Administration Announces $10 Billion Rural Infrastructure Fund With Broadband Focus
The White House Rural Council announced the creation of a $10 billion investment fund that aims to help a variety of rural infrastructure projects, including deployment of broadband infrastructure. President Barack Obama created the council in 2011 to focus on rural initiatives. The fund is known as the U.S. Rural Infrastructure Opportunity Fund, and CoBank is the anchor investor in this public-private partnership, with Capitol Peak Asset Management handling the fund’s operations.
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"We can begin to aggressively address the infrastructure deficit,” Agriculture Secretary Tom Vilsack, chair of the council, said during a Thursday press call, citing “opportunities to expand rural broadband.” He called it a “significant commitment for CoBank.”
The fund is “immediately open" and other investors can increase the $10 billion of capital that CoBank has provided. The Department of Agriculture will help identify potential applicants for the fund, according to the White House (http://1.usa.gov/1nvPWv9), listing “rural broadband expansion efforts” among the fund’s target investments. The announcement coincided with the White House Rural Opportunity Investment Conference this week. Details of the application process were limited immediately after the announcement. CoBank, in its own news release (http://bit.ly/WLwQY0), said the investment activities of the fund will encompass “recruiting new sources of private capital to support rural infrastructure projects; serving as a co-lender for borrowers financing projects where the government’s program limits or resource constraints warrant the fund’s involvement; and, private lending in support of projects capable of meeting market terms."
"NTCA welcomes this much-needed attention on the real challenges of promoting investment in rural areas,” Senior Vice President-Policy Michael Romano told us. “Our members live in and are committed to the rural communities they serve. But the significant challenges of building and then -- just as importantly -- operating and sustaining world-class communications networks in these hard-to-serve areas should be seen as national priorities that require a national effort."
"These businesses really do have capital intensive requirements,” CoBank CEO Bob Engel said during the press call. He cited rural communications service providers among CoBank’s clients and emphasized the “common mission” that USDA and CoBank share in coming together for this fund. “The scale of commitment that’s going to be necessary in the coming years ... is absolutely huge,” Engel said, citing the challenge of bringing such infrastructure to rural areas. “We're just the beginning of this.” Engel said the fund is intended to have certain flexibility.
There’s greater demand for credit than the Rural Utilities Service can provide, Vilsack said, referring to CoBank’s stepping up to meet that need. “We know the need is out there, and we know the profit opportunity is out there,” Vilsack said. “There’s not much of a limit on this.”
CoBank can review and approve every case it wants to, it said. “Loans made by CoBank side-by-side with the fund will remain on CoBank’s own balance sheet or be syndicated to Farm Credit lending institution partners, and will be supplemented by additional capital provided by investors brought in by the fund manager, including pension funds, endowments, sovereign wealth funds and other institutional investors,” CoBank said. “CoBank may also act as the servicer of some loans made through the fund."
Broadband featured prominently in a fact sheet that the White House circulated to highlight the fund, emphasizing ways the Obama administration says it has furthered these priorities over the past three years. “U.S agencies that manage Federal properties and roads are partnering to offer carriers a single approach to leasing Federal assets for broadband deployment,” the fact sheet said. “Providing a uniform approach for broadband carriers to build networks is speeding the delivery of connectivity to communities, business, and schools in rural America.” It also mentioned 25 cities and 60 national research universities united as part of the U.S. Ignite initiative, “creating a new wave of services that will extend programmable broadband networks to 100 times the speed of today’s internet.” The fact sheet highlighted the Department of Education’s partnership with the council in developing online tools, and the FCC’s move in “investing $2 billion over the next two years to dramatically expand high-speed Internet connectivity for America’s schools and libraries -- connecting 20 million more students to next-generation broadband and wireless.”