$309 million in broadband grants headed for Gianforte’s approval (2023)

A state commission advanced grant recommendations Wednesday for a massive, $309 million rural broadband connectivity push, moving a previously delayed grantmaking process forward despite concerns voiced by Montana-based internet companies about the amount — approximately $110 million — slated for telecom giant Charter Communications.

The list of ConnectMT awards, funded by federal stimulus money, now heads to the desk of Gov. Greg Gianforte for his approval.

“Is this perfect? No. And I don’t think anything ever is perfect. But what this does is it serves Montana best. And I’m proud to say that I think with the work that we’ve done that we’ve gotten to that point,” said Communications Advisory Commission chair Sen. Jason Ellsworth, R-Hamilton.

Charter’s combined grant amount to subsidize 17 broadband projects in different parts of Montana would be a historic award for state government, which normally works with sums of money at least an order of magnitude smaller.

In comparison, a grants list maintained by the Montana Department of Commerce indicates the department’s awards in fiscal year 2019, before pandemic-era stimulus dollars flooded into state coffers, totaled $79 million across 421 projects, with the largest single award being $10 million. A contract with a consulting group hired to oversee the struggling Montana State Hospital signed by the state health department earlier this year totals $7 million.

The broadband commission, which includes Gianforte administration officials as well as Republican and Democratic legislators, capped the amount it recommends allocating to Charter projects at approximately 35% of the total broadband program.

That cap, however, wasn’t enough to quiet objections raised by smaller, Montana-based telecommunications companies that want more of the money to expand their own networks. Several have argued this year that the scoring system the commission developed to rank grant applications gave Connecticut-based Charter an unfair edge in places where it and local internet service providers proposed competing projects.

One small telecom company owner, Robert Bialecki of Great Falls-area provider KDS Fiber, wrote in an email to the commission this week that awarding public money to Charter would jeopardize his business by providing a public subsidy to a competitor that wasn’t previously focused on building in his coverage area.

“KDS was rolling out fiber to rural neighborhoods, households, and small businesses in Cascade County as an upgrade from wireless services before the federal subsidies came available,” wrote Bialecki, whose company’s application was outscored by a Charter proposal.

“ARPA was not designed to crush locally owned, small businesses in our communities,” Bialecki wrote.

SCORING THE PROPOSALS

The small telecom companies argue the state’s grant scoring system has allowed Charter to “cherry-pick” projects that serve comparatively profitable urban centers with less distance between customers while excluding less-profitable rural areas. In some cases, the smaller providers say, their proposed projects rely on those higher-density areas to balance otherwise unprofitable rural expansion —meaning rural customers could be left out if the state forges ahead with Charter-proposed projects that improve connectivity in more constrained areas.

In a Wednesday letter to the broadband commission, Nemont Telephone Cooperative CEO Mike Kilgore wrote that his organization had applied for two grants to help fund broadband expansion east of Billings around Huntley Project and Worden through a subsidiary, Project Telephone Company. Charter, he noted, had put in for grants to expand its network in some of the same territory.

Because Charter’s applications were scored higher than Project Telephone’s in the commission’s rankings, its proposed projects take priority in the overlap region, leaving the Montana-based company with a partial grant award.

However, Kilgore wrote, Project Telephone is already the region’s Public Service Commission-regulated telephone service provider and has been offering broadband service in the Huntley and Worden exchanges since 2002. As such, he said, his company is obligated to provide service to all customers in the region and has proposed broadband projects with broader coverage.

“The applications of Charter represent the expansion of their Billings network limited to the eastern suburbs of Billings while excluding the highest cost, most difficult to serve locations,” he wrote.

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Kilgore also argued the commission’s scoring criteria violates the state law that created the broadband program last year. That law requires the scoring criteria to give “the highest weight or priority” to factors including “the length of time the provider has been providing broadband service in the state,” “the extent to which government funding support is necessary to deploy broadband service,” and “the extent to which the project does not duplicate any existing broadband service infrastructure in the proposed project area.”

Those criteria, Kilgore wrote, don’t appear to have been included on the ConnectMT program’s official scoring matrix.

Department of Administration spokesperson Megan Grotzke said in an email Thursday that the department didn’t receive Kilgore’s letter until after Wednesday’s meeting began. She also noted that the scoring criteria went through a formal public comment process last year.

Grotzke didn’t provide an explicit response to a question about whether the statutory criteria singled out by Kilgore had been accounted for as grant applications were scored.

“While making a historic investment to bridge the digital divide in Montana and increase Montanans’ access to affordable, reliable broadband, CAC’s process and recommendations comply with state law,” she wrote, referring to the Communications Advisory Commission.

Charter, which offers internet service in Montana under the Spectrum brand, has lobbied the broadband commission extensively. The company’s Montana Government Affairs Director, Bridger Mahlum, said at Wednesday’s meeting that the company supports the current recommendations.

“We are looking forward to getting our shovels out and getting access to Montanans who don’t have it,” Mahlum said.

WHERE THE MONEY COMES FROM

When the state broadband program was launched last year, its champions described it as a once-in-a-generation opportunity to make a transformational investment in modern internet connectivity in parts of rural Montana where access has lagged.

“Too many of our communities, particularly in rural and frontier Montana, don’t have access to reliable broadband,” Gianforte said in a release as he signed the program into law in May 2021. “Greater access to broadband will increase opportunities for Montanans, whether in ag or high-tech or other Montana industries, but we need to get more cable in the ground.”

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The money fueling the program comes from the American Rescue Plan Act, a coronavirus pandemic stimulus measure that was passed by the Democrat-controlled U.S. Congress over opposition from most congressional Republicans. When the act passed in March 2021, Gianforte, a Republican, called it a “fiscally irresponsible progressive wish list” in a tweet from his official account. His office has since said he’s committed to ensuring that Montana’s relief money is put toward effective long-term investments.

Last year’s Montana Legislature followed the federal bill with its own laws implementing a spending framework for the roughly $2 billion that the American Rescue Plan Act, or ARPA, allocated to state government. That framework dedicated funding to water infrastructure, public health efforts, economic development and broadband expansion. Lawmakers created a system of public-facing advisory committees including the broadband commission, but delegated final authority for most spending decisions to the governor.

As it sketched out parameters for the ConnectMT broadband expansion effort, the Legislature chose to create a grant program through which internet service providers would receive public money to support projects that expand coverage to underserved corners of Montana and, in theory, wouldn’t be economically viable without a subsidy. The ConnectMT law also included a grant challenge mechanism intended to give existing providers a way to fend off subsidized competition from companies that wanted to use the grants to move onto turf where existing providers had already invested.

The Legislature specified the effort would be housed within the Montana Department of Commerce, the agency that handles most of the state’s economic development grantmaking. The Gianforte Administration later determined the program would instead be managed by the Montana Department of Administration. The heads of the two departments signed a memorandum of understanding between the two agencies formalizing the transfer in June 2021.

“Commerce recognizes that the DOA’s Architecture and Engineering Division (‘A&E’) has the necessary financial, procurement, human resources, and construction expertise to implement the program,” the memo reads in part.

The Department of Administration and its director, Misty Ann Giles, moved ahead with the broadband effort, hiring program staff, developing the scoring criteria with input from the advisory commission and unveiling a state broadband coverage map to guide decisions about where to focus expansion efforts.

The state’s broadband coordinator, Chad Rupe, left his post in May 2022 after six months with the program to take a job at a California telecom company. In an email to advisory commission members announcing Rupe’s departure, state ARPA Program Director Scott Mendenhall said the state had contracted with an outside engineering firm, CTC, to review grant applications and wrote that Giles would continue to lead the program.

Industry news outlet Fierce Telecom quoted Rupe last month discussing the challenges facing states like Montana as they try to develop new broadband grant programs.

“You look across the nation and there’s a lot of state offices that are getting stood up and they lack the personnel, they lack the expertise, they lack the track record and so do the state legislatures and different governor administrations. There’s just not a lot of depth of knowledge and expertise in these arenas,” Rupe told the outlet. “And so what you get is you get a whole bunch of cooks in the kitchen who don’t really know how to cook and they all want to put their own recipe into the mix. So, it’s really a challenge.”

The challenges facing the Montana broadband program came to a head in August, when the broadband commission, led by Giles and Ellsworth, had planned to forward its grant recommendations to the governor. However, an initial grant application ranking that proposed awarding Charter nearly half the program’s funding drew criticism from small telecom companies, some of whom alleged their applications had been scored improperly.

State officials responded by convening a new committee to conduct what they called an “independent review” of the grant scoring by a group of state employees. That review, which found some categories had been left unscored in the initial pass, resulted in adjusted scores for 76 of 85 applications, in many cases bumping projects up by 20 or more points out of 100.

“Going through this process and getting everybody a complete and accurate score, that was our goal. And that’s always been our goal,” Ellsworth said at a Nov. 1 meeting where the revised scores were presented.

That revised ranking, with the addition of extra funding from a separate pot of stimulus money and the 35% cap limiting the amount of money granted to any single entity, was the basis for the grant awards recommended by the broadband committee this week.

In addition to Charter’s $110 million for 17 projects, large proposed recipients include Blackfoot Telephone Cooperative, which is slated for $60 million to support seven projects in western Montana, and Grizzly Broadband, which is slated for $48 million to support six projects in the Bitterroot Valley. Seventy-three projects are recommended for award in total.

Project Telephone, the eastern Montana Nemont subsidiary, is on the books for a $4 million allocation. Bialeki’s KDS isn’t currently slated for a grant award, but remains eligible for alternate funding if higher-ranked companies pull their projects out of the program.

While they await final action on the current grants from the governor, broadband committee members are looking ahead to a fresh round of federal money heading the state’s way from the Infrastructure Investment and Jobs Act. That amount, Ellsworth said this week, could total as much as half a billion dollars.

“Guess what? Round two is coming. And we want to make sure we serve the entire state,” he said.

$309 million in broadband grants headed for Gianforte’s approval (6)

This story is published by Montana Free Press as part of the Long Streets Project,which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Discuss MTFP’s Long Streets work with Lead Reporter Eric Dietrich atedietrich@montanafreepress.org.

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