Michigan Moves to Limit Federal Funds for Municipal Broadband

With an unprecedented amount of federal funds to build broadband networks flowing into individual states, lawmakers in some states are doing the bidding of the big monopoly Internet Service Providers and potentially blowing a once-in-a-generation chance to invest in the locally-accountable infrastructure that offers the best chance to bridge the broadband gap for millions of families once and for all.  

Two weeks ago we wrote about the anti-competition broadband legislation making its way through the State Legislatures in Illinois and New York as state lawmakers across the nation establish high-speed Internet grant programs.

That trend looks like it’s continuing in Michigan where Democratic Gov. Gretchen Whitmer and the state’s GOP-dominated Legislature recently reached a deal to pass a nearly $5 billion spending bill.

While the “Building Michigan Together Plan” is being “celebrated” by the governor’s office as a way to “grow the economy, create jobs, and benefit families in every region of the state,” the main supplemental spending bill, known as Senate Bill 565 (SB 565), may sink some hope community broadband advocates have for leveraging the windfall of federal funds the Great Lakes State is getting from the American Rescue Plan Act (ARPA) and the forthcoming funds in the Infrastructure Investment & Jobs Act (IIJA).

Protecting Incumbents from Competition

The legislation allocates nearly $251 million for a statewide broadband grant program to be overseen by the newly created Michigan High-Speed Internet Office (MIHI), a subdivision of the state’s Department of Labor and Economic Opportunity (LEO). But, buried in Section 359 of the bill, paragraph (3), it stipulates that Michigan's “infrastructure grants must only be allocated for projects that support the provision of broadband service in unserved areas.” 

The IIJA defines “unserved” locations as census tracts that do not have access to broadband with minimum download and upload speeds of 25/3 Megabits per second and “underserved” as census tracts that do not have access to 100/20 Mbps service.

And while the IIJA does say that the money from the National Telecommunications and Information Administration (NTIA) Broadband Equity, Access, and Deployment (BEAD) Program must first be used to deploy networks in “unserved” areas, it does NOT say those funds “must only be allocated” to unserved areas. It specifically says that after unserved areas have been addressed, the funds can, and should, be used to deploy networks in “underserved” areas.

To Michigan’s credit, the bill defines “unserved” as those parts of the state that do not have access to 100/20 Mbps connectivity, which is what the IIJA defines as “underserved.” So, in effect, the Michigan bill expands the federal definition of “unserved” to include what the IIJA defines as “underserved” areas.

Still, in Michigan, as in most states, there are two massive broadband gaps. Those in rural, predominantly white areas where infrastructure is lacking and those in more urban areas that are predominantly Black and other historically-marginalized communities where the most significant problem tends to be affordability and poverty-related challenges to accessing broadband (though there are infrastructure gaps there too).

The United States has spent tens of billions on the rural challenge while all-but ignoring the urban challenges, which we believe affects about four times as many people. Michigan is doubling-down on that discriminatory approach despite the clear direction within the Rescue Plan to address urban challenges as well as rural

ILSR's Director of the Community Broadband Networks Initiative Christopher Mitchell said he considers the Michigan bill to be “a shot across the bow of Detroit because this language looks like a way to stop efforts to address affordability problems in urban areas.”

In the bill that passed in Michigan, grant funds are being limited only to “unserved” areas. And, similar to the legislation being proposed in Illinois, in Section 359, paragraph (4), it goes on to explicitly state:

The (Michigan) department of labor and economic opportunity must not directly or indirectly award infrastructure grants to a governmental entity or educational institution, or affiliate, to operate or construct broadband infrastructure.

While the IIJA does not have a preference for publicly owned and cooperative projects (as the Biden Administration initially wanted), it does explicitly say that states cannot exclude cooperatives, nonprofit organizations, public utilities, or local governments from being eligible as grant recipients.

And that’s the one saving grace contained in the Michigan bill: a provision that says: “unless another Internet service provider has directly applied for an infrastructure grant in the same unserved area, the Department of Labor and Economic Opportunity may award grants to governmental entities for infrastructure grants,” but “only for a public-private partnership.” And even then, those public-private partnerships are only allowed in “unserved” areas.

Because the NTIA has yet to publish its final rules on how the BEAD Program funds established by the IIJA can be spent, it’s not clear if Michigan will be denied its forthcoming broadband deployment money, considering the state’s grant program does expand the definition of “unserved” and allows for public-private partnerships.

We should also note that it is not clear to us how much of MIHI’s $251 million budget comes from state funds, if any, and how much relies on federal funding. Based on the language in the enabling legislation of the state’s new grant program, however, it specifically says that a portion of the state’s Rescue Plan Funds will be used for the purpose of operating “a Michigan broadband program, consistent with the Coronavirus Capital Projects Fund, section 604 of the American Rescue Plan Act of 2021.” 

And depending on what the final NTIA rules on BEAD ultimately require, here again we echo what Kevin Taglang, Executive Editor at the Benton Institute for Broadband & Society, noted in his detailed analysis of the Illinois bill: Michigan risks losing access to hundreds of millions of dollars in federal support for broadband deployment, as SB 565 imposes limits on governmental entities that are far more rigid than what is laid out in the IIJA.

Even if Michigan’s grant program passes NTIA’s muster, Michiganders weary of not having a choice of providers will not be happy with a grant program that limits new network deployment only to unserved areas – a recipe for protecting monopoly incumbents from any competition whatsoever.

We should know more in May when NTIA is expected to release the BEAD Notice of Funding Opportunity (NOFO), which will describe the requirements under which it will award grants for the BEAD program.

Municipal Broadband Bright Spot in Holland

There is one municipal broadband bright spot in Michigan that can be found in Holland, a city of approximately 33,000 in the southwest part of the state along the shore of Lake Macatawa.

Last month, the Holland Board of Public Works (BPW) presented a plan to the Holland City Council to build an open-access fiber network. The estimated price tag for construction is $24 million with the Holland BPW requesting a millage to pay for the construction costs.

The city council is supportive of the idea, although as reported by the Holland Sentinel, city councilors are considering allocating $4.2 million of its Rescue Plan funds to help pay for network construction, reducing the amount of tax dollars needed to fund the buildout of a city-wide open-access network.

Holland BPW General Manager Dave Koster is confident the proposal will benefit the city, pointing to the success of its downtown pilot project.

Similar to public ownership of city streets, the proposed publicly-owned broadband network would be open access, encouraging Internet companies to offer fast internet for less. Given the success of our pilot project downtown, we are confident we can manage the infrastructure reliably and pass along the savings to our customer-owners.

Right now, city officials are aiming for the city’s August primary election to put the millage question on the ballot.

To see and hear Holland Mayor Nathan Bocks make the case for building an open access network in Holland, click on the video below:

Inline image of Michigan State Legislature courtesy of Flickr user Mike Figliuolo, Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0)