Why DFLers at the Minnesota Capitol are fighting — with each other — over rural broadband

On the surface, government funding to build high-speed internet infrastructure is a bipartisan success story.

In the coming years, Minnesota is theoretically in line for at least $578 million in federal cash approved under Republican and Democratic presidents to subsidize broadband projects. And both Democrats and Republicans at the Minnesota Legislature agree the state should approve substantially more cash to help developers reach more than 240,000 households who lack access to a connection that meets state standards.

A closer look at the issue, however, reveals infighting, discord and failure bred by government delays.

So far, only a small fraction of that money has materialized yet because of bureaucratic hurdles set by the federal government and other problems, causing Minnesota’s flagship “Border to Border” broadband grant program to miss an entire construction season. A large chunk of the money could be delayed for years.

Now, the Speaker of the DFL-controlled House has split from rural Democrats and Gov. Tim Walz’s administration by reducing the amount of proposed broadband funding when the state has an enormous $9.25 billion surplus and $1 billion in leftover COVID-relief funds from Congress.

Money promised, not yet delivered

The influx of broadband cash over the last few years has largely come from three federal government programs. In total, it’s a huge sum of money that dwarfs previous state spending to help broadband developers reach areas where it’s too costly to build infrastructure, namely fiber cable. But the federal cash has been more of an IOU than a reality.

First, in 2020, the Federal Communications Commission announced more than $408 million in broadband subsidies for Minnesota through a program known as the Rural Digital Opportunity Fund, or RDOF.

Some developers have started building infrastructure with that cash. But three quarters of the money was earmarked for a relatively small and inexperienced company, LTD Broadband, that many in the industry don’t believe can deliver on the work it promised and has yet to get final federal approval.

Then, in 2021, Congress approved the $1.9 trillion American Rescue Plan, which included at least $179 million for Minnesota in a “capital projects” fund that can be used for things like paying to subsidize broadband infrastructure, but also buying equipment like laptops or improving certain community buildings.

Last summer, Minnesota lawmakers agreed to use $70 million of that $179 million ARP fund — leaving about $110 million left over — on the Border to Border grant program helping broadband developers. But the federal government is still reviewing a state application for the money, so no grants were distributed last year. There’s a possibility Minnesota could miss this year’s construction season, too, if the feds move too slowly.

“We are eager, let me tell you, because the ground is getting soft, these grant rounds take time and we’re kind of ready to push go as soon as we’ve got the green light from Treasury,” said Steve Grove, commissioner of the state’s Department of Employment and Economic Development.

Lastly, in December, Congress approved a $1.2 trillion infrastructure bill that includes at least $100 million for high-speed internet construction in Minnesota. That infrastructure money is in limbo too, for now, as the federal government works on how to distribute it.

Some want more

Despite all that potential money, Minnesota lawmakers and state officials want even more spending on broadband. Angie Dickison, who manages the state grant program as executive director of DEED’s Office of Broadband Development, told legislators during a late March hearing at the state Capitol that she would conservatively estimate the cost of meeting the state’s 2026 goal for adequate broadband at $1.3 billion, and most of that would need to come from the state, especially if not all of the RDOF money is used.

The Republican-led Senate GOP has proposed authorizing the remaining $110 million from the ARP’s “capital projects” fund to subsidize construction of high-speed internet infrastructure. House Democrats initially wanted $100 million from the state’s general fund to spend on broadband, arguing that relying on state money instead of federal cash is more flexible and would lead to fewer delays and regulatory hurdles.

That DFL plan, however, has been reduced significantly, touching off fierce intra-party debate. This week, Democrats slashed the proposal from $100 million to $25 million at the direction of House Speaker Melissa Hortman, DFL-Brooklyn Park.

In an interview, Hortman said the reduction was in part because that $25 million from the state general fund is what she believes the market can actually use on top of the $580 million from the feds. She said local and national providers in the telecommunications industry are set to receive an unprecedented amount of federal money and told her they are backed up. “There’s just been so much allocated that the blocker right now is not actually the funding, it’s the staff to lay the cable that’s already been authorized and funded,” Hortman said.

Hortman also said the DFL has many other priorities they’re trying to balance, such as spending on schools, health care and transportation. The House DFL eventually will have to negotiate with the Senate and Walz, so any plan from her isn’t final.

“It’s a marker on the table,” Hortman said of the House DFL bill.

Not everyone agrees with Hortman’s assessment of the broadband market.

Brent Christensen, president of the Minnesota Telecom Alliance, said the industry could “absolutely” use $100 million, just not in the next two years. “The question is not can we use it, it’s how can we use it and when can we use it,” he said. “I don’t know where (Hortman) thought the $25 million was the higher end of it.”

Christensen, whose trade association represents a host of broadband providers from small co-operatives to larger companies, said putting more money into the program now gives the industry some certainty to plan for projects later on. The state is also not guaranteed to have a huge surplus after this year, meaning broadband developers are pushing for a big slice of cash while they have the chance.

There certainly are issues slowing construction, Christensen said. For instance, he said during the March hearing that there’s a 72-week delivery wait time for fiber cable. But Christensen said his company ordered three years worth of fiber last June and expects it to show up in April. “A lot of our folks planned ahead,” he said.

The Walz administration is also pushing for a bigger investment in broadband. Grove, the DEED commissioner, said on Wednesday that his office talks to broadband providers every week, and they would not have proposed $170 million in general fund cash for subsidizing infrastructure, “if we didn’t think we could get that money out the door.” Grove said a major investment could help the state finally finish off connecting the state to adequate internet, even if the state has to be “creative in timing” how and when to use the money.

“We’re bullish,” Grove said. “I think it’s fair to say that the more money for broadband the better … I think higher numbers are a stronger place to be — $25 million from our perspective just isn’t nearly enough at this moment given the need.”

State Rep. Rob Ecklund, a Democrat from International Falls who sponsored the $100 million broadband funding plan, and state Rep. Gene Pelowski, a Winona DFLer who chairs a House committee with oversight of broadband spending, said Hortman was listening to large cable organizations to make her assessment.

“I wasn’t too thrilled, but the Speaker has her reasons,” Ecklund said of the reduced funding. “I disagree. I think some of the groups like the electric co-ops, the different broadband co-ops were ready to apply for funding and could move the projects.”

Pelowski said it is critical to avoid “cumbersome” federal funding and get a significant amount of money out now. “We desperately need to raise the entire state up to one level and we did zero over the last year because of federal money,” said Pelowski, who added that listening to “one element” of the broadband industry means ignoring consensus reached during hearings in his committee.

“The overwhelming view was to get this money out as soon as possible and make sure that we can continue the grant program in a fair way,” Pelowski said. “Our leadership decided because of one I guess influential element to take their word above everything that was done in committee.”

For their part, Big Cable — also known as the Minnesota Cable Communications Association — supports broadband infrastructure subsidies doesn’t advocate for any specific amount in funding, said executive director Anna Boroff. (The association represents some smaller and mid-size providers but also some giants like Comcast.)

But she said: “I have been very clear with the Speaker and with others, that the supply chain issues are real and so are labor. And rising costs are an issue.” 

“We live in Minnesota, our construction seasons are short,” Boroff said. “Part of my job has been to manage some expectations with legislators that, yes, there is an unprecedented amount of federal funding coming and has begun to already be here, but this is not going to happen overnight.”

Hortman also pushed back on any notion that she has been stingy with broadband funding. She said some local governments used their own share of money from the $2.2 trillion CARES Act and other federal stimulus bills for infrastructure projects — which is true in some cases, though not widespread, according to the League of Minnesota Cities and the Association of Minnesota Counties. Hortman also noted the Legislature approved $40 million for broadband in the 2019 legislative session.

For context, the state spent more than $126 million on broadband between 2014 and 2021 — before the $70 million from the ARP was authorized.

How to use leftover ARP money

Hortman didn’t rule out a different House committee focused on bonding and capital construction projects using some cash on broadband grants, or tapping into the remaining $110 million from the ARP for more border-to-border grant spending. Though no concrete plan for that has been announced.

Grove said the Walz administration wants to dedicate some of that ARP money to construction of internet infrastructure. But he said they want to use some of it for other allowed projects focused on what the Treasury Department calls “digital connectivity,” such as buying devices and equipment like laptops to facilitate internet access or “multi-purpose community facility projects,” such as upgrading libraries or community health centers.

Senate Republicans would use the full $110 million on broadband infrastructure. Sen. Torrey Westrom, an Elbow Lake Republican who chairs the Senate’s Agriculture and Rural Development Finance and Policy Committee, said using only federal money allows them to pump lots of cash into broadband while still delivering large tax cuts proposed by the GOP — even if industry groups say state money would be put to use much faster. The federal money can also be spent over a few years, offering flexibility, Westrom said.

“A once in a generation opportunity, let’s take advantage of it for rural broadband,” Westrom said. “And give the taxpayers their money back to boot. How much better of a baked pie can you get?”

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And Westrom said Minnesota should focus ARP money on the people who have no access to quality broadband instead of paying for equipment or community centers. “It’s analogous to buying people cars for roads they don’t even have to drive on,” Westrom said. “Right now we’ve got a lot of citizens left behind.”

If the Legislature doesn’t come to an agreement on how to use the remaining $110 million from the ARP, it will be up to Walz to decide how to spend it.