Last November, we reported on a change to the tax code that is deterring rural telephone and electric cooperatives from leveraging government funding to expand broadband access. We were alerted to the issue by the office of Senator Tina Smith (D-MN), who sent a letter to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig requesting that they remedy the issue and announcing her intention to introduce corrective legislation.

Federal elected officials have introduced such a measure, called the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act. Senator Smith together with Senator Rob Portman (R-OH) introduced the Senate version of the bill, S. 1032, in early April, followed by Representatives Terri Sewell (D-AL) and Adrian Smith (R-NE), who introduced a companion bill, H.R. 2147, in the House a few days later. The RURAL Act would ensure that co-ops, which are many rural communities’ only hope for better connectivity, could take full advantage of federal and state funding for broadband networks.

Addressing Legal Ambiguity

As we explained last year, a tax policy change included in the 2017 Tax Cuts and Jobs Act carelessly put rural co-ops at risk of losing their tax-exempt status if they accepted government funding for broadband projects or disaster relief, among other things. Traditionally, these government grants were excluded from the requirement that electric and telephone cooperatives obtain at least 85 percent of their income from members (often referred to as the member income test) to maintain their tax exemption. The 2017 law threatened this precedent by changing the tax code so that “any contribution by any governmental entity or civic group” is now included in a corporation’s gross income. This has made some co-ops hesitant to apply for programs like the U.S. Department of Agriculture’s ReConnect Pilot Program for fear of jeopardizing their...

Local communities in the state of Mississippi have the legal authority to develop publicly owned Internet networks and offer broadband, or any other utility, to the general public. When it comes to bonding in order to financing deployment for broadband infrastructure, however, the law isn’t as cut and dry. In order to stay on the right side of the law, the community of Columbus, Mississippi, decided to obtain permission from the state legislature to issue bonds for a $2.75 million expansion of their existing fiber optic network. Things didn’t work out as well as they had hoped, thanks to powerful lobbying influence in Jackson.

Stuck in Committee

Rep. Jeff Smith is Chair of the House Ways and Means Committee and introduced HB 1741, which would have granted permission for the city of Columbus to issue bonds to fund the infrastructure for better connectivity. Smith, who is also a board attorney for Columbus Light and Water (CLW), filed the bill because past opinions from state Attorneys General conflict on interpretation of the law. Bond attorneys told the utility board that the safest way forward would be to approach the Mississippi State Legislature for permission to bond.

The bill was directed to the House Local and Private Committee, but never received a hearing before the committee deadline of March 28th. According to Smith, HB 1741 had necessary support in the House, but Senate leadership would not let the bill advance:

"We were told lobbyists from Comcast and the other big cable providers had sat down with (Lt. Governor Tate Reeves) and encouraged him to kill three similar bills," Smith said. "He's the president of the Senate so ... when we heard that we knew it wasn't going to make it." 

When compared to the lobbying forces of Comcast, AT&T, and other national Internet access providers, CLW and the city of Columbus can expect to be outgunned at every turn. Large companies with millions to spend on experts well-versed at convincing state Senators not to take up bills such as HB 1741 have an unfair advantage. With the financing and manpower to...

Current lawmakers in the Vermont House have rapidly advanced H 513, a bill that addresses both policy and funding hurdles in an attempt to expand broadband throughout the state. After a vote of 139 - 2, the bill went on to the Senate on March 26th.

Looking at Local Models

H 513 recognizes that more than a quarter of the state’s premises don’t have access to broadband speeds as defined by the FCC, 25 Megabits per second (Mbps) download and 3 Mbps upload. The state’s Department of Public Service, which assembled the data, also determines that almost a fifth of premises can’t obtain speeds of 10 Mbps / 1 Mbps. With so many rural communities hurting for access to fast, affordable, reliable connectivity, state lawmakers are anxious to find tools to expand broadband across Vermont.

Legislators note in the language of H 513 that they believe the FCC’s “light-touch” approach toward expansion of broadband:

“…does little, if anything, to overcome the financial challenges of bringing broadband service to hard-to-reach locations with low population density. However, it may result in degraded broadband quality of service.”


H 513 goes on to acknowledge that grassroots approaches that use local knowledge and support will be the most successful in Vermont.

Lawmakers and their staff have lauded ECFiber as one model that works in a place like Vermont, where many smaller communities can pool their resources and work together to develop a regional network. As the Communications Union District has developed over the years and dealt with funding challenges head-on, it has become apparent that access to capital is one of the most difficult hurdles to overcome.

Funding for Innovation

In order to help local projects, H 513 will establish the Broadband Innovation Grant Program within the Department of Public Service (DPS) and the Broadband Expansion Loan Program within the Vermont Economic Development Authority (VEDA). 

Governor Jay Inslee started to promote his bill for better broadband earlier this year and, with any luck, Washington will have a solid foundation to expand broadband before the end of this year’s legislative session. SB 5511, a measure backed by the Governor, has sailed through the Senate, and has now appeared in the House. The bill establishes a State Broadband Office and earmarks funding for local broadband initiatives.

The bill is on the agenda for today's House Innovation, Technology & Economic Development Committee meeting at 10 a.m. PDT.

Difficult But Doable

In order to bring high-quality Internet access to all of Washington, millions and possibly billions of dollars of infrastructure investment are required. No one is certain how much completing the task will cost, and obtaining a better estimate will be one of the tasks of the State Broadband Office (SBO), which will be created by SB 5511. The bill allocates $1.2 million for the SBO.

Rural communities, economic development organizations, and tribes have all supported a measure to establish state investment in broadband infrastructure deployment across Washington. In January, Inslee met with leaders from communities across the state, including Colville Business Council member Susie Allen representing the Colville Tribes, to discuss the need for state funding:

“I have been working on broadband initiatives on our reservation for many years, but unfortunately, substantially, we still remain under-served and unserved, without broadband services,” said Allen. “The Colville Tribes have invested several millions of dollars to begin to meet this need, but we require assistance from the state and federal agencies to complete this work… The lack of broadband service creates not just an inconvenience, but poses real safety concerns throughout the reservation.”

The Colville Tribe has invested $6 million in order to connect the tribal government and under the terms of SB 5511, they would qualify to receive more funding in grants and low-interest loans.

The Tribe...