Minn. Legislators Weigh $276 Million for Broadband

Minnesota lawmakers weighed bills Tuesday to release more cash for broadband and create a tax exemption for fiber broadband. In Florida, electric cooperatives raised concerns a bill to apply pole attachment rules to co-ops would make it harder for them to bring broadband to hard-to-serve areas.

Minnesota would appropriate $138 million each for FY 2024 and FY 2025 for the state's border-to-border broadband program, under HF-2323. The bill would also raise the cap on grants that may be awarded to each project to $10 million, twice the current $5 million limit. Under an amendment considered at a House Agriculture Committee hearing, the bill would set up a pilot program that would allow the state to fund up to 75% of a project’s cost if it’s in an area with low population density. The existing program provides a maximum 50% state match for all projects.

"Additional funding is necessary to ensure the standard grant program does not miss a construction season while we wait for federal funds to arrive,” said Vice Chair Kristi Pursell (D), the bill’s sponsor. The bill answers the governor’s request for $276 million over two years, she said. The existing $5 million grant cap, means providers and communities with large areas often need to complete work in phases, said Pursell: Increasing that limit would "relieve some planning stress on providers and their local partners." Pursell proposed including her bill in an agriculture omnibus.

The governor’s broadband task force identified a $426 million gap between all available state funds plus estimated federal funding and what it would cost to connect every household and business in state, said Nathan Zacharias, Association of Minnesota Counties technology policy analyst: HF-2323 will help close that gap and would be a funding “bridge” until the state gets money from the federal Infrastructure Investment and Jobs Act. Areas with too little population to raise enough money for the current 50% matching requirement would benefit from a policy allowing them to cover 25% and get a state grant for the remaining 75%, he said.

Democrats and Republicans joined earlier that day in support of a bill to exempt broadband from a Minnesota sales tax. "I will let this bipartisan sea rise up," Chair Ann Rest (D) responded to committee members’ support at a livestreamed Senate Taxes Committee hearing.

Lawmakers thought they had exempted broadband from the tax when they passed a 2017 bill carving out fiber, said SF-1063 sponsor Sen. Torrey Westrom (R). But later, the state revenue department applied the exemption only to television and landline telephone uses of fiber. Westrom’s bill, which would apply retroactively to the date of the original exemption, "cleans up what many of us thought was happening in 2017."

Everyone missed the caveat in the original exemption saying it was only for landlines and TV, said MTA President Brent Christensen. Auditors told some Minnesota Telecom Alliance members they had to pay the sales tax on only the broadband portion of fiber they used for broadband, telephone and TV, said Christensen: That’s tough to prorate.

“The biggest cost” of SF-1063 “is the catchup part,” said Rest, citing a fiscal impact estimate of $13 million for FY 2024 to refund ISPs, and then about $2.5 million annually in following years. The $13 million looks like a "a one-time cost, which in the Tax Committee we like,” said the chair. “And then the ongoing cost in Tax Committee terms is pretty reasonable.” Sen. Aric Putnam (D), author of similar bill SB-1523, said he would like to co-sponsor the Republican measure.

The need for the bill raises concerns for Sen. Steve Drazkowski (R) about a possibly “activist” revenue department that may require more oversight, he said. The burden is on legislators, too, countered Rest. “How come we didn't read the bill?”

Fla. Pole Attachments

The Florida Senate Regulated Industries Committee unanimously advanced a bill (S-626) Tuesday to apply state pole-attachment rules to electric cooperatives. Florida reverse-preempted FCC pole-attachment authority last year (see 2206070071), allowing the state to regulate attachments and resolve disputes. Locally owned co-ops testified at the livestreamed hearing that they should remain uncovered by such rules.

Electric cooperatives were exempt from the FCC’s pole attachment regime, said Mike Bjorklund, Florida Electric Cooperative Association general manager: Don’t change that now that Florida has authority. Congress didn’t think rules were needed for community-owned entities, Bjorklund said. Officials from several co-ops in the association said they committed to bring fiber to 100% of their areas, but the bill could hinder deployment.

Multiple committee members asked for more information on what kind of financial impact the bill could have on co-ops. Bjorklund couldn’t provide specifics but said more regulation will be “troublesome” because it’s already hard enough to bring broadband to areas that only co-ops will serve.

Charter Communications supported the bill. Reaching pole attachment agreements with co-ops has been "problematic because they have no incentive to negotiate," especially with co-ops that want to get into the broadband business, said Berger Singerman’s Floyd Self, representing Charter. Marva Johnson, Charter Communications group vice president, said finding agreement with co-ops is like negotiating with her mother. "At the end of the day, I have no authority."

Stakeholder conversations will continue to work out differences with the bill, said sponsor Sen. Nick DiCeglie (R):The bill’s intent is to bring co-ops under the same framework as other ISPs.

Also, the committee advanced commissioner confirmations for the Florida Public Service Commission, supporting nominees Gary Clark and Gabriella Passidomo. Gov. Ron DeSantis (R) reappointed them to the PSC in September.