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May 23, 2023

How State Broadband Offices Are Using Initial Dollars from Capital Projects Fund

First half of allocations going to wide variety of initiatives to expand high-speed internet access

States are implementing a variety of strategies as they allocate the initial rounds of federal Capital Projects Fund (CPF) dollars to help expand access to broadband services. The U.S. Department of the Treasury has officially released more than half of the CPF dollars, with $6 billion awarded to 40 states as of May 2023. Approaches to using the funding differ widely depending on states’ needs and resources, but in many instances, officials are making these decisions while planning how best to use other federal funding still to come in order to ensure that more residents will have high-speed internet.

Congress established the CPF as part of the massive American Rescue Plan Act enacted in March 2021 as the COVID-19 pandemic unfolded. The fund allows states, territories, and Tribal governments to “carry out critical capital projects that directly enable work, education, and health monitoring, including remote options, in response to the public health emergency.” The government distributed funding based on a formula accounting for total population and the percentage of rural and low-income households. And given the national focus on rapidly responding to the disparities in the digital divide laid bare by the pandemic, CPF allows states relatively broad flexibility in designing their programs.

The Department of Treasury includes a few specific requirements for CPF, including that states can only fund providers participating in the Affordable Connectivity Program and that funded broadband projects must be capable of minimum speeds of 100 megabits per second (Mbps) for downloads and 20 Mbps for uploads and can scale to 100/100 Mbps.

With a total of $10 billion available through 2026, CPF will be a critical tool for expanding internet access nationwide. Early analysis of the funds released so far reveals emerging state strategies. The approaches suggest that states are intentionally designing their CPF programs to complement the forthcoming $42 billion coming to states through the federal Broadband Equity, Access, and Deployment (BEAD) Program and the $2.75 billion through Digital Equity Act (DEA) programs.

How states are deploying CPF

As of April 2023, the majority of CPF funding announcements have involved states using funds to expand or create programs that target what is known as last-mile service—the broadband connections available directly for customers’ homes or businesses—in unserved and underserved areas. Those are typically areas without access to internet speeds of 25/3 Mbps or 100/20 Mbps, respectively, depending on the definitions used by each state and territory. For example, Indiana has allocated its entire $203 million CPF allocation to its Next Level Connections grant program to build on prior state and federal funding for unserved areas. Since 2019, the program has run three grant rounds, awarding a combined $268 million to connect over 74,800 unserved homes and businesses. Similarly, Michigan has launched a new program, Realizing Opportunity With Broadband Infrastructure Networks (ROBIN), with its $251 million allocation. As a sign of state-wide interest in the ROBIN program, the Michigan High-Speed Internet Office closed applications on March 14, 2023, after receiving $1.3 billion in funding requests—more than five times the available money—from more than 150 applicants.

In addition, the availability of CPF dollars has increased the number of states operating line extension programs. These programs subsidize “curb-to-home” connections—the final infrastructure segments needed to connect each individual home or business to a network. For example:

- Maine set aside $20 million for its Reach Me Line Extension Incentives program.
- Minnesota allocated $15 million to its Broadband Line Extension Connection Program.
- West Virginia dedicated $25 million to the state’s Line Extension Advancement and Development Program.
- Pennsylvania’s Broadband Infrastructure Program, which received $200 million of the state’s CPF allocation, will accept proposals for line extension builds.

Within these programs, states are using CPF dollars to create new mechanisms to ensure that the money reaching communities reflects policymaker priorities. Arizona is dividing its funding to operate two parallel grant programs, one for projects in the state’s more urban counties and another in its more rural ones. South Carolina’s MAIN ST program, meanwhile, prioritizes projects serving rural town centers and their surrounding residential areas. And in Iowa, the state asked community leaders and groups to nominate specific areas within their jurisdictions as Broadband Intervention Zones, which it will evaluate for future funding rounds.

CPF money also can be used for “digital connectivity technology projects,” such as to purchase devices or public wi-fi equipment, and for “multipurpose community facility projects.” In March, Kansas announced the first CPF award to specifically fund digital connectivity programs: the Kansas Digital Technology Connectivity program will invest $15 million in public wi-fi infrastructure, devices, and digital-literacy training resources.

On the facility side, Delaware has dedicated $40.3 million to construct or expand nine libraries, providing access to high speed internet for community members who may lack access in their homes. Similarly, Idaho has dedicated $3.4 million to fund improvements at 23 libraries and Florida has invested $86.9 million to improve as many as 60 community facilities. Four states so far have said they will directly prioritize broadband access and adoption needs in affordable housing:

- New York plans to use $100 million to fund its Affordable Housing Connectivity Program for broadband infrastructure within low-income housing buildings.
- Nevada will allocate $55.2 million to the state’s Low-Income MDU [multidwelling units] Broadband Program.
- Connecticut designated $40.8 million to the Connecticut Broadband Infrastructure Program to “focus funding on low-income/multifamily curb-to-home broadband infrastructure.”
- Hawaii will provide $8 million to the Hawaii Public Housing Authority’s Connections Program to provide their facilities with affordable, 100/100 Mbps service.

In February, the U.S. Treasury Department said that as many as 20 other states have applied to use CPF for technology and facility programs.

CPF is one piece of broadband funding puzzle

On its own, CPF represents one of the single largest federal investments in broadband access and adoption in history, and importantly, the money will flow directly to states, territories, and Tribal entities. As research by The Pew Charitable Trusts’ has demonstrated, several states have established track records for running highly effective broadband grant programs.

As the CPF money is being awarded by the Treasury, another federal agency, the National Telecommunications and Information Administration, has started to distribute $65 billion from the 2021 Infrastructure Investment and Jobs Act for broadband and digital equity initiatives. In that context, how states structure their CPF programs then becomes a factor in their broader strategy.

Every state’s BEAD program will need to demonstrate that the state can fully reach every unserved area before funds can be allocated to other uses. In some states, CPF will serve as an accelerator, lowering the number of unserved communities and allowing states to plan for more flexible uses of BEAD funding. For others, the relative flexibility of CPF’s grant requirements creates an opportunity to support programs that may not squarely fit into BEAD’s more prescriptive process. This could allow states to augment funding that will be available for devices and community anchor institutions under BEAD and DEA.

The individual state BEAD and DEA programs will bring tremendous resources to state efforts to expand broadband access and adoption. But with more than half of CPF’s available funding already released, providers and community stakeholders will need to participate in the programs currently being developed and deployed. In fact, for a handful of smaller states and territories, their CPF allocations may rival or exceed their BEAD allocations, given the different formulas for each program. Engaging with CPF can help prepare jurisdictions and stakeholders for the upcoming BEAD and DEA programs. The spending represents significant investments that factor into each state’s unique strategy for ensuring and expanding critical broadband access. With another $4 billion in CPF announcements from the Treasury still to come, how states decide to use these funds will dictate how the federal support helps narrow the digital divide.

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