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Regulation - What is it Good For?

Let’s Try Another Approach – Part II

Yesterday’s blog talked about the many problems with the recently concluded RDOF grant process. The FCC has an opportunity to clear up some of these problems through the long-form approval process. But if the FCC awards the grants as auctioned, then the FCC will have completely botched the only two giant-dollar broadband grant programs it has administered – the original $11 billion CAF II and now the $16 billion RDOF. Even if the FCC cleans up some of the worst problems, the agency has shown us that it should have no role in deciding who gets to build broadband networks.

There is a better and easier approach to successfully administering broadband grants sitting openly in front of us. Congress gave block grants to the states for CARES funding that included money for broadband. This money came with some odd strings and rules that kept changing, but from what I can see, the states did a decent job of administering the funds. The biggest hurdle with the CAREs money was that states had to spend the money too quickly and were faced with having to repay any money that was later deemed to not meet the intentions of the CARES Act. But even with the CARES restrictions, each state carefully deliberated and debated the best way to use the money.

The most effective way to award large amounts of grants like the RDOF is through block grants that would allow each state to determine how to use the money. To be effective, block grants shouldn’t be saddled with any stupid rules or restrictions – but I think it’s clear that states know local broadband needs far better than the FCC. For example, one of the big problems with RDOF is the FCC determining the Census blocks where the grants were to be awarded based upon its admittedly crappy broadband mapping. With block grants, states should be free to pick where funds are allocated.

Block grants would have avoided most of the mistakes made by the FCC with RDOF. Consider the state of Minnesota as an example. The state already has a successful grant program that could have been expanded to deal with a large block grant. Minnesota uses its own broadband map and would have ignored the FCC mapping. Minnesota already has a minimum speed requirement for grant recipients of 100 Mbps download and would not have considered slower technologies. Minnesota would likely not have considered satellite broadband as an acceptable solution. In the RDOF, a large portion of the money in Minnesota was awarded to WISP that says it will build fiber. The Minnesota grant program would have likely rejected this company for lack of technical experience and financial wherewithal – but that would be a local decision for the state to make.

Not every state has its act together as well as Minnesota and perhaps the FCC rules would have to create a few guidelines. For example, the current state grants in Washington are only awarded as a combination of a grant and a loan. The federal money should be awarded as pure grants that shouldn’t be complicated or encumbered with state loans.

States certainly wouldn’t be perfect with block grants and some states would make boneheaded decisions. As an example, a few years ago a large state grant program was created in California, and before the money was awarded, AT&T and Frontier lobbyists used political influence to make sure most of the money went to them. However, there is currently huge public pressure to solve broadband gaps, and any politician who bungles state grants would be under a microscope and held accountable. I like that accountability. There is zero accountability when the FCC botches a grant. We never saw any heads roll for the disaster of the CAF II awards when an $11 billion screw-up should have been front-page news. Giving the money to the states bring accountability and transparency that we don’t have at the federal level.

The FCC is a regulatory body and should never have tackled figuring out how to award $16 billion in grants. It was obvious from the start that the FCC had bitten off more than they could chew – but considering the time that the FCC had to get ready for this, I was surprised at the utter failure of the reverse auction process. The FCC could have instead announced state block grants and gotten positive acclaim from coast to coast – that would have been a legacy that Ajit Pai could have been proud of – instead, he’ll be known as the guy who botched the RDOF grants.

One reply on “Let’s Try Another Approach – Part II”

One additional suggestion: When VT got it’s CARES Act grant we suggested using it to fund a revolving loan facility, that would have more accountability than a grant program. The VT Dept of Public Service informed us that the CARES Act prohibited that use of the funds. That was a big mistake, IMHO.

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