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Regulation - What is it Good For?

The Senate Broadband Grants

Now that it looks like the House might sign an infrastructure bill, I figured it was time to take a harder look at the $42.45 billion Senate broadband grant program. There is still more to be done before this becomes law – the House needs to pass infrastructure legislation, and then any differences in the two bills must be reconciled. That still gives lobbyists a lot of time to try to change the rules. The following is not a complete summary of the Senate bill, just the highlights that I think are the most important.

The Senate created a $42.45 billion grant program to be administered by the NTIA. Administered in this case means the NTIA will interpret the final grant rules within the confines set by this legislation. The grant money will go to states, and states will pick grant winners using the rules dictated by the NTIA. This won’t be the free-for-all as we’ve seen with CARES and ARPA funding, and I expect fairly explicit rules from the NTIA based upon whatever is demanded in the final legislation. 10% of the funding will be distributed nationwide to reach the highest cost areas to serve. That determination probably comes from the FCC’s cost models. Every state will get at least $100 million.

The grants define unserved to mean areas that lack access to 25/3 Mbps broadband. Underserved means areas that have broadband greater than 25/3 but less than 100/20 Mbps. Since speed is the determining factor, this means using the FCC mapping data – unless the NTIA allows an alternate method. States must offer grant funding to cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments.

The funding can be used for several purposes, including building last-mile infrastructure to unserved and underserved locations, connecting to anchor institutions, data collection and mapping, providing WiFi or reduced-cost broadband to eligible MDUs, broadband adoption, or any other use allowed by the NTIA. This list is worth noting because all of the money doesn’t go to last-mile infrastructure.

A state must certify that it will bring broadband to all unserved areas and anchor institutions before money can be used for underserved areas. States must prioritize the following in awarding grants: deployment to persistent poverty counties and areas, the speeds of the proposed technology, the length of time required to build a network, and compliance with federal labor laws.

There is a challenge process, and local governments, nonprofit organizations, or ISPs can challenge the eligibility of proposed grant areas, including if an area is unserved or underserved. The NTIA can intervene in these challenges.

Grant winners must bring at least 25% matching funds. Matching funds can be in cash or in-kind contributions. Matches can be made from CARES and ARPA funds.

Grant winners must build broadband networks that provide speeds of at least 100/20 Mbps. Broadband must be made available to every home and business in a grant area that wants service. Grant recipients must offer at least one low-cost broadband service option for eligible subscribers – the NTIA will determine the definition of an acceptable low-cost option.

It won’t be easy to understand the winners and losers in this grant until after the NTIA crafts the specific grant rules. The cable companies, WISPs, and maybe even the satellite companies already won a huge battle by setting the eligible technology requirement to 100/20 Mbps. The challenge process allows the incumbents to delay the grant process and create havoc.

But the public is also a big winner. There have been shenanigans for years from telcos that have lied about rural areas that can receive 25/3 Mbps broadband. Allowing funding to areas with speeds up to 100/20 Mbps washes away most of the past nonsense.

The big ISPs likely also view this as a victory because they probably feel that they have a decent chance in some states of winning most of the grant funding. How well the grant will work in a state is going to depend upon how well a particular state does its job – many states are not prepared to handle this kind of grant program.

There are still areas that will fall through the cracks. For example, it might be financially infeasible for an ISP to take this funding in high-cost places like Appalachia if an ISP has to provide a 25% matching while also offering a low-income broadband product. There are still places where costs are so high that a 75% grant is not sufficient.

Just about everybody won by not using a reverse auction.

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