SENATE FINANCE COMMITTEE February 24, 2023 9:01 a.m. 9:01:41 AM CALL TO ORDER Co-Chair Hoffman called the Senate Finance Committee meeting to order at 9:01 a.m. MEMBERS PRESENT Senator Lyman Hoffman, Co-Chair Senator Donny Olson, Co-Chair Senator Bert Stedman, Co-Chair Senator Click Bishop Senator Jesse Kiehl Senator Kelly Merrick Senator David Wilson MEMBERS ABSENT None ALSO PRESENT Thomas Lochner, Director, Alaska Broadband Office, Department of Commerce, Community and Economic Development; Senator Cathy Giessel. SUMMARY PRESENTATION: UPDATE ON BROADBAND EQUITY, ACCESS, AND DEPLOYMENT (BEAD) IN ALASKA Co-Chair Hoffman discussed the agenda. ^PRESENTATION: UPDATE ON BROADBAND EQUITY, ACCESS, AND DEPLOYMENT (BEAD) IN ALASKA 9:02:36 AM THOMAS LOCHNER, DIRECTOR, ALASKA BROADBAND OFFICE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, introduced himself and discussed his background. He relayed that he had 24 years' experience in telecommunications, including work with the Anchorage Telephone Utility, Alaska Communications, and the Arctic Slope Telephone Association Cooperative. He had experience in engineering, finance, marketing aspects of telecommunications, as well as urban and rural areas. He had been selected to be the director of the Alaska Broadband Office (ABO) the previous September. He discussed a presentation entitled "Alaska Broadband Office Update," (copy on file). Mr. Lochner looked at slide 2, which showed an organizational chart of ABO, including the Division of Community and Regional Affairs (DCRA) grants staff. The office was made up of himself, an administrative specialist, and a tribal liaison. There was an affiliated senior project manager from the Department of Commerce, Community and Economic Development (DCCED). He noted that the office was looking for a connectivity manager and would also have the opportunity to take advantage of DCRA grant staff. 9:04:25 AM Mr. Lochner spoke to slide 3, which showed a list of the Broadband Advisory Board members. He mentioned the passage of HB 363 sponsored by Representative Bryce Edgmon, which established ABO and created the Broadband Parity Adjustment Fund, and established the statewide Broadband Advisory Board. He noted that the board was diverse and experienced, and would be solicited to help with some aspects of projects in development related to labor and equipment costs. Mr. Lochner referenced slide 4, "Infrastructure Investment and Jobs Act NATIONAL TELECOMMUNICATIONS AND I NFORMATION ADMINISTRATION (NTIA) PROGRAMS Digital Equity (DE): $640,000,000 Broadband Equity, Access and Deployment (BEAD): $42,000,000,000 Mr. Lochner relayed that the funding for ABO would be passed through with the exception of a small administrative costs and came from the Infrastructure Investment and Jobs Act (IIJA). There were small administrative fees that would come to the state, and the rest of the funding would be a pass-through to entities to administer grants. Mr. Lochner turned to slide 5, "Infrastructure Investment and Jobs Act So Far NTIA PLANNING GRANT AWARDS TO ALASKA DE Planning Grant: $567,800 Develop the DE Plan due September 30, 2023 BEAD Planning Grant: $5,000,000 Develop the BEAD Program Mr. Lochner explained that the state had already received two of the small administrative fees, which were listed. He detailed that the state was working with partners, primarily with the Rasmuson Foundation, to write the plan. 9:07:01 AM Mr. Lochner considered slide 6, "Digital Equity Digital Inclusion Digital Literacy COVERED POPULATIONS • Households at/or below 150% of the Poverty Level • Aging Individuals • Incarcerated Individuals • Veterans Individuals with Disabilities • Individuals with a Language Barrier • Individuals who are Members of a Racial or Ethnic Minority • Individuals who Reside in Rural Areas FUNDING • Planning Grants: $60 Million Alaska Awarded $567,800 • Capacity Grants: $240 Million Alaska's Award: TBD • Competitive Grants: $1.25 Billion Alaska's Award: TBD Mr. Lochner detailed that the competitive grants were for anyone in the state or nation to apply. He anticipated that various state agencies would apply for the grant funding to engage in digital equity training. Co-Chair Hoffman asked if Mr. Lochner would be covering other funds that had been awarded directly and not going to the state in order to get a better picture of the funds available for broadband construction. Mr. Lochner answered in the affirmative. He relayed that he would provide a sum total number of funding and would identify projects. He noted that he would not be listing the projects in his presentation. Co-Chair Hoffman asked Mr. Lochner to provide his office with the information at a later time for dissemination to members. He thought it was important for the committee to have a high-level view of what was happening with broadband, and not just what was happening with state funding. Mr. Lochner displayed slide 7, "Broadband Equity, Access and Deployment ALLOCATED $42 BILLION FOR ALL STATES AND TERRITORIES • $100 Million Minimum Allocation per state • High-Cost Allocation (10% of $42B) = High-Cost in Alaska / High-Cost total for US • Remaining Funds = Unserved in Alaska / Unserved total US DISBURSEMENTS OF ALASKA'S ALLOCATION Grants will be based on percentage of locations that are: • Unserved - less than 25Mbps/3Mbps • Underserved - less than 100Mbps/20Mbps and • Unserved Community Anchor Institutions - less than 1Gbps/1Gbps Co-Chair Hoffman asked if when discussing high costs in Alaska, Mr. Lochner was referring to the high cost of construction, the high cost of operations, or the high cost of subscriptions. Mr. Lochner related that the high-cost allocation formula had not been determined yet. He thought the high cost was for the building and the service. He was not privy to how the calculation was being developed. The National Telecommunication and Information Administration (NTIA) had selected a company called Cost Quest to work on the formula, and the office had been working with the Congressional delegation to ensure the proper cost factors were accounted for in Alaska. 9:11:07 AM Senator Bishop mentioned 184 unserved and underserved communities and mentioned that the previous year there were individuals testifying about internet bills that were $400 to $900 dollars per month during the Covid-19 pandemic. He asked if there was a goal to drive down the cost of household internet. Mr. Locher affirmed that affordability was one of the key functions of the program. Mr. Lochner continued to address slide 7. He relayed that disbursements would go first to unserved locations which had less than 25 megabits per second (MBPS) download speed and less than 3 MBPS upload speed. He noted that home usage generally had more usage downloading from the internet as opposed to uploading. The second level of disbursements would go to under-served locations, which reached 100 MBPS of download speed. If there was leftover funding, it would go to underserved anchor institutions. Mr. Lochner referenced a term called "donut holes," and mentioned the Rabbit Creek area as an example of an area that was unserved within Anchorage. The area would be addressed fourth after the three groups previously discussed. Co-Chair Hoffman asked if Mr. Lochner had a map or list of communities in the state that fell within the category of unserved. Mr. Lochner affirmed that he had a list of unserved communities in a forthcoming slide. 9:14:33 AM Mr. Lochner spoke to slide 8, "NTIA Milestone Dates & ABO Timeline," and explained that the dark grey arrows denoted benchmarks from NTIA. The first item was the awarding of the grant. He relayed that after receiving the grant in November 2022, the broadband office had 270 days to come up with a five-year action plan. The plan did not describe what would be done with the funding, but rather what it would take to build out all of the state. He continued that the process was underway and there was a goal to submit the plan to NTIA by June 15, prior to NTIA funding being released on June 30. Co-Chair Hoffman asked what involvement the advisory board had in developing the plan. Mr. Lochner shared that the advisory boards primary role would be to review the plan before submission. The board would have a larger in the initial proposal that kicked off on June 30. Senator Kiehl asked about the timeline for mapping who was served and at what speed. Mr. Lochner cited that the process was called "fabric mapping," and had been ongoing. The first iteration of the fabric mapping was dropped by the Federal Communications Commission (FCC) on June 30, 2022. The telecommunications providers and the state had an opportunity to challenge the results, and had done so. The second iteration of the fabric mapping had been released on December 30, and there had been a significant outcry. He explained that it looked like NTIA was going to be making funding decisions using an FCC map that had a little bit of a disconnect. He continued that the FCC map was a beta map and would still be revised over time. He had heard that NTIA was going to make a decision based on the map, which had known issues. He cited that the broadband office continued to work with both agencies to ensure that all the broadband serviceable locations (houses and small businesses) that were valid were on the map to be included in the funding allocation. 9:18:44 AM Senator Kiehl thought it would not make a difference if an entire community was unserved. He asked how much a delay of the correct map would affect the rest of the plan. Mr. Lochner relayed that the delay in the map would not affect the plan but would affect the funding. Co-Chair Hoffman asked Mr. Lochner to expand. Mr. Lochner discussed the allocation based on percentage of unserved areas or houses. He asserted that the office was working closely to ensure that every single unserved broadband-serviceable location was recognized by the FCC to fairly optimize the funding allocated on June 30. Mr. Lochner continued to address slide 8. He related that once the allocation was made, ABO had 180 days to submit the initial proposal, which would indicate how the grant funds would pass through to subgrantees to build, operate, and maintain the systems. He continued that the broadband office was agnostic to the applicants and was not just focused on telecommunications. He asserted that anyone that could show longevity, sustainability, and affordability into the future to apply for the grants. He noted that the office was on a very aggressive schedule to submit the proposal to NTIA on July 31, which was 149 days early. Mr. Lochner related that once the plan was approved, NTIA would release at least 20 percent of the funds so that the ABO could release the funds to the subgrantees. The subgrantees would have to be in communities that were 80 percent unserved in total. Additionally, the communities as a whole would need to be at 150 percent of the poverty line. Once the approval was done, the final proposal for running the grant program would start, and would include the process for selecting subgrantees. After the final proposal was submitted, NTIA would release the rest of the funding. He shared that he was not aware of the timeline for the final proposal, but estimated it would be early the following year. 9:22:53 AM Mr. Lochner looked at slide 9, "Required Broadband Service Level for BEAD Funding Unserved: • 25 Mbps Download Bandwidth (Watching a video) • 3 Mbps Upload Bandwidth (Posting a picture) Underserved: • 25 Mbps Download Bandwidth, but cannot reach 100 Mbps • 3 Mbps Upload Bandwidth, but cannot reach 20 Mbps Served: • 100 Mbps Download Bandwidth • 20 Mbps Upload Bandwidth Mr. Lochner addressed slide 10, "Evaluation of Current Status of Broadband," which showed a map of Alaska that was based on telecommunication providers rates in communities. In every single case, the locations were on fiber systems. Mr. Lochner advanced to slide 11, "Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide, and noted that the orange lines on the map showed the fiber systems in the state. Co-Chair Hoffman considered the orange line going to Nome and asked about Quintillion, which he did not think was a provider. Mr. Lochner realized that Quintillion was a retailer and wholesaler. Mr. Lochner looked at slide 12, Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide with the addition of light blue lines on the map that showed microwave systems, which offered some broadband. The systems were robust and did not meet NTIAs threshold of 100/20, so the locations were considered unserved. Co-Chair Stedman asked about the four fiber optic lines and asked if there were any pigtails off the lines that were not attached so that they could be run into Southeast Alaska. He noted that the Southeast part of the map was hard to see. He commented that there were a lot of microwave present in Southeast. He commented on the complexity of Prince of Wales Island. Co-Chair Hoffman agreed. He thought a map of the communities that were unserved and underserved would be important for the community. He asked Mr. Lochner for the information. Mr. Lochner did not have a list included in the presentation, but affirmed that the list was posted on a website and he could send the information to the committee. Co-Chair Stedman asked for the list in Excel. Mr. Lochner affirmed that the list was in Excel. 9:26:25 AM Mr. Lochner showed slide 13, "Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide but for blue pins that indicated federal projects. The projects were primarily through NTIA through the Tribal Broadband Connectivity Program, and through the U.S. Department of Agricultures Reconnect and Community Connect programs. The sum total of projects identified by the blue pins was about $750 million. He mentioned various projects in different parts of the state. He thought it was good to see the programs in partnership with Native organizations as well as telecommunication providers. Co-Chair Hoffman asked if the projects in blue were both unserved and underserved communities. Mr. Lochner answered affirmatively and noted that the communities would be considered served once the projects were completed. Mr. Lochner referenced slide 14, "Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide, with the addition of another blue line showing the fiber and microwave that would be added once the projects were complete. Co-Chair Hoffman asked if Mr. Lochner could provide a list of projects mentioned earlier, including when the contracts would be completed. Mr. Lochner relayed that he had access to the list of programs but did not completion data from the Native organizations or telecommunications providers. Co-Chair Hoffman thought it was important to have information about when the state would be connected. Mr. Lochner agreed that the information was important for the state. He noted that each of the programs had a fixed timeline that could provide an estimate of a completion date. Mr. Lochner turned to slide 15, "Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide, with unserved areas. 9:29:56 AM Co-Chair Olson asked about the status of working relationships between smaller tribal entities and big corporations such as GCI. Mr. Lochner could only speak to the grants that would be coming out of the Broadband Equity Access and Deployment (BEAD) Program. Co-Chair Olson had been made aware that there had been some attempt to make it so some smaller entities did not have the access to access the funds being discussed. Mr. Lochner stated "that is not true." He emphasized the importance of ensuring that were not just capital up front without economics to continue. He had worked with tribal broadband connectivity with other Native organization programs. He mentioned a project in the Interior with an operational cost of -2400 percent margin. He discussed cost negotiations and small communities banding together for an economy of scale. Co-Chair Olson thought what Mr. Lochner described involved an area with more affluence in comparison to less advantaged areas such as in the Yukon-Kuskokwim area. 9:33:18 AM Co-Chair Olson asked if Mr. Lochner was familiar with Alaska Tribal Spectrum. Mr. Lochner answered yes. Co-Chair Olson understood that the Alaska Tribal Spectrum was trying to access some federal funding to try and provide smaller communities with internet systems. Mr. Lochner relayed that the office encouraged Alaska Tribal Spectrum to submit grant opportunities within BEAD funding. He relayed that the office would encourage all comers to submit a proposal. Mr. Lochner considered slide 16, Evaluation of Current Status of Broadband," which showed the same map of Alaska as the previous slide. He discussed the charter of the broadband office. Mr. Lochner displayed slide 17, "Network Ideas for Underserved/Unserved Locations," which showed the same map of Alaska as the previous slide. Co-Chair Hoffman asked how many villages were listed on the map. Mr. Lochner answered that there were 196 villages listed, with 184 unserved and 12 underserved. Mr. Lochne r relayed that part of the notice of funding opportunity that was received stated that in as much as possible the state had to (in its grant program) leverage the infrastructure that was already in place. Mr. Lochner highlighted slide 18, "Network Ideas for Underserved/Unserved Locations," which showed the same map of Alaska as the previous slide with the addition of microwave and fiber infrastructure. 9:35:38 AM Mr. Lochner looked at slide 19, "Network Ideas for Underserved/Unserved Locations," which showed the same map of Alaska as the previous slide with the addition of pink marks denoting ABO network ideas. He did not want to call it a network design but thought the proposed system to serve all the unserved and underserved locations was reasonable. The office had posted the map and a list of projects (a capital model) with the ability for individuals to change inputs. Co-Chair Hoffman mentioned that NTIA grants to Native entities, and asked if the grants were taken off the list, if there was map illustrating communities still not being provided service. Mr. Locher affirmed that slide 19 was the map with the information being discussed. The communities were not on the map after being awarded from NTIA. He pointed out the villages of the North Slope had been removed due to being served. Additionally, Point Lay, Kaktovik, and Anaktuvuk Pass had also been removed. Co-Chair Hoffman asked if there were 196 communities on the map. Mr. Lochner answered affirmatively. Co-Chair Stedman asked for an idea of how much faster the communities would be than if they went with Starlink. He asked for a comparison. Mr. Lochner relayed that an upcoming slide would address the topic. He shared that one of the primary grading categories for the grants was affordability. The grading category defined affordable as one gigabyte over one gigabyte, and NTIA had indicated affordable one gigabyte over one gigabyte service was no more than $150. He addressed Starlink, which was a solid service in Southeast. He thought there were fewer satellites in Alaska. Co-Chair Hoffman mentioned that satellites went over Southeast Alaska much more frequently than over Barrow. Mr. Lochner clarified that he had meant there were fewer Starlink satellites in the Interior. 9:39:42 AM Co-Chair Hoffman asked Mr. Lochner to explain why Southeast received microwave services while other areas had intermittent Starlink service and were looking forward to fiber, which was most likely much faster. Mr. Lochner relayed that the primary band of Starlink satellites went up to the 60th parallel. Co-Chair Hoffman asked which community was at the 60th parallel. Mr. Locher specified that Adak was well covered, and some of the southern parts of Southeast. The reason the remainder of Southeast was served well, there was enough view of the satellites. Co-Chair Hoffman asked if it was fair to say that more satellites were planned for communities farther North to be added by Starlink. Mr. Lochner relayed that he had met with Starlink two weeks previously, and had learned the company planned for more group 2 satellites over the Interior and northern Alaska. Co-Chair Hoffman asked about the timeframe for the additional Starlink satellites. Mr. Lochner had not learned about the timeline but would endeavor to learn the information. Co-Chair Hoffman asked Mr. Lochner to provide a comparison between microwave and fiber services, understanding that Starlink was microwave. Mr. Lochner used the analogy that Starlink was a fast helicopter with a limited capacity. He described space lasers which connected the satellites to make the system fiber-like. He discussed the lower orbit of 3,000 miles high of satellites versus geo-synchronous satellite orbits about 34,000 miles up. At lower speeds satellites had a fiber-like performance if they were numerous enough for continuous service. Fiber was more like a bullet train with unlimited length. Fiber had low latency and could grow on a single fiber. He summarized that fiber had an ability to grow in a way that satellite and microwave currently did not. He offered the caveat that ten years previously, satellites were slower. 9:44:00 AM Co-Chair Hoffman used the analogy of a snow machine compared to a dogsled, and then compared to a car on the road system. He thought many people saw Starlink as something much improved over current services, but eventually when fiber was available it would be a much improved option for many people that wanted faster speeds, particularly in medical and educational fields. Mr. Locher thought Co-Chair Hoffman used a great analogy. He thought Starlink was a good product. He mentioned satellitemap.space, which showed the position of every Starlink and Oneweb satellite over Alaska in real time. Mr. Lochner addressed slide 20, "BEAD Next Steps Five- Year Action Plan Work with Communities, Tribes, Village & Regional Corporations, AFN, AML, Industry, and others to develop and submit a Five-Year Action Plan. Outreach: • Digital Equity Inclusion and External Engagement Process • Alignment with Other Statewide Social / Economic / Infrastructure Plans Network: • Broadband Service Needs • Asset Inventory • Deployment Barriers & Obstacle Identification • Comprehensive High-Speed Internet Plan Logistical: • Outline of Broadband Office, Employees, Consultants & Contractors, Program Work, and Anticipated Technical Assistance & Capacity Needs • Broadband Funding Identification (Federal, State, Local & Tribal Providers) and Broadband Affordability Data Mr. Lochner explained that the notice of funding opportunity had required 13 items, which ABO had categorized and combined into 8 items to reduce repetition. He referenced boxes with a green mark that showed the completion progress for each category. He referenced increasing outreach and ensuring tribal consultation regarding digital equity for the five-year action plan. He noted that the five-year action plan was based upon the digital equity outcomes. He commented on the importance of digital equity in the BEAD exercise. 9:47:06 AM Senator Bishop asked if there were enough people to meet the deadlines. Mr. Lochner answered "yes." and detailed that in addition to sufficient staff, ABO had engaged consultants. Senator Bishop acknowledged a potential eight years of work for the five years of funding due to supply constraints and workforce issues, which could slow projects down. He mentioned that federal highways had a true-up each year, by which funding that was not allocated by other states was put in a pot and redistributed annually. Alaska had historically been at the forefront of being able to capture unspent federal highway dollars. He pondered that such a redistribution could happen if other states did not allocate all of their funding. Co-Chair Hoffman mentioned the five-year plan, and asked if the state would be providing updates or reports on progress on an annual or semi-annual basis. He thoguht five years could pass quickly. Mr. Lochner relayed that there was a reporting functionality to the NTIA that was very robust. Co-Chair Hoffman asked about the timeframe for the reporting. Mr. Lochner said "semi-annual." Co-Chair Hoffman asked for the dates of the reports. Mr. Lochner thought the dates were based on the start date and would be every six months. Mr. Lochner commented on the map on slide 19. He relayed that there were several applications out to different agencies. He mentioned the Tribal Broadband Connectivity Program (phase 3), the Middle Mile Infrastructure Fund, and the United States Department of Agriculture Reconnect (round 4 and round 5). He thought there may be several communities on the map that would become connected. He cited the price of $1.88 billion for the idea ABO had come up with. 9:50:43 AM Mr. Lochner advanced to slide 21, "BEAD Next Steps - Grant Criteria - Initial Proposal Primary Criteria: Fixed 75% of Scoring from Notice of Funding Opportunity: • Efficient Use of BEAD Funding How big is the match? • Affordability 1Gbps/1Gbps affordable consumer product • Fair Labor Practices Can and will Subgrantees comply with Federal labor and employment laws? Secondary Criteria: Will the work be completed by a set date? All Other Criteria: • Network Design • Operating Costs Sustainable, Affordable and Scalable • Native Bidders • Carrier Neutral and Fair Pricing Practices Mr. Lochner discussed the work completion criteria, which was required but not specified. He explained that the office would get advice from the advisory board. He reiterated Senator Bishop's point that projects in Alaska could experience challenges with supply chains or weather. He did not anticipate the timing being a large criteria. He explained that there were scoring items and gating items. Mr. Lochner showed slide 22, "Contact Information Thomas Lochner Director thomas.lochner@alaska.gov (907) 269-4048 Lisa Von Bargen Sr. Project Manager lisa.vonbargen@alaska.gov (907) 660-7877 Melissa M. Kookesh Tribal Liaison melissa.kookesh@alaska.gov (907) 465-6466 Anessa Feero Administrative Specialist anessa.feero@alaska.gov (907) 269-8159 9:53:09 AM Senator Bishop asked Mr. Locher to repeat his statement related to concurrence. Mr. Lochner relayed that it was important to ensure that an affected village believed in and supported projects. Co-Chair Hoffman mentioned the Broadband Advisory Board, which he thought seemed large. He asked if the board had a meeting schedule for the following year. Mr. Lochner relayed that the organizational meeting would st take place the week of March 21. The board was currently working to establish a meeting time. Co-Chair Hoffman asked if a meeting location had been identified. Mr. Lochner thought the meeting would be held virtually. Co-Chair Hoffman commented on the complexity of the subject matter. He thought the goal was to get every Alaskan connected with the desired service. He mentioned the issue brought up by Co-Chair Olson and used the example of building a car and then having to pay for gas. He commented on the broad spectrum of users and the many reasons the state had unserved and underserved communities. He commented high energy costs in the communities and pondered how the communities would afford ongoing costs. Mr. Lochner cited that there were two ways; as part of its evaluation, ABO would have a target affordable number that would be between $75 and $150. He mentioned the Affordable Connectivity Program, which offered a $75 subsidy for every internet household depending on the bandwidth/speed. He discussed criteria for the program. Co-Chair Hoffman thought the affordability was a critical component, and hoped that areas of the state with low population density would be connected. 9:57:32 AM Co-Chair Olson considered the board of directors and observed that there was only one name of a person not on the road system. He asked about the length of the term for board members. Mr. Lochner relayed that members were appointed by the governors Office of Boards and Commissions and would serve a three-year term. Mr. Lochner relayed that the Affordable Connectivity Program was available currently, and ABO encouraged everyone to take advantage of the program. Co-Chair Hoffman thought the committee would be interested in an update from ABO on at least an annual basis. Co-Chair Hoffman discussed the agenda for the following Monday. He noted that the three committee co-chairs had met the previous day, and noted that there was a marked increase in Covid-19 in the building. Starting the following week, the committee members and staff would be required to test weekly. He commented on the importance of the committee to the legislative process. Co-Chair Stedman noted that the co-chairs would like the tests to be completed by 9 o'clock in the morning on Mondays. Co-Chair Hoffman relayed that there had been concern by the support staff and members' staff, and thought the increased testing was an important step for the committee. ADJOURNMENT 10:01:22 AM The meeting was adjourned at 10:01 a.m.