I’m seeing rural counties facing some interesting dilemmas about where to offer local support for the giant upcoming federal grant funds that will hopefully build broadband in their counties. I believe that counties that are willing to provide local matching grants from ARPA or other funds will rise to the top of the list of list of who gets funded. I’m fairly certain that most state grant programs are going to support an ISP that has strong local support, including local financial backing, over ISPs that don’t.
You may wonder why that matters. I think many counties fear that nobody is going to seek the $42.5 BEAD grant funding in their county – and some are probably right. But I also think there is a good possibility that some counties are going to see multiple ISPs seeking the big grant dollars in their county. There are seemingly a lot of companies considering the $42.5 billion BEAD grant program. It seems likely that an ISP that already won any significant RDOF award in a county will pursue the BEAD grants to fill in the nearby areas not covered by RDOF. We now know that big ISPs like AT&T, Frontier, Windstream, Charter, and likely others will pursue the big grant funding. I’m betting that new companies we’ve never heard of before, backed by private equity money, will pop out of the woodwork for this grant.
The dilemma faced by many counties is that they might not want any of these entities to win the BEAD grants and become the new monopoly ISP. Many rural areas are already dubious of RDOF winners that are bringing a wireless solution instead of fiber. They wonder if the wireless technologies will bring the futureproof broadband solution needed for the rest of this century.
Counties are rightfully leery about having some of the big ISPs win the BEAD grants, particularly the big telcos. The big telephone companies carry a lot of the blame for the poor condition of broadband in the rural areas. The telcos slowly abandoned rural America starting in the 1980s. They closed local customer service offices. They cut back on technician staff to the point where it is nearly impossible to get a problem fixed quickly, if at all. They stopped making any investments in rural areas, so in-place technologies were frozen at a time when technology everywhere else was being modernized in the rural areas served by smaller telephone companies and cooperatives.
The question that communities are wrestling with is if they should trust the big telcos again? What’s to stop the big companies from taking federal grants, building just enough to meet the letter of the law, underfunding maintenance going forward, and starting the cycle of ignoring the market all over again. If a new fiber network is not properly maintained, it will begin to see problems in a decade and could become a paperweight in two decades.
I also suspect most local communities are going to be leery of new investor-backed ISPs created just to take advantage of the BEAD grants. Even with grant funding, there is not enough margin in a rural ISP business to make the kinds of returns that investors are seeking. It seems likely that grant chasers will already have a seven-year plan to flip the property to earn the desired return. A community partnering with one of these new ISPs might end up with somebody they don’t want as the ISP in a decade.
Many counties already have one or more local ISPs they know and like. This might be a small telco or cooperative that is serving part of the county or in the county next door. It might be a local WISP that provides great customer service. Unfortunately, we’re going to see many cases where the smaller ISPs are unwilling or unable to pursue all of the big grant opportunities around them. Small companies all have a natural credit limit, and many have a weak balance sheet, and they might be unable to borrow the needed matching funds.
There are also counties with no natural local ISPs. If you look at a map of the footprints of the big telcos you’ll see plenty of counties that are not close to an independent telephone company or cooperative. Remember that companies like Frontier, CenturyLink, and Windstream grew by gobbling up hundreds of smaller telephone companies.
Counties should be having the conversation today with local ISPs to see if there is one or more they are willing to back. Counties also need to give serious consideration to contributing some local grants. The local matching could come from ARPA funding, but some counties consider broadband to be important enough that they are floating bonds to help pay for better broadband.
This is no guarantee that an ISP a county backs will be an automatic winner of grant funding. I’m sure we’ll see some well-funded big ISPs make plays to serve large contiguous swaths of counties – and grant offices might find that an easier grant to administer. But I think that counties that pick the ISPs they want to partner with and that put up local matching funds will have a high probability of getting the ISP of their choice. Counties who do nothing might end up getting a technology solution or a big ISP they don’t like – or no solution at all.