Annual Report on the Activities of the ConnectME Authority Report to the Maine State Legislature Joint Standing Committee on Utilities and Energy January 14, 2010 ConnectME Authority Annual Report January 14, 2010 TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................ 3 INTRODUCTION ............................................................................................................. 6 I. BACKGROUND .......................................................................................................... 6 A. The Importance of Broadband ....................................................................... 6 B. The Connect ME Initiative .............................................................................. 8 II. SUMMARY OF AUTHORITY AND BROADBAND ACTIVITIES.............................. 9 A. Budget.............................................................................................................. 9 B. Investments ..................................................................................................... 9 C. Grant Activities ............................................................................................... 9 D. ConnectME Authority Advisory Council ..................................................... 12 E. Model Cable Television Franchise Agreement ........................................... 12 III. FEDERAL BROADBAND ACTIVITIES AND INITIATIVES ................................ 13 A. American Recovery and Reinvestment Act of 2009 ................................... 13 B. Federal Communications Commission ....................................................... 14 C. Federal Legislation ....................................................................................... 14 IV. ONGOING AUTHORITY ACTIVITIES................................................................ 14 A. Maine Broadband Strategy Council ............................................................ 14 B. Coordinate Broadband Initiatives ................................................................ 16 C. Broadband Mapping and Inventory Project ................................................ 16 D. Broadband Adoption and Take Rates ......................................................... 17 E. Access to Facilities and Rights of Way ...................................................... 17 F. Health Information Technology ................................................................... 18 V. CONCLUSION ......................................................................................................... 19 Attachments: ............................................................................................................... 19 Attachment A – ConnectME Authority and Advisory Council Members ..................... 19 Attachment B – ConnectME Fund Reports ................................................................ 19 Attachment C – ConnectME Grant Awards: 2007, 2008, and 2009 .......................... 19 Attachment D – Letter from Governor John E. Baldacci to the NTIA. ........................ 19 Attachment E – Glossary ........................................................................................... 19 Submitted by the ConnectME Authority Page 2 ConnectME Authority Annual Report January 14, 2010 2010 Annual Report on the Activities of the ConnectME Authority Report to the Joint Standing Committee on Utilities and Energy January 14, 2010 EXECUTIVE SUMMARY In recognition of the critical importance of technology for education, health and business success in Maine, the legislature created the ConnectME Authority (Authority) in 2006, to develop and implement its broadband strategy for Maine.1 In 2007, the Legislature approved the Authority’s major substantive rule that defines the state’s broadband strategy and implementation process. In 2009, the Legislature created the Broadband Strategy Council (BBSC) to help implement Maine’s stated broadband strategy. The functions of the BBSC are: to advise the ConnectME Authority on opportunities available under the American Recovery and Reinvestment Act of 2009 (ARRA); and to advise the University of Maine System with respect to matters pertaining to the lease or sale of excess broadband capacity of the educational broadband service (EBS). 2 One of the ARRA projects recommended by the BBSC to the Authority and Governor was recently awarded $25.4 million for a middle mile-fiber ring project. The goal of the Authority is to facilitate universal availability of broadband service and to increase the “take rate” or adoption to equal or greater than the national average. Increasing access and take rates is critical to Maine’s education and economic prosperity. Nearly three years ago, approximately 86% of the State had access to high- speed Internet service with an adoption rate of approximately 40%. In the three years since the Authority was established, we estimate that broadband access or availability has risen to over 90% and nearly 60% of Maine households subscribe to some type of broadband service (compared to 75% nationally). 3 The Authority increased the access and take rates through its charge of identifying areas that do not have broadband access and then, to select projects for broadband expansion; administer the projects; and to provide funding, resources, and incentives for the projects. The Authority has struggled with incomplete data regarding the location of unserved areas of the state. The recently started comprehensive broadband mapping and inventory project will alleviate that problem and facilitate a more proactive approach to funding infrastructure projects in unserved areas. 1 PL 2005, c. 665, and PL 2008, c. 698. 2 Resolve, Chapter 108, 124th Legislature, First Regular Session. 3 “High-Speed Services for Internet Access: Status as of June 30, 2008,” Federal Communications Commission, July 2009. Submitted by the ConnectME Authority Page 3 ConnectME Authority Annual Report January 14, 2010 Much more work needs to be done meet these broadband strategy goals. As important, continued work needs to be done to bring all levels of government and agencies together to work collaboratively to get the best results for Maine’s future. This report summarizes the Authority’s activities; describes federal activities and initiatives; and outlines the Authority’s ongoing activities. In 2009, the Authority awarded its third round of grants, based on smaller, more focused proposals. The Authority suggested grant limits of $100,000 per project, funding no more than 50% of the total project. Recognizing the need for flexibility for exceptional proposals, we made eight awards for just over $600,000 (total project value of $1.23 million), to serve over 4,200 households in the most rural areas of Maine The following table summarizes all the Authority’s grant activities to date: Grant # of Grant Range Total Total Project Household Increased Year Grants Grants Amount Availability Availability 4 2007 6 $38K - $370K $738,724 $1.53 million 13,800 2.7% 2008 5 $45K - $533K $1.44 mil $5.5 million 9,000 1.7% 2009 8 $43K - $232K $609,860 $1.23 million 4,200 .8% 19 $2.79 mil $8.26 million 27,000 5.20% The grant dollars per household availability is higher for the last two rounds, and is expected to continue to rise, because the areas covered are becoming more difficult to serve and the projects are smaller. The Authority’s Executive Director also facilitated a legislatively mandated stakeholder process to develop a “voluntary” model cable franchise agreement for municipalities and cable companies that choose to use it. 5 The final model franchise agreement is posted on the Authority’s website. In 2010, the Authority will:  Complete the first phase of a comprehensive broadband mapping and inventory project to define served and unserved areas of the State, to be partially funded by an NTIA BTOP mapping grant;  Continue to refine the Authority’s goals, minimum performance criteria for broadband service, and areas eligible for Authority support, with guidance from the Legislature and the Advisory Council; 4 Based on the 2000 Census for population and number of households in Maine, obtained from the State Planning Office. Total occupied housing units = 518,200, population = 1.275 million, 2.39 = average household size. 5 PL 2007, c. 548. A separate report and the model franchise agreement were submitted to the Joint Standing Committee on Utilities and Energy on October 28, 2009. Submitted by the ConnectME Authority Page 4 ConnectME Authority Annual Report January 14, 2010  Serve as a conduit for Maine’s broadband initiatives at all levels of government and across agencies;  Monitor and assist the eight (2009) third round grantees to ensure that they have the resources necessary and that they meet grant requirements; and  Conduct a fourth grant round over the next few months. In addition, the Executive Director will:  Continue to work with the Broadband Strategy Council and other Maine agencies to review and support “stimulus package” proposals in the upcoming funding round that enhance Maine’s broadband infrastructure and technology including education and rural health initiatives;  Assist Network Maine (a consortium including the Maine Department of Education, State Library, Office of Information Technology, and University of Maine System) with efforts for the Maine School and Library Network to connect every K-12 public school and public library to the internet with high- speed fiber-based access; 6  Continue working with the rural health care pilot program grantees to enhance telehealth broadband connections;  Develop policies and procedures for use of public and private facilities such as radio towers, buildings, and rights-of-way by private service providers for expanding broadband and cellular service; and  Participate in the state’s Health Information Technology (HIT) initiatives. Maine has formed a “stakeholder” group to work on the HIT initiative. The ConnectME Authority wholeheartedly agrees with the importance of technology and medicine. 6 The Maine School and Library Network (MSLN) began in 1996. MSLN provides internet access to approximately 950 schools and libraries statewide. MSLN is funded from the Federal E-Rate program (approximately 60% of the cost) and the Maine Telecommunications Education Access Fund (MTEAF) (approximately 40% of the cost). Funds are generated through an assessment on interstate phone bills for the Federal E-Rate portion and on intrastate bills for the MTEAF portion (0.6%). Submitted by the ConnectME Authority Page 5 ConnectME Authority Annual Report January 14, 2010 INTRODUCTION The ConnectME Authority 2010 annual report is divided into five sections: I. Background; II. Summary of Authority and Broadband Activities; III. Federal Broadband Activities and Initiatives; IV. Ongoing Authority Activities; and V. Conclusion and Attachments. I. BACKGROUND A. The Importance of Broadband A number of national organizations, governmental agencies, and public-interest groups have provided studies documenting the importance of broadband or high-speed internet access for rural states (such as the Federal Communications Commission, Pew Internet & American Life Project, and the USDA’s Economic Research Service). The overwhelming consensus is that access to broadband services is a significant economic development tool for small businesses and home-based businesses, and enables telecommuting, rural education, and telemedicine. It is worth repeating from last year’s report as it is even more relevant and important today, that: Speed defines what is possible. It determines the amount of information that can be transmitted in a given time, the quality of the transmission, and the timeliness of the transmission. Speed determines the type of transmission possible: two-way, voice, data, audio, and video. Benefits from truly high speed Internet networks include:  Economic Growth & Quality Jobs. New, high speed Internet applications create jobs and opportunities for innovation, growth, and e-commerce. Technology allows businesses based in rural and remote communities to compete in the global economy.  Telemedicine and Independent Living. High speed Internet allows instantaneous, interactive contact between health professionals and patients permitting remote monitoring, efficient chronic disease management, and more effective responses to emergencies. High speed Internet can help senior citizens and people with disabilities live independently, improve their quality of life, and reduce costs of care.  Education & Integrated Learning. Two-way high speed communication and videoconferencing allows students and teachers to minimize the obstacles of distance and maximize the potential of simultaneous voice, data, and video sharing. Submitted by the ConnectME Authority Page 6 ConnectME Authority Annual Report January 14, 2010  E-Government, Civic Participation and Public Safety. Advanced high speed networks will allow citizens to increase participation in civic life, beyond simply downloading forms or researching programs. Government meetings could be opened to many more citizens using two-way video technology. High speed networks enable police, fire, and emergency personnel to coordinate and respond more quickly to crises.7 A recent study that addresses the ConnectME Authority’s primary goal of expanding availability is from the Economic Research Service of the United States Department of Agriculture. It says, “Whereas an estimated 55 percent of U.S. adults had broadband access at home in 2008, only 41 percent of adults in rural households had broadband access. Evidence suggests that some of this shortfall in broadband use is involuntary, and may be due to the higher cost of broadband provision or lower returns to broadband investment in sparsely populated areas.” 8 The 2009 Pew Broadband Adoption Study found, generally, that relevance, price, availability, and usability were the main reasons cited for not using broadband at home.9 Based on this and other research and comments filed in the record, the Federal Communications Commission (FCC) “believes that the primary barriers non-adopters face include: affordability of service, affordability of hardware, insufficient digital and technical literacy levels, unawareness of the personal relevance and utility of broadband technology and online content and an inability to use existing technology and applications due to physical or mental disabilities.” 10 Finally, the importance and necessity of broadband was emphasized in a draft report from Maine Innovation Economy Advisory Board. The 2010 Science and Technology Action Plan articulated a vision: “Create an environment where science, technology, innovation, and entrepreneurship stimulate Maine’s economy.” Strategy 2.3 to accomplish that vision says, “Build a supportive environment for high-growth, high- potential, innovation-based enterprises.” Section 2.3.1, says, Provide the telecommunications infrastructure necessary for Maine businesses to compete globally by: • Providing high-speed, high bandwidth broadband to businesses throughout the state. 7 “Speed Matters: High Speed Internet for All,” October 16, 2006, http://www.speedmatters.org/ 8 “Broadband Internet's Value for Rural America,” ERR-78. Economic Research Service/USDA, August 2009. 9 Internet & American Life Project, “Home Broadband Adoption 2009” (2009). 10 Federal Communications Commission, GN Docket Nos. 09-47, 09-51, and 09-137, NBP Public Notice # 16, released November 10, 2009. Submitted by the ConnectME Authority Page 7 ConnectME Authority Annual Report January 14, 2010 • Improving wireless coverage. 11 B. The Connect ME Initiative As early as 1995, the Maine Legislature recognized the value of broadband when it stated: The Legislature further declares and finds that computer-based information services and information networks are important economic and educational resources that should be available to all Maine citizens at affordable rates. It is the policy of the State that affordable access to those information services that require a computer and rely on the use of the telecommunications network should be made available in all communities of the State without regard to geographic location.12 In 2006, the Legislature created the ConnectME Authority to develop and carry out its broadband strategy by identifying unserved areas of the State; developing proposals for broadband expansion projects, demonstration projects and other initiatives; administering the process for selecting specific broadband projects; and providing funding, resources, and incentives.13 In 2007, the Legislature also approved the Authority’s major substantive rule that defines the state’s broadband strategy and describes how that strategy is to be implemented. The Authority consists of a board of five members, an Executive Director, Staff from the Public Utilities Commission and the Governor’s Office, and an Advisory Council. (See attachment A for the Authority and Advisory Council members). In 2009, the Legislature created the Broadband Strategy Council to further refine and develop Maine’s stated broadband strategy. The primary function of the BBSC is to advise the ConnectME Authority on all matters pertaining to broadband opportunities available under the American Recovery and Reinvestment Act of 2009, as well as advise the University of Maine System with respect to matters pertaining to the lease or sale of excess broadband capacity of the educational broadband service. 14 11 “2010 Science and Technology Action Plan, A Bold Approach to Stimulate Maine’s Economy,” Final Draft, October 28, 2009. Maine Innovation Economy Advisory Board, and Maine Office of Innovation, Department of Economic and Community Development. 12 Title 35-A M.R.S.A. §7101(4). 13 PL 2005, c. 665. 14 Resolve, Chapter 108, 124th Legislature, First Regular Session. Submitted by the ConnectME Authority Page 8 ConnectME Authority Annual Report January 14, 2010 II. SUMMARY OF AUTHORITY AND BROADBAND ACTIVITIES The ConnectME Authority statute requires the Authority to report on four components: Budget; Investments; Activities; and Market Conditions. This Section covers the first three items. Market Conditions are reported on in Section IV. A. Budget The funding mechanism for the Authority is a 0.25% (one quarter of one percent) surcharge on all communications, video, and internet service bills for retail in-state service.15 It is expected to generate between $1.25 million, and $1.4 million per year. Verizon-Maine, as a condition of the stipulation that was approved by the Public Utilities Commission in approving Verizon’s merger with Fairpoint, contributed $2.5 million to the ConnectME Fund.16 It was received on May 8, 2008, and continues to provide resources for the Authority. The grants awarded in 2007 and 2008, total over $2.2 million. The third grant round, awarded in July 2009, totaled over $600,000. The ConnectME fund balance on December 31, 2009, is $3,316,136. (See Attachment B for fund reports) B. Investments The ConnectME Fund is administered by an independent fiscal agent who manages the assessment process, invests the unused funds, and makes payments as directed by the Authority. The fund administrator operates under contract at the direction of the Executive Director.17 Interest generated by the fund is added to the fund balance. Infrastructure improvements are described above and listed in Attachment C, grant awards. C. Grant Activities 1. Awarding Process and Grants Awarded 15 Also included are retail revenues received or collected from mobile communications services (i.e. cellular telephone) that voluntarily agree to be assessed by the Authority. 16 On December 21, 2007, in MPUC Docket No. 2007-67, known as the Verizon-Fairpoint merger case, an amended stipulation was filed and accepted that contained a provision stating (on page 10): “…within 30 days of closing Verizon will make a one-time cash contribution in the amount of $2.5 million to the ConnectME Authority in furtherance of the Authority’s statutory objectives.” Approved by MPUC ORDER, Docket No. 2007-67, issued February 1, 2008. 17 The quarterly assessments are paid to an independent fund administrator the month after the end of each quarter. Rolka Loube Saltzer Associates (RLSA) is the fund administrator for the ConnectME Fund as well as the Maine Universal Service Fund and the Maine Telecommunications Education Access Fund. Submitted by the ConnectME Authority Page 9 ConnectME Authority Annual Report January 14, 2010 The Maine Legislature established the Authority “to stimulate investment in advanced communications technology infrastructure in unserved or underserved areas.”18 The Authority believes that the goal to expand broadband access in the most rural, unserved areas that have little prospect of broadband service from a traditional or existing provider is a priority. The Authority accomplishes that goal primarily by awarding broadband expansion grants for projects that serve unserved areas. Grant applications are reviewed by three non-industry members of the ConnectME Authority Advisory Council, the Executive Director, and one ConnectME staff member. The applications are scored on the four criteria specified in the statute and rule: cost-benefit; community support; project scope; and project value. The public- private partnership concept is considered in the review, yet “getting the most for the money” is also a high priority because of the limited funds available. For the first grant round (2007) the Authority awarded six grants totaling over $738,000 for total project amounts of over $1.53 million.19 The grants ranged from $38,000 to nearly $370,000, and serve over fifty communities, with the potential of providing broadband service to nearly 14,000 households and businesses. The completed grant projects represent a potential increase in broadband availability of approximately 2.7%. 20 For the second round (2008) the Authority awarded five grants for $1.44 million for total project amounts of over $5.5 million. Four of the projects will expand access to high speed internet service to over forty-five communities representing nearly 9,000 households and businesses and add another 1.7% in potential household broadband availability. The fifth grant was significantly different from the others. The Authority decided to award a grant to Franklin Community Health Network (FCHN) to help fund a fiber optic cable network that will connect three partnering medical centers and seven health care facilities in six towns across Franklin, Oxford, and Androscoggin counties, providing high speed telehealth services.21 The ConnectME funds will provide part of the match requirement for a $3.6 million Federal Communications Commission (FCC) Rural Health Care Pilot Project grant.22 This project is a long term investment. Initially, 18 35-A, M.R.S.A. §9203(1). 19 The small grant to fund a project serving the Town of Edgecomb was cancelled due to non- performance. The town applied for and received a grant in the third round. 20 2000 Census (Maine State Planning Office), total occupied housing units = 518,200, population = 1.275 million, 2.39 = average household size. 21 Franklin Community Health Network, http://www.fchn.org/. 22 The grant has two conditions from the Authority: 1) The selected service provider would be an Authority eligible provider; and 2) The selected provider must agree to install additional commercially available fiber facilities at its own expense. These conditions will ensure that the provider is an “eligible applicant” as Submitted by the ConnectME Authority Page 10