Federally backed credit facilities needed to fund fiber expansion

The Infrastructure Investment and Jobs Act passed by the Senate provides a strong infusion of grant funding for fiber advanced telecommunications infrastructure builds. Particularly for public and consumer cooperative owned fiber distribution infrastructure connecting homes, businesses and institutions. As President Biden suggested when he put forth his outline for the bill as the American Jobs Plan, building this critical infrastructure to reach all premises is more likely to occur when funding prioritizes networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives. Providers Biden noted, with “less pressure to turn profits and with a commitment to serving entire communities.” With that reduced financial burden and tax-exempt status, these entities can make funding go further than legacy telephone and cable companies.

Grant funding under the bill is a kick starter. More money will be needed given the high capital as well as operating costs involved. That’s where federal government-backed credit facilities could prove most useful while at the same time encouraging the use of fiber. It’s “future proof” technology as called for in the American Jobs Plan and has a life span of decades, corresponding to long term loan payback periods. The use of credit facilities is also more likely to appeal to fiscal conservatives than grant funding.

The Infrastructure Investment and Jobs Act would give tax exempt status to state issued bonds used for telecom infrastructure. But the bill language limits their use to areas where more than half of addresses that would be served in a census block group lack access to throughput that later generation DSL or fixed terrestrial wireless can provide. That’s not fiber, potentially leaving some premises with outdated, inadequate and poor value options.

Separate legislation pending in the House but thus far not advancing, H.R. 7302, would provide for low cost loan term loan guarantees and lines of credit for advanced telecommunications infrastructure administered by the federal Department of Commerce. Long term loans could cover up to 49 percent of capital costs and lines of credit up to 33 percent. The Department of Commerce would select eligible projects in areas lacking access download speed of at least 100 megabits per second and upload speed of at least 20 megabits per second and with latency that is sufficiently low to allow real-time, interactive applications. That could potentially rule out areas served by existing cable TV providers. While open access networks are specifically preferred under the bill language, fiber is not per a “technology neutrality” provision.