Best of the ISP-Lists

Fixed Wireless Business

Tax Dollars Used to
Stimulate Rural Wi-Fi Communities

Members of the ISP-Wireless list discuss how to secure grants from the Rural Utilities Service through the Community-Oriented Connectivity Broadband Program.

[October 29, 2002]

On the ISP-Wireless discussion list in October, VP inquired:

Has anyone applied for this "Pilot Grant Program" or know any of the fundamentals, or can point me in the direction to find some information?

[PL replied] "Our latest [Alvarion] newsletter addresses this and provides links to the application process for RUS funding. This program is a new extension to the 1936 Rural Electrification Program. One of the great things about it is that it is technology neutral, allowing for wireless to be on equal footing. Unfortunately, it is a small gesture providing only $20 million in guaranteed loans per year through 2005, and then reducing to $10 million per year for 2006-2007. Remember, these are not grants, these are loans."

[MK countered] "Not grants? Yes, they are grants. Further, they cannot be used to provide any type of telecom services (read: Phone company infrastructure), so wireless fits perfectly."

[PL replied] "We may be talking about different things. The RUS program that is the extension of the 1936 law came to pass via a tiny insert into a 2002 farm bill. The ones I refer to are not grants, they are low interest (4 percent) loans."

[VP clarified] "It is a grant. I am working on the application this weekend. It is called the Rural Utilities Service: Community-Oriented Connectivity Broadband Program, Grant Application Guide, and fiscal year 2002. The application has to be in by November 5th. There are several stipulations, i.e., the town can be no larger than 20,000, it must meet an economic criteria; it also must have no other form of broadband availability, including DSL, Cable, or Satellite. So far this is my understanding."

[KS said] "That's true. We looked in to this, and the requirements were too strict for our liking. The whole community center thing with the computers, and who pays for keeping the computers from getting torn up, and in the end you spend all your grant money on the community and you've got nothing left to build out your backhaul to them and provide service.

At least that's the conclusion we came to with some of the small towns around here that only have 8-10,000 people in them and nothing but very bad dialup.

Serving a small town of say, 2-5,000 people would be more possible I would think, but then with fewer people your going to get fewer signups."

[RJ added] "Yes, the grant has strings. Yes, the paperwork is tough. Even if you don't think you will succeed in the endeavor you should still fill everything out to learn the process. Money will be available next year. Two weeks is way too short to get things done. The paperwork took us (4 people) 6 weeks to complete. Still, try, because you can never tell what will happen and the lessons learned are good for the next run of funds."

[KS agreed] "Also a good point. We'll probably wait for now and see if they ease up on the requirements. I don't think they will, because as we all know—nothing in this world is free—Not even a grant."

[KA queried] "So where are the applications? Are they online?"

[KS responded] Here's the link that I have."

[DR said] "From what I read on the website, you can use it to provide conventional telephone service as long as the areas have no service. (Although, I don't know where that would be.) The kickers are:

• Only to provide broadband to areas that do not already have it.
• Provide the service for free for two years.
• Match 15 percent of the funds.
• Provide public access during and after normal business hours including terminals for one percent of the population.

That is fine for the long term but does not help for the short term. With this I spend the 15 percent and cannot get any return for at least two years.

For those of you that have applied for and are getting these funds, am I reading this right?"

[VP asked] "Well, I have to say it is some interesting reading. So how did you set up your 15 percent matching fund, in-kind services? Also, on the two year budget, how did you project that?"

[MK said] "Well, here's how I understood it. I got some of this from a representative of my state government, who was evangelizing this mid summer.

( 1 ) The grant is to FULLY FUND your venture, minus the contribution—which can be "in kind", meaning work you put into it, money, equipment, etc. You figure out how much it costs to operate your business, all capital investment, including backhaul and CPE, the costs of the community access—both to construct and maintain—including computers and personnel to monitor/operate it and even the costs of the space it's housed in.
( 2 ) It covers all costs for two years. During these two years, you must maintain the community access for free (terminals for one percent of the population). After the two years is up, it is expected you will keep the business going for at least three or five more years (I forget which) but not free community access. You can also get money to assist your city or county, police, sheriff, fire, medical, library, and other services in obtaining IT systems—including internet access and computerization and software. Your plan submitted must show how you are going to make it during that time. You ARE expected to charge consumers for the service from the start, but not for the hardware, if you applied for money for CPE.

Basically, it sets you up in business, with cash flow to run profitably for the next two years. You are expected to put the wages or salaries of any and all employees, including yourself, in the plan. It is for a for profit, and you must show the ability to stay in business during the 2 years and after, as well. You must demonstrate you either have, or can contract the necessary technical skills, as well as financial and business skills to keep going. The smaller the community, the better (500 or less being the highest score). Also, designations that meet federal guidelines for being economically disadvantaged (high unemployment, low average incomes, etc), and a whole host of other statistical data is used to calculate your "score," and those with the highest scores will 'win.' The more 'hopeless,' the better your chances. You will need the cooperation of your local county and city officials and perhaps even state level offices to completely write the application."

[SGC said] "I got our first RUS check today! $4.25 Million! Check out my web site for the approval letter. I was so shocked I had to sit down."

[TD asked] "How long did this take you?"

[SCG advised] "Best advice is to call the local RUS contact in your area and meet with them. Get the specifications or suggested supporting documentation required. Have your local contact review the application and submit it with a local cover letter. My local contact made me re-write my proposal, but it was well worth it.

Please be advised it will take a while, my application took over 20 months, I started with the USDA RUS Broadband Program in January 2001 and I am expecting the first funding to hit in January 2003.

One of the keys to getting funding is to call your contact or his boss or his boss every week or every other week for an update."

[CJ said] "Congratulations on the loan. It's nice to see our tax dollars used to stimulate rural economies."

—End