Are You Shovel-Ready? Part II: Planning a Winning Program

By Andy Spurgeon

 

In the second installment of Tilson’s blog series, “Are You Shovel-Ready?”, Tilson’s VP of Strategy & Business Development, Andy Spurgeon, shares his experiences from NTIA’s Broadband Technology Opportunities Program – which funded more than $3B in broadband programs. Andy leverages his experience at NTIA to outline the key steps for planning a broadband program that will put your application on the fast track to funding.  

To learn more about Tilson’s comprehensive broadband deployment services, click here or contact us to discuss your specific broadband deployment goals.

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INTRODUCTION

A wave of broadband infrastructure funding is expected in 2021 and access to that funding will be competitive. Evaluators will consider how your project adheres to program requirements, if it has a solid financial plan and schedule, how risky it may be, and whether it delivers sufficient benefit to the target beneficiaries established for the program. By considering these topics in advance, you can design a project that will both win funding and succeed during implementation.

 

STEP 1: ASSESS PUBLIC FUNDING OPPORTUNITIES

In our last article, my colleague Adam Quinlan discusses the critical questions that must be considered when assessing public funding opportunities for broadband infrastructure:



If you have completed this initial evaluation and determined that the program is a fit, the next step is to develop program that meets those requirements and can succeed at the level of funding available.

 

STEP 2: CREATE A SUSTAINABLE FINANCIAL PLAN

Using public funding for network deployment poses some unique challenges; many state and federal broadband infrastructure programs limit the use of funds to capital expenditures during the period of the award. Some permit the use of funding for eligible operating expenditures incurred during the period of performance of the award. Almost no programs provide ongoing funds to subsidize operations once the grant period ends! This means that it is essential to account for ongoing operating costs and working capital requirements.

At Tilson, we define a successful broadband project as:

​During my tenure with the federal government, my colleagues and I frequently met with local and regional stakeholders to discuss the benefits of broadband and how to initiate programs. These audiences included economic development, local business groups, and political stakeholders with an interest in advancing broadband availability among their constituencies. One of the biggest stumbling blocks among stakeholders was a misunderstanding of three critical truths of telecommunications and broadband:

  1. Owning and operating a network costs money. Fiber optic cables get cut. Utility pole attachment fees are due each year. Storms damage infrastructure and misalign wireless equipment. Electronics break or become obsolete and must be replaced and upgraded. You must pay for sufficient transport bandwidth to connect your network and subscribers to the rest of the world. Infrastructure costs do not end at deployment and you must account for these in your financial modeling to deploy a sustainable network.
     
  2. You must spend money to make money. To deliver service, you must connect customers. For fiber-to-the-premise networks, that means a drop cable and customer premise equipment (CPE) at every premise. For fixed wireless, that usually means radios with line of sight to each customer at every premise. Delivering service means you have labor, equipment, and materials costs for every customer connection. We refer to this as “success-based capital”. You have successfully acquired a customer; now you need to pay to connect them!
     
  3. Networks lose money for a period after launch. Because of the points above, even if you have subscribers at network launch, working capital requirements and operating expenses mean that your network will lose money. This occurs because combined expenses (construction, operation, debt service, success-based capital) will exceed revenue until there are sufficient subscribers for the network to break even. A basic graph of broadband infrastructure revenue and income looks something like the chart below. Revenue trails network deployment and commencement of operations, leading to operating losses until the business reaches operating scale and recurring revenues outpace capital and operating expenditures.   



    Operating losses are the bad news. The good news is that we can anticipate them! That means we can plan for losses, scale our projects and networks with these costs in mind, build financial relationships to overcome them, and deploy sustainable projects.

 

STEP 3: CONSIDER RISK MANAGEMENT

During my time at the National Telecommunications & Information Administration, we assessed the risk of grant applications as part of our due diligence process. We evaluated each project by considering four fundamental project factors that could expose the agency to financial, operational, legal, and reputational risk if a grant awardee could not perform as expected:

  1. Technical: most infrastructure grant and loan programs prefer to support established technologies, rather than invest in emerging solutions. These are not research and development programs. It is important to explain the widespread use and end-user success of the technologies you are proposing to deploy.
     
  2. Financial: The financial performance of publicly funded programs is critical. Most subsidy programs are monitored for potential waste, fraud, and abuse and it is financial issues that lead to most criticisms of the use of public funds. Expressing a detailed budget and solid financial model that address both the initial deployment and long-term sustainability are critical to assuring application reviewers that your program is low-risk and likely to be successful.
     
  3. Organizational: a strong, experienced team is another critical success factor. You should identify the key personnel on your project, explain how your project will be staffed, and include resumes that express past performance and how that will promote the success of your proposed project.
     
  4. Schedule: subsidy programs always have an end date and may have performance targets during the award period (e.g.., a project should be “substantially complete” by a certain date). Establishing a project schedule that aligns with your budget demonstrates your expertise and confirms that you understand the expectations and requirements of the program.

When developing a project, you can strengthen your application by considering these factors and proactively addressing them in your application through a risk matrix or other artifact.

 

STEP 4: INCLUDE DETAILED BENEFITS AND USE CASES

Understanding and addressing the targeted impact of the grant program is essential. Make sure to address the question, Does your program deliver sufficient benefit to the target beneficiaries? A popular business phrase when delivering a sales-pitch is ‘know your audience,’ and approaching public infrastructure funding is no different. A program that acutely addresses the target audience and motivation behind the subsidy has a greater chance of being funded than even the most well-planned program that fails to emphasize the target beneficiaries. 

Three key considerations should be top-of-mind when developing your program and approaching public funding:

  1. Align: Revisit your initial determinations and the motivating factors of both your program and the relevant public funding to ensure they are still in alignment.
  2. Quantify: Establish concrete numbers to support the planned impact of your program in furtherance of its goals as they align with the goals of the public funding source.
  3. Follow Through: As indicated previously, the onus starts after awards have been made. It is imperative that the aligned conceptual goals of your program and those of the funding vessel are realized and measured for reporting and compliance purposes.

 

REMEMBER: REMAIN ADAPTABLE

Most applicants approach a grant with some understanding of the problem they are trying to solve. More than likely, you will already have a sense of project scale, funding requirements, beneficiaries, and other details. Having a strong sense of what you want to accomplish is both a strength and a weakness. On one hand, you are not starting from scratch and have likely evaluated current levels of access and adoption, captured information on market demand, and developed a sketch – if not a high-level design – of the infrastructure required to address the problem.

On the other hand, this knowledge can become a hindrance if you fail to adapt your understanding to the program and available funding. You will almost always need to scale the project down or make changes to meet program requirements and work within available levels of funding. You must be flexible and not dogmatic in your pursuit of funding! This applies to service levels, technology, scale, and the number of beneficiaries. Do not let the perfect be the enemy of the good.

 

CONCLUSION

The United States is entering an unprecedented period of public investment in broadband infrastructure. Substantial funding will become available beginning in 2021 and competition will be fierce. Developing a program design that is supported by reliable data and aligns with program goals will assure evaluators that your program can and will be successful, if awarded.

Remember that evaluators will consider how your project adheres to program requirements, if it has a solid financial plan and schedule, how risky it may be, and whether it delivers sufficient benefit to the targets established for the program.  Being proactive in early-stage planning efforts will address these considerations and increase your opportunity to procure funding, laying the groundwork for a successful infrastructure program in your community.

 

HOW TILSON CAN HELP

Tilson designs, builds, and maintains sustainable and cost-effective broadband networks that are essential to the health, safety, and quality of life in the modern community. Learn more about our comprehensive broadband deployment services or or contact us to discuss your specific broadband goals. 

 

Andy Spurgeon

Andy Spurgeon is responsible for Tilson’s revenue generation strategy and business development activities. Previously, Andy served as Chief of Operations for broadband programs at the National Telecommunications & Information Administration (NTIA), with responsibilities spanning grant evaluation and oversight, data analytics, broadband technical assistance, and the implementation of the National Broadband Availability Map (NBAM). 

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