Nebraska Broadband Progress Report with Commissioner Mary Ridder, Mike Hybl & Jim Ediger
On a special episode of Nebraskanomics, Jim Smith asks three experts on telecommunications and regulation about the state’s progress on grant programs that expand broadband connectivity. Nebraska Public Service Commissioner Mary Ridder, Nebraska Legislature Transportation and Telecommunications Committee Legal Counsel Mike Hybl, and Hamilton Communications General Counsel Jim Ediger are our guests. A transcript of this episode is available below.
Jim Smith: Today we have a special edition of Nebraskanomics focusing on broadband. Nebraska is set to allocate a historic amount of money to deploying high-speed internet—an estimated $500-600 million. Today we’re going to discuss how Nebraska can make the most of these funds and address connectivity needs in underserved and unserved communities with three guests who are experts in the telecommunications and regulatory fields. Joining me today is Commissioner Mary Ridder representing District Five of the Nebraska Public Service Commission, which regulates telecommunications in Nebraska, Jim Ediger, the general counsel with Hamilton Communications, one of Nebraska’s leading telecommunications providers, and Mike Hybl, the legal counsel for the Nebraska Legislature’s Transportation and Telecommunications Committee.
Thank you all for joining me, and I’m going to ask Mike to get us started today. Mike, can you provide our listeners a recap of the legislative activity this session relating to broadband, specifically relating to legislative bills LB1114 and LB1024?
Mike Hybl: Yes, I can. Thank you, and thank you again for the invitation to be here. This session, the Legislature as you noted—two significant bills that were considered and passed by the Legislature this year. The first one is LB1144. It was introduced by Sen. Curt Friesen. Sen. Friesen is the chair of the Transportation & Telecommunications Committee, and 1144, his goal with that legislation, which directly addressed the Nebraska Broadband Bridge Act, was primarily to maintain maximum flexibility with the Public Service Commission, to continue to review, modify the Bridge Act program as needed, based upon the experience that the Commission gained through each round of funding that’s occurred.
The changes that were made to the Bridge Act through 1144 were really based upon consensus items that the committee felt would both improve the program’s effectiveness and the accountability and were changes that were beyond the commission’s statutory authority. Four main areas that that were important in that bill. First, there was a change made that the match was lowered to 25% of the project cost of projects that were directed to and served unserved areas of the state. The second main change made by LB1144 was to the challenge process. A party that wishes to challenge an application under the Bridge Act on the basis that they currently provide at least 100/20 megabit service will be required to provide speed test data showing that fact and the speed test data is going to be based upon criteria established by the Commission.
A party that’s going to challenge an application based upon the fact that they have construction in process, and if that challenge is upheld, if they fail to provide that service within 18 months of the challenge, they will now be—under the changes made—they will be subject to potential of civil penalties being imposed by the Commission, and in addition to the current requirement that says they cannot challenge another grant for two years, they will also be unable to file an application for any support based upon an order of the Commission.
Third major change is that the Commission now must consider a Bridge application where the proposed service will have service offerings that use usage caps or data throttling mechanisms. The Commission is able to discount in the scoring process those particular service offerings as compared to other offerings that may be available. And the other major change is that currently a successful bridge act applicant is was required to provide service in the project area until relieved of that obligation by the Commission. What LB1144 did was change that to a commitment by the successful applicant to provide service in the project area for 15 years. To ensure compliance with that, the legislation also provides that the Commission is authorized to use its civil fine authority to ensure that over that 15-year period the applicant does provide 100/100 megabit service. And those are really the key components of 1144. The other significant bill is LB1024, which was introduced by Sen. Wayne from Omaha. That bill, in part, directed the Department of Economic Development (DED) to administer the Capital Projects Fund program. That’s a program that was created under the ARPA legislation by the federal government.
Under the Capital Projects Fund, the state’s going to receive $128 million for eligible projects. The federal requirements define an eligible project as a project which invests in a capital project to directly enable work, education, health monitoring, is designed to access a critical need that resulted from or was made apparent or exacerbated by the pandemic, or is designed to address a critical need of the community to be served by it. And the Department of Treasury has defined the following as eligible projects: broadband infrastructure, digital connectivity projects, and then multi-use community facilities.
What the Legislature ended up doing with this bill, with this specific program—is as I said—Department of Economic Development is going to administer this particular program, and the funding is basically going to be equally divided amongst the three congressional districts in the state. The exception, or one of the restrictions, is that in the third congressional district the only entities that can apply for this funding are Second-Class Cities and villages for projects that relate to broadband under this program. The DED is directed to administer any broadband funding they release in a manner that is consistent with the Broadband Bridge Act, with one exception, and that is there will not be a match requirement for any of these dollars the DED is distributing.
And the application period for these Capital Projects Funds, the period will open up on July 1st and through July 15th of this year, that they’ll be receiving applications for funding. And the legislation also provides that if in this round of funding, if DED does not distribute the dollars available, then they are allowed to do additional rounds of funding. Just real quickly, two other changes in 1144 that I think are worth mentioning are that the Commission is given the authority, that if they determine it’s in state’s best interest, they can use federal funding that’s being made available to the state to create and maintain a state broadband map.
You know, everyone is waiting to see what the new federal broadband map is going to look like, but if the Commission determines down the road there is a need to also maintain a state map, they will have that authority to do that. And then LB1144 also had included within it LB761, which was a bill that adopts the Precision Agriculture Act. I think this is a program that’s going to evolve over time, there’ll probably be a need to do further legislation to kind of refine it and clarify a little bit, but the committee felt at this time with everything going on with broadband—the precision agriculture end of what broadband can offer—it was a good time to at least get this started and get it into law. And Jim, with that, that’s kind of my summary of what we did with the Legislature.
Jim Smith: Thank you, Mike, for that overview. Commissioner Ridder, can you recap the first round of Bridge Act grants that have occurred, and also preview the second round that will occur beginning July 1st of this year?
Commissioner Mary Ridder: Thank you for inviting me, I appreciate it. Bridge 1 had 76 applications from 23 different entities with $111 million in projects—that was our application pool. We approved 61 applications, we granted $19.1 million dollars, and that is to help reach approximately 12,500 locations. Of those locations, just under 3,300 are unserved locations, and just under 9,600 are underserved locations. So the applications went this way—there were 12 that were purely rural, there were 54 that were in town, and there were 10 that were mixed. So that’s what that pool of applicants look like.
If you want more information, specific information about any of that you can find regarding geography, total project costs, grant amounts, it’s on our broadband.nebraska.gov site or on the Broadband Bridge website which is on our PSC website, so that’s a real quick summary of Bridge 1. It took a lot more time to create Bridge 1 and to oversee Bridge 1, and to have lots of really big discussions about that than that summary. So, Bridge 2, we changed—tweaked—lots of things, and I’ll start with the one that caused the most discussion in the Legislature, in the PSC, around, and that had to do with both the match and the challenge process. And as Mike referred to, what 1144 did was added the ability for us to lower that match if an application was in a very high-cost area—the areas I call “rural, rural” areas—the most difficult to reach areas. So that gave us another tool to help reach some unserved locations. The challenge process was challenging. When we came up with the rules for this, I guess at the Commission you never know which places are going to be the most attention-getting until after you release the applications. You get them in, and you find out where we need to tweak. Challenge process was the area we needed to tweak. In Bridge 1 we said “if you challenge you need to show—the challenged person needs to show—proof of what they have. And what they were to show us was sort of open-ended. That didn’t work as well as it could have. So now, as of Tuesday, we passed the order, will require a challenger to better define the area they’re challenging. And what they will do is provide us—the FCC has this hub data that carriers are already submitting information to, that proves what they are offering.
And I didn’t know about that or what it particularly does. I’m not a tech person to that degree. I just remember always saying “I don’t care what we do as long as it is the same for everybody and it is absolutely something that will prove what service is being delivered at that location.” And one of our carriers came up with this suggestion, “We already supply this to the FCC, let’s use that part of the challenge process.” It’s a super idea. We like it, we passed it. And what it is, they call it the Performance Measure Testing Standards—that’s what it’s called—so that will be part of our challenge process now. Also something that will help both the applicant and a potential challenger who’s thinking about challenging, all of the applicants has to provide location shape files, as well as the project outline shape file, so there will be absolute drawing-specific of the project being applied for, as well as each location shapefile, to show what their project will be. That will make it so much easier for anyone considering challenging to see whether they should or not. So I think the ability to communicate with each other and the Commission to oversee all that is, I think, very much enhanced.
We added a location density metric, so in addition to what 1144 gave us as a tool, we also can reward with points density of a project. The less dense than, the more rural high-cost area, the more points they can get. We allowed labor cost as an in-kind match. That was something that was asked of us, we saw no problem with doing that as long as somebody can point proof to what they actually spent there, and we allowed more time for the challenges. Previously, I think it was 30 days. I think LB1144 gave us up to three months, we went to the middle, we said you have 60 days to do that for the carriers that were really concerned about how long it would take for them to go out and do speed tests to prove their challenge. This gave them more time.
So we will have approximately $20.2 million dollars available for grants, there’s a little carryover from 2021, and applications are due July 1st, and we are really excited about seeing what comes in.
Jim Smith: Well, Commissioner, we know that there are several broadband funding programs in place today, such as the Nebraska Universal Service Fund, the NUSF, the Federal Universal Service Fund, the Bridge Act that we’ve heard about here already, Capital Projects Fund, and the soon to be announced Broadband Equity Access and Deployment (BEAD) program. What is the role and what is the Commission doing to coordinate and maximize the effectiveness and success of all of the combined programs?
Commissioner Mary Ridder: Jim, I think I would say that our role remains what our role has been. It is to take any legislation that gives us direction, and our own rules and regulations, and apply them. And having Bridge in place is wonderful, not just for the Bridge program, but because now federal funds will be filtered through there. It sets us up to just do what we’ve been doing, and I don’t know that I would say—in terms of getting ready, coordinating, maximizing opportunities—we are as well as we can positioning ourselves at the Commission, but in terms of, if we need to hire people, or add certain programs, or certain rules within, we won’t know that until we get absolute direction from those programs. So as we do throughout the legislative season, as we see bills dropped and what they are saying, we start trying to position ourselves towards those, but until that last moment or in this case those last rules are issued, it’s always a “we’ll sort of have to wait and see.”
Jim Smith: Thank you.
Commissioner Mary Ridder: You’re welcome.
Jim Smith: Jim Ediger, having heard from Commissioner Ridder, what is your industry’s perspective on the opportunities these new funding programs offer?
Jim Ediger: Yeah, thanks for having me, Jim. You know, the industry really looks at these programs as a once in a generation, or even once in a lifetime opportunity to truly bridge digital divide. I think Nebraska providers know we have a small window here to step up to the plate and prove we can get the job done, and I think that showed in applications for both the CARES Act grant that was administered by DED and then also round one of the Bridge Act that Commissioner Ridder just mentioned. In both cases, industry responded on a very short notice and under very difficult circumstances with COVID, and I anticipate that we’ll see the same reaction and probably even more applications for round two of the Bridge Act based on some of the regulatory and legislative changes that both Mike and Commissioner Ridder just went over. And once the BEAD dollars from the federal program reach the state, I think we’re gonna have the same type of response. And with that, I really do tip my hat to policymakers like Commissioner Ridder, Sen. Friesen, with the help of Mike Hybl, as programs like the Bridge Act show that the right policies can help spur investment and encourage innovation in the broadband sector, and Nebraskans are benefiting from better service at a lower cost.
These programs have leveraged taxpayer dollars to promote private investment in the state, you know, Commissioner Ridder just went over the amount of applications, spent the amount of dollars that were going to be invested in the state, with you know $19 million of that being from the program. Using Hamilton as an example, we received about $3.5 million in grants in round one of the Bridge Act and that’s going to result in over $10 million in broadband deployment in unserved and underserved areas in the state, and we think that’s an incredible return on investment and a good use of state funds, and really it just shows how good policy can drive progress.
Jim Smith: Well, we’re fortunate to have the funding available to us today, but it doesn’t satisfy the workforce issue. So, does the industry have concerns regarding timelines, supply chain, and contractor availability to achieve these goals?
Jim Ediger: Yeah, yeah, of course, Jim. And I think you can add inflation to that list, as well. All broadband providers are trying to stock up on materials and lock in labor, both internal labor and use of contractors, to prepare for these opportunities. As you know, prices for everything are going up, and it’s a little scary when you’re applying for grants, so Hamilton will apply for grants for this round two of the Bridge Act and will submit the application in June. The grant will be awarded until December, and we won’t start construction until late March or April when the ground starts thawing in Nebraska, and you know, you really don’t know what differences are going to be in supply chain, and labor force, and really just the price of materials and labor between June and when we start deploying in March and April. So that uncertainty is something all companies are dealing with right now. We do think that changes made in 1144 that Mike Hybl talked about are a big deal to help allow additional extensions for providers upon a showing of good cause and we think that’ll help get more applications submitted.
You know, we had a stretch here at Hamilton where we had a lot of trouble getting the fiber vaults that you put in the ground, there was a shortage of resin, and it was something we didn’t anticipate being a supply chain issue, but it was for us. And then we also had a splice case shortage, and we got those figured out too. And we know all providers are having some type of supply chain issue, and that uncertainty is difficult to know what to expect and where we should stock up on materials. Same with labor, we’re all fighting over the same pool of contractors and fiber technicians, and the state’s 2% unemployment certainly doesn’t make that any easier on us. I’d also add that, you know, there’s this overall expectation from policymakers and the public and the desire from providers to make broadband as affordable as we possibly can for everyone, and we saw during COVID just how important broadband was for every single household, between telehealth, remote learning, work from home, we really do need to get it to every house, we have to make sure it’s affordable, and with these inflation costs and labor and material shortages, you know, I don’t think there’s a whole lot of industries that can say they’re actually providing a better service at a lower cost during this period. And I think that’s, you know, a testament to not only what the industry is doing but also some of the work that the policymakers are doing in this in this area as well.
Jim Smith: In regard to program administration, what does your industry need to see from the state to encourage full industry participation in these grant opportunities going forward?
Jim Ediger: Yeah, I think everybody knows it can be extremely uneconomical to build out in these high-cost rural areas, so the change in the Bridge Act to lower the match rate for high-cost areas should help with participation. I think the next step is really coordinating resources for these high-cost areas that are currently unserved or underserved. The state does not need to tackle this on its own. You know, there needs to be coordination between state and federal programs, and I think we’re doing a pretty good job of that today, but there’s always more opportunity for coordination of programs. And the long-term challenge is, how do we maintain these rural networks once they’re in the ground. At the end of the day, it’s unlikely that we’re going to get full industry participation, and if you can’t get the incumbent [editor’s note: an existing internet service provider in an area] to build out in these programs, the Commission needs to look at every tool they have available, such as reverse auctions that they’re looking at now, to try to entice another provider to come build out in these high-cost areas.
One thing that Hamilton’s former president Phil Nelson would always say is “You can only spend it once,” and I think that’s really important for the policymakers to keep in mind here. This really is a once-in-a-generation or once-in-a-lifetime funding that’s coming to our state, and we really need to focus on smart long-term investments and be sure that these funds are going to providers who we know will get the job done and continue to provide quality service, you know, long beyond just that 15-year period that’s in the Bridge Act, and we want to make sure we’re getting the best return on our dollars, and I think that’s just important for our policymakers to keep in mind.
Jim Smith: So, Jim, one last question for you. We know that deployment of new or replacement broadband is important, but then you have the ongoing maintenance and support of the networks and the high-cost areas of the state, particularly those in which we’re trying to prioritize deployment. What concerns do you have about the ongoing maintenance and support of the network?
Jim Ediger: Yeah, absolutely. You know, everyone—and rightfully so—is focused on deploying the fiber. How do we get the fiber in the ground? How do we get broadband to every house? I mean, that is the first priority, but the reality is there is an ongoing support issue, and those costs cannot always be supported by the open marketplace and need either federal or state support, and we’ve had a system with Universal Service Fund, at both the state and federal level, that’s acknowledged this issue for a long time now. And the approach has been getting it built, and then after the 15 years, you know, that’s the smart investment for the state, we want to make sure we’re getting the most money or the most return on our initial investment, but we just can’t abandon that after the 15 years, and if we want ubiquitous broadband—meaning we can get the same speed so that rancher in Cherry County as a business executive over in Bennington—we need to have the ongoing support to help maintain those networks and be able to offer broadband at an affordable price for everybody.
I can give a little bit of example, but if you have a rancher that’s five miles out and you have to spend $100,000 to get to that ranch, you know, if you are only getting $50 a month in broadband service back from that customer, that takes, you know, 160-plus years just to recover that initial investment, and that does not include any of the expense for ongoing maintenance, or when you have to send a truck out to the ranch to fix a problem, and that’s just hard to do without some type of support either at the state level or federal level. And again, that’s where the Universal Service Fund has come in and at least acknowledge and help providers overcome that issue, and I think that’s something we need to keep in mind going forward.
Jim Smith: Mike, I’m going to return to you and I’m going to ask you what you see as the Legislature’s role going forward. What should we expect in the 2023 session related to broadband—but right on the heels of your remarks I would like to also hear from Commissioner Ridder and also Jim representing the industry what to expect in 2023, because just in the last few days we had primary elections, and we know that we’re going to have three out of five new Public Service Commissioners in 2023. We’re fortunate to have the continuity of a very experienced staff at the Public Service Commission, but nonetheless, we’re going to have a large change in policymakers at the Public Service Commission, not to mention a new group of legislators coming into the Unicameral. So, Mike, I’m going to start with you as to what you see going forward in 2023.
Mike Hybl: This is kind of how I see the, at least the end of the year, and into next year playing out at least from the legislative level. One of the things that was introduced at the end of the session was a interim study resolution LR401 by Sen. Friesen, and I think our tentative plan with that study is that since the round two of Bridge Act is scheduled to be released on December 6th, hopefully within a week or two after that, we will hold an interim hearing on LR401. It will be a, you know, a basic oversight hearing, basically take comments from the Commission, the industry, other interested parties. With maybe a little bit of luck somebody representing the new administration, just giving feedback on how round two went. I think Sen. Friesen wants to see some comment just as the Capital Projects funding, to the extent that DED makes investment in broadband and that, how the process of coordinating the Commission’s work with the Department of Economic Development’s work on that, how that’s transpiring, what we need to look at in terms of legislation for ’23, to maybe address some of those issues, and then what I think the bigger issue will be is the Broadband Equity Access and Deployment Act that I think in the next week or so we’re going to start hearing the first information from the NTIA [Nebraska Telecommunications and Information Administration] as what that program’s going to look at.
I think it’s going to be fairly important for Sen. Friesen as one of the term limited senators, and he won’t be back next January. For those that are going to be here, particularly at the committee level, what input the industry has, the Commission has, in terms of what we need to do to make sure that we really have the maximum flexibility both in the statutes and at the administrative level to administer that program, because that’s going to be, I think, a very significant undertaking, once we get into that. And then I think we may just raise—I think it’s probably an appropriate timing—is take testimony on should we as a state consider having a formalized state broadband office to help coordinate all these roles, or are people kind of comfortable with right now—the broadband function is really kind of spread out over between the Commission, the DED now, as well as the office of the CIO [Chief Information Officer]. It’s, I think, kind of an informal coordination. I think the individuals in those offices do a very good job of coordinating, but it seems like the trend in a lot of states is they are going to a more formalized structure in terms of the state’s broadband response, and I think December would be a good time to take at least some comment and testimony from that, so that if that’s something the new administration wants to consider championing it’s kind of put out on the table for them to start the discussion if they wish.
Jim Smith: Commissioner, Jim, do you have any comments to add?
Commissioner Mary Ridder: Yes, 40% of the commission is changing, maybe 60%. Two or three of the commissioners will be new next year, and thankfully we have such a terrific staff. When it comes to these three different lead points on broadband that we have now, I think we do coordinate pretty well, but I will say that the Nebraska Rural Broadband Task Force, one of our subcommittees, one of the things that we recommended that has not been acted on yet was a Broadband Coordinator and everyone probably has a little different idea of what that person looks like, what their role would be, where they be housed, who would be, you know, overseeing them. And all those details would have to be worked out. That is an attractive idea to me depending how it’s developed, so that’s a big consideration, and in terms of how the Nebraska Public Service Commission operates, particularly when you have new commissioners, there is internal educational opportunities, and there are national regulatory group—NARUC [National Association of Regulatory Utility Commissioners] opportunities to learn. And they’re terrific opportunities to understand the role you’re stepping into, so that will happen, and the Commission will continue doing what it does really well.
Jim Ediger: I think from an industry standpoint, 2023 will definitely be a transition year and a year of education. You know, Sen. Friesen being term limited, he’s been a fantastic chair for the Telecommunications committee for years. He’s very, very familiar with the real issues. It’s easy enough just to say “we need more broadband out there,” but he’s been willing and capable of digging into the issues and working with all the stakeholders across the state, and I think he’s done a fantastic job, and he’ll be certainly missed over at the Capitol, and Commissioner Ridder, same with you. I mean she’s just done an excellent job of diving into the issues and willing to understand, you know, what problems are out there, and willing to work at solutions such as this Bridge Act uh to help get more broadband out there, and she’ll certainly be missed along with the other one or two commissioners that may be leaving as well.
So it’s going to be an opportunity for the industry to educate both new senators and commissioners on the issues that our industry faces and how we can best serve the entire state. So, definitely a year of transition and education but also of great opportunity. I know by the end of the year we should have applications announced for the winners for round two of the Bridge Act, we’ll know more about the NTIA, BEAD program and funding there, so you know, there’s certainly some uncertainty, but it’s definitely an exciting time and should be an interesting year.
Commissioner Mary Ridder: I would just tap one on top of that. Jim Ediger, you mentioned this earlier, our reverse auction that we’ve been working towards. Perhaps by the end of the year we will have accomplished that, and that’ll be the first state has ever bit that off and learned from lessons learned at the FCC so that hopefully it would go pretty smoothly. So there’s an opportunity to take funds that are not being utilized in an area where people reside and bringing in carriers who will provide the type of service these people deserve.
Jim Smith: Very good. Well, Commissioner Ridder, Jim Ediger, Mike Hybl, I want to thank you all for sharing your knowledge with our audience today and for joining me on Nebraskanomics.