Two non-traditional investors are partnering to provide BEAD matching funds and to directly invest in broadband for communities that do not win government grants. One of the entities is Connect Humanity, a non-profit fund focused on digital equity. The other is Appalachian Community Capital (ACC), which is a community development financial institution (CDFI).
Connect Humanity and ACC are collaborating on a campaign to raise $25 million that would be invested in community-minded broadband providers that are looking to increase digital equity across 13 Appalachian states. Telecompetitor talked with Brian Vo, chief investment officer for Connect Humanity, and Donna Gambrell, president and CEO of ACC, about the plans.
How Connect Humanity Got Involved
The collaborators’ fundraising campaign, dubbed Investing in Digital Equity in Appalachia (IDEA), has its roots in Connect Humanity’s Appalachian Digital Accelerator program, which was created in partnership with the Appalachian Regional Commission (ARC), according to a press release. The goal of the accelerator program is to “empower” 50 of the least-connected communities in Appalachia by helping them to plan, develop and build broadband networks that will enable the communities they serve to thrive in the digital economy.
Conversations about funding those plans brought ACC into the picture. Vo said he met Gambrell during Connect Humanity’s work with ARC-funded programs.
“What really started to emerge through our conversations was that there were just not enough investors looking at community-centric ISPs,” said Vo. “So, some of our conversations became more focused on how we could support that ecosystem and grow more community-oriented investors.
“CDFIs became an obvious conduit for this work, so, the problem statement became ‘what is preventing CDFIs from doing more of this work and what can we do to grease the skids?’”
Vo went on to say that he thinks CDFIs will play the same role for broadband that they did for affordable housing. All they need is some more exposure to the tools and underwriting approaches that are already working for Connect Humanity, he said.
“Our partnership with ACC was very natural,” said Vo.” It’s been a great conversation to think about the skills, tools and frameworks that would be most helpful for CDFIs to do this.”
Talking to ACC, which is a network of 34 CDFIs itself, was a great opportunity for Connect Humanity to get real-world feedback from CDFIs that may want to participate in the funding campaign, he added.
“We think there is so much work to be done that there is no way we would be able to do it all, so why not share how we have done it successfully and see where it resonates,” said Vo.
Connect Humanity can assist CDFIs by training them how to underwrite broadband projects or “convert or translate what we do, into what they do,” he added.
ACC’s First Broadband Foray
Gambrell told Telecompetitor that a few of ACC’s members have been engaged in broadband initiatives, but this is ACC’s first foray into the area.
“We were attracted to Connect Humanity because its mission to support underserved communities mirrors CDFIs’ and ACC’s mission,” said Gambrell. “In addition, Connect Humanity has demonstrated that fast, affordable broadband can be provided to low-income, rural communities.”
In its current phase, investors can participate directly in the IDEA Fund or as capital partners on individual projects. Initially, the partnership is looking to fund community-focused Internet service providers, which “frequently lack access to sufficient capital,” but are “best placed to connect communities in Appalachia,” according to the partners.
The IDEA Fund will help these ISPs raise enough money to match government broadband funds for programs such as BEAD or invest in communities that do not secure government grants.
“We are hoping to have more capital available to invest over the next year or so,” said Vo. “We are trying to make sure we have financing products that both complement and supplement BEAD, so that’s our hopeful timing.”
In Phase 2, ACC and Connect Humanity will collaborate on a technical assistance program to support Appalachian CDFIs in making direct investments in digital equity and emerging, community-focused ISPs. The long-term goals are to make community broadband investments a key part of CDFI portfolios, demonstrate that community broadband is a viable investment and ignite a wave of such investments across the region, the partners said.
The fact that the large amount of money the IDEA Fund plans to raise will come from local investors is key to properly supporting community-centric broadband providers, Vo said. Currently, funding for small broadband providers is limited to foundations and small grants, which yield limited results, or private equity firms, which typically lack the long-term commitment that small providers need from their investors. Banks are also in the mix, but they are often limited in their ability to think about the social outcome side of their investments. As a result, their products are not the most relevantly designed, explained Vo.
“My greatest hope for this collaboration is two-fold,” said Gambrell. “One, that it will accelerate broadband access across Appalachia’s least connected communities, preparing them to build next-generation networks. Two, that it will enable regional CDFIs to obtain the tools and technical assistance so they can develop the capabilities and expertise to make similar investments in digital equity.”
Since 2015, ACC and its members have promoted economic opportunity in Appalachia by deploying $32 million in leveraged debt, raising $17 million in grants and helping to finance 121 small businesses.
Over the past two years, Connect Humanity has focused on investing in low-income communities, rural communities and communities of color in the U.S., including communities in Alabama, Mississippi, Louisiana, Texas and Georgia.
One of Connect Humanity’s recent investments was a line of credit provided to Hawk Networks/Althea. Hawk builds and operates networks serving underserved rural and low-income communities in ten states.