Designing the Ideal Federal Broadband Grant Program

In April, FCC Chairman Ajit Pai announced a new rural broadband initiative that will provide $20.4 billion of new funding. We don’t know many details yet, but here are a few things that will likely be involved in awarding the funding:

The FCC is leaning towards a reverse auction.
The program will likely require technologies that can deliver at least 25/3 Mbps broadband speeds.
The program will be funded within the existing Universal Service Fund, mostly by repositioning the original CAF II plan.
The grants might all be awarded at once, similar to A-CAM and CAF II awards, meaning that there might be only one chance to apply, with the awards to be paid out over a longer time period.

I’m writing a series of blogs that will examine the ideal way to design and administer a grant program of this size. We’ve seen both good and also disastously bad federal broadband programs before, and i’m hoping the FCC will take some time to make this grant program one of the effective ones. I’m sure the details of this new program are not yet set in stone, and folks in rural America need to make their voices heard now if they want some of this money to benefit their communities.

I’m going to look at the following topics, and perhaps more as I write this. At the end of this process I’ll post a whitepaper on my website that consolidates all of these discussions into one document.

A well-designed broadband grant program of this magnitude should consider the following:

What is the End Goal?

It’s important up-front for the FCC to determine how the grant moneys are to be used. The best grant programs have a specific goal, and then the application and award process is designed to best meet the goals. The goal can’t be something as simple as ‘promote rural broadband’, because a goal that simplistic is bound to create a hodgepodge of grant awards.

What Broadband Speeds Should be Supported?

This is an area where the FCC failed miserably in the past. They awarded over $11 billion in the CAF II program that was used to upgrade broadband speeds to speeds of only 10/1 Mbps. When the FCC set the 10/1 Mbps speed that didn’t even meet their own definition of broadband. How should the FCC determine eligible speeds this time to avoid a repeat of the CAF II debacle?

Who Should be Eligible?

FCC programs in the past have usually made the monies available to a wide range of recipients. However, the specific details of the grant programs have often made it hard for whole classes of entities like cities or counties to accept the awards. As an example, there are many entities electing to not participate in the current Re-Connect grant program because they can’t accept any part of the awards that include RUS loans.

Is a Reverse Auction the Right Mechanism?

The FCC and numerous politicians currently favor reverse auctions. Like any mechanism, there are situation where reverse grants are a great tool and others where they will distort the award process. Are reverse auctions a good tool for this grant program?

Other Issues

There are two drastically different ways to hand out these grants. One is to follow the CAF II mechanism and award all of the $20 billion in one huge auction and then pay it out over 6 or 8 years. The other would be to divide the award money into even tranches and have a new grant award for each of those years.

In the recent Re-Connect grants the FCC decided to blend grants and loans. I know the loan component stopped most of my clients from pursuing these grants. Should there be a loan component of the grants?

There are also technical issues to consider. I had clients who were outbid in the recent CAF II reverse auction by wireless companies that gained bidding preference by promising that their fixed wireless networks could achieve across-the-board 100 Mbps broadband. I still don’t know of a wireless technology that can do that over a large footprint. How should the FCC make sure that technologies deliver what’s promised?

What’s the Role of States in this Process?

What should states be doing to maximize the chance for federal grant money to be awarded to their state?

This blog is part of a series:

Setting the Right Goals for Grants

Speed Goals for FCC Grants

Who Should be Eligible for Grants?

Are Reverse Auctions the Right Mechanism?

What Technology Should be Covered?

State’s Role in Broadband Grants

Summary and Conclusions