Few eastern Montana projects in $258 million broadband proposal

A committee advising Gov. Greg Gianforte on a massive state grant program billed as a historic effort to enhance broadband connectivity across rural Montana has plowed into rocky ground as it considers a list of recommended projects this month.

An initial ranking of proposed grants to private telecom companies, produced by the state Department of Administration, recommended that nearly half of the Connect MT program’s funding, $126 million, be awarded to projects proposed by telecom giant Charter Communications — an amount that has drawn the ire of smaller, Montana-based companies that want more support for their own networks.

Additionally, committee members have acknowledged that relatively few projects have been proposed and recommended for funding in eastern Montana. The broadband program, created by last year’s Legislature using federal coronavirus relief money from the American Rescue Plan Act, is tasked by law with prioritizing access for “frontier, unserved and underserved areas.”

In hearings this month, Department of Administration Director Misty Ann Giles, the committee’s vice-chair, described the $258 million program as a learning experience for the state government, which hasn’t previously managed a large broadband program. The scoring system the department used to rank applications, she said at an Aug. 2 meeting, “is not perfect by any means.”

“This is a first-in-kind program for the state of Montana, so there’s definitely some lessons learned,” Giles said.

Giles and committee chair Sen. Jason Ellsworth, R-Hamilton, have also said the state will have the chance to fine-tune its awards process and fund additional projects as it works through additional federal broadband money it expects to receive through the Infrastructure Investment and Jobs Act.

Both the American Rescue Plan Act and Infrastructure Investment and Jobs Act were passed by the Democrat-controlled U.S. Congress and opposed by most congressional Republicans. When the American Rescue Plan Act passed in March 2021, Gianforte called it a “fiscally irresponsible progressive wish list” in a tweet from his official account. His office has since said he’s committed to ensuring that Montana’s relief money is put toward effective long-term investments.

The Republican-controlled 2021 Montana Legislature responded to the federal legislation by passing its own bill setting up a system of advisory committees to make recommendations to the governor about rescue plan act-funded investments in water infrastructure, public health, economic development and broadband.

The volume of funding for the broadband program alone represents a historic sum for state government, which normally makes grants in much smaller amounts. For example, the Montana Department of Natural Resources and Conservation, which runs state water infrastructure grant programs, reported awarding a total of $40 million in fiscal year 2021. That’s less than a third of the amount Charter alone could receive through the broadband program.

The broadband committee, which consists of legislators and Gianforte administration officials, previously developed a scoring matrix to rank grant applications from internet service providers who want to use public money to expand their company-owned infrastructure so they can serve more Montana customers. Proposals, for example, received more points if providers proposed building faster connections or covering a higher percentage of the project cost with their own money.

The initial grant ranking, prepared by the Department of Administration and consultants at CTC Technology and Energy, recommended funding 47 broadband projects proposed by 14 different companies. If completed, those projects would expand high-speed internet access to an estimated 41,000 homes and businesses across Montana.

In addition to the $258 million in public funding for the broadband effort, participating companies would put up $118 million in matching funding to support the work under the initial proposal, with $57 million of that coming from Charter.

The initial ranking also proposes putting $43 million of program money toward projects proposed by Missoula-based Blackfoot Communications.

Of the broadband projects recommended for grant approval, most are clustered in western Montana, with only seven of the 42 projects proposed for parts of the state east of Great Falls and Bozeman.

The commission had planned to vote Aug. 8 on a recommended list of projects to pass on to the governor for final approval, but delayed that decision when representatives from smaller internet service providers raised concerns, including arguments that the scoring system rewarded proposals that cherry-picked profitable areas over those that sought to provide wider access around small towns.

It is generally more profitable to run fiber-optic lines in densely populated areas. Conversely, rural areas where homes are spaced farther apart are more difficult to serve without losing money, since providers have to run longer lengths of cable to reach each paying customer.

Several small providers told the committee their business plans rely on being able to bundle less profitable rural areas with urban cores — and that they worry rural customers could be cut off from wired broadband service long-term if the commission approves projects that serve denser areas alone.

“Some applications, very strategically, took the nice neighborhoods but left the homes that were just a little way out of those nice neighborhoods,” said Neil Schlenker, who owns providers TCT and Gallatin Wireless.

“We’re favoring high-density, low-cost areas that are commercially viable at the expense of rural high-cost areas, when the law prioritizes high-cost, frontier, unserved and underserved in that order,” said Montana Telecommunications Association General Manager Geoff Feiss.

Feiss, whose group represents the interests of small telecom providers, also said some companies appeared to have had their scores calculated improperly, for example by failing to receive bonus points for proposals that would provide service to rural health clinics in their coverage areas.

The broadband committee now plans to meet again Aug. 17, a delay that will give its members time to weigh those concerns.

Rep. Katie Sullivan, D-Missoula, said this week that she’d like to see the Department of Administration come back to the committee with suggestions for how to ensure more grant funds get into hard-to-reach rural stretches of Montana.

“If we are going to have a future where our whole state is connected to high-speed internet, we need to see geographical diversity now — with investments going across the entire state, not focused around the edges of cities,” she said in an email.

Committee members have publicly discussed amending the initial ranking to cap the amount that could go to a single company, in effect limiting how much funding would go to Charter. That would free up some money to fund non-Charter projects that haven’t made the cut, including unfunded projects proposed in eastern Montana.

Rep. Ed Buttrey, R-Great Falls, has suggested capping awards to a single company at 35% of the overall funding pool, and made a motion to that effect that was endorsed by the committee with a unanimous vote at the Aug. 2 meeting. That threshold would limit Charter projects to roughly $90 million in support. Ellsworth and Giles, however, signaled Aug. 8 that they may be interested in revisiting that number.

“What I would recommend at this point is, kind of play with the numbers, from 35 on up, and see if there’s magic that can happen somewhere,” Ellsworth said

Charter lobbyist Bridger Mahlum testified earlier in that meeting that reducing the company’s award to the 35% threshold would likely defund its five lowest-ranked projects. One of those projects would run 119 miles of fiber optic lines to nearly 1,400 locations in the Bitterroot Valley west and northwest of Hamilton, a project area that is almost entirely within Ellsworth’s senate district.

Mahlum argued that the projects proposed by Charter would be more cost-effective in terms of the subsidy required per location served than the potential alternatives.

“We hope that the commission would remain provider-agnostic when you make these really important decisions,” Mahlum said.

Connecticut-based Charter, which offers telecommunication services under the Spectrum brand, operates in 41 states and provides internet service to approximately 30 million customers nationally. The company reported $52 billion in revenue last year.

Mahlum also argued it wouldn’t be fair for the committee to modify the program’s scoring criteria this late in the grantmaking process.

“I would just caution, as you think about these things, what’s going to be consistent for everybody involved in the process,” he said.

Both Charter and the Montana Telecommunications Association lobbied extensively during last year’s legislative session as lawmakers drafted the bills that defined the parameters of the Connect MT program. Lobbying disclosure records indicate Charter retained five lobbyists and spent a total of $87,000 trying to advance its agenda on topics including the Connect MT legislation. The telecommunications association, represented by Feiss, reported spending about $42,000.

Ellsworth said in an interview this week that given Charter’s major existing presence in Montana it’s not unreasonable for the company to be a major player in the state broadband program. He also said the commission’s recommendations won’t be swayed by lobbying.

“Lobbying doesn’t play any factor in our decision-making process,” Ellsworth said.

“I look at the reality,” he continued. “I don’t look at the company. I look at what the project is and what it’s going to accomplish.”

This story is published by Montana Free Press as part of the Long Streets Project, which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Discuss MTFP’s Long Streets work with Lead Reporter Eric Dietrich at edietrich@montanafreepress.org.