act, then, finds it is in the public interest to correct this and:

1) provide access to broadband service to consumers residing in unserved areas of the United States;

2) provide improved access to broadband service to consumers residing in underserved areas of the United States;

3) provide broadband education, awareness, training, access, equipment, and support to­ --

• schools, libraries, medical and healthcare providers, community colleges, and other institutions of higher education, and other community support organizations and entities to facilitate greater use of broadband service by or through these organizations;
• organizations and agencies that provide outreach, access, equipment, and support services to facilitate greater use of broadband service by low-income, unemployed, aged, and otherwise vulnerable populations; and
• job-creating strategic facilities located within a State-designated economic zone, Economic Development District designated by the Department of Commerce, Renewal Community or Empowerment Zone designated by the Department of Housing and Urban Development, or Enterprise Community designated by the Department of Agriculture;

4) improve access to, and use, of broadband service by public safety agencies; and

5) stimulate the demand for broadband, economic growth, and job creation.

Governments and non-profits share a number of characteristics that ensure they pursue altruistic goals:

• their missions are to undertake activities whose goal is not primarily to earn a profit;
• no person owns shares of a government or non-profit or interests in their property; and
• the property and any income of a government or non-profit are not distributed to any "owners," but instead are recycled into the their public benefit mission and activities.

Both governments and nonprofit organizations, in a sense, are "owned" by and accountable to the public. They have extensive reporting and disclosure requirements, in some cases well beyond those imposed on for-profit enterprises. They also have limitations on activities meant to influence public opinion and the legislative process.

As the NTIA crafts the "in the public interest" rule, it should keep in mind these characteristics of non-profits and governments to ensure all eligible entities are aligned with the goals of the Recovery Act. The NTIA's rules should counterbalance the characteristics of for-profits -- maximizing revenues and values for shareholders -- that may conflict with the broader public's interest and ensure that entities' use of government funds are transparent so the public may hold them accountable.

Since the NTIA is, in essence, donating money to these entities in a shared, public mission as defined by the Act, the entities should adhere to a donor bill of rights.

The public interest rule, then, should require that applicants have a statement of values and code of ethics, a well-defined conflict-of-interest policy, and a Whistleblower Protection policy. The eligibility rule should require applicants to allow independent reviews of their financial procedures, controls, and policies in order to provide strong financial safeguards. And, to the extent a for-profit entity uses an award to improve or extend a portion of an existing project or network they should have to adhere to these conditions to the entire network benefited.

Since the NTIA is, in essence, donating money to these entities in a shared, public mission as defined by the Act, the entities should adhere to a donor bill of rights, if you will. The public should retain the rights to:

I. Be informed of the organization's mission, of the way the organization intends to use donated resources, and of its capacity to use the grant effectively for their intended purposes as defined by the Recovery Act.

II. Be informed of the identity of those serving on the organization's governing board, and to expect the board to exercise prudent judgment in its stewardship responsibilities.

III. Have access to the organization's most recent financial statements.

IV. Be assured our grants will be used for the purposes for which they were given.

V. Receive appropriate credit for the funding of projects.

VI. Be assured that information about our grants are easily accessible via the Internet. Specifically, all information about NTIA-funded projects should be shared immediately for the NTIA mapping project and with the Federal Communications Commission for use in its National Broadband Strategy.

VII. Be able to track an entities' solicitation of NTIA grants.

VIII. Directly or through the NTIA or other government agency question the entities about a grant and to receive prompt, truthful and forthright answers.

At a March 16 public meeting at the Department of Commerce, a coalition of commercial telecommunications providers suggested that any currently licensed or sanctioned provider be automatically eligible for NTIA broadband grants. They tout their experience and expertise. At the same meeting, a member of the National Association of Regulatory Utility Commissioners suggested any entity in a public-private partnership be eligible.

To these suggestions I would add caveats. If any currently-licensed/sanctioned provider is eligible, the NTIA should conduct a review with the regulatory agencies that oversee these applicants to make sure they are in good standing. Our stimulus dollars should not flow to bad actors in the telecommunications sector. And, if a State is active in the creation, endorsement or certification of an application, the State should be required to demonstrate how the project's goals address the State's current broadband priorities.

Next we'll look at grant award criteria.

Earlier posts in this series:

Let's Get to Work on the Purposes of the Broadband Grant Program

Let's Get to Work on the Role of the States in the NTIA Broadband Grant Program