Will Some States Not Accept Broadband Funding?

The upcoming BEAD (Broadband Equity, Access, and Deployment) grants bring a huge once-in-a-generation grant to states to solve the digital divide and build broadband infrastructure. The average state will get over $800 million dollars, with the exact amount per state still to be determined.

It seems almost too absurd to imagine for communities with poor broadband, but there are some states that may end up not getting this funding. I’m working with communities all over the country who are working to put together the partnerships with ISPs to be able to win and use this funding – and who will be shocked if their state turns the money down. But this seems like a real possibility.

The BEAD grant funding will flow from the NTIA through states, and states get to decide who wins the grants. But states need to take steps first to get this funding. They must decide who in the state is going to administer the large grant program, and states must demonstrate that they plan to hire the staffing needed for this – using funding supplied by BEAD.

States also have to file a detailed plan that shows how the grant program will function – who is eligible, how the grant winners will be chosen, how funding will be distributed to grant winners, and how the state will ensure that grant funding is spent wisely. Many of the details of how this will work were spelled out in the Internet Investment and Jobs Act that enabled the grant program.

And that is where the rub will come in for some states. In almost any instance where large federal money flows to states, there is arm-wrestling between some states and the federal government over the rules of the funding, which is often referred to at the state level as federal mandates. There are many examples where states have refused to accept federal mandates and have not been given funding. The most recent major example is the Affordable Care Act funding which provides funding to bring affordable health insurance. There are still twelve states that have not accepted the rules of this plan and which have subsequently passed on billions of dollars of federal funding.

There is proposed legislation in Illinois that would probably stop the NTIA from agreeing to give the funding to the state. State Senator Patrick Joyce has introduced a bill (SB 3683) that would establish the rules for administering the BEAD grant funding. That step of requiring legislative approval is needed in most states to accept the federal funding, so having a bill like this is a normal procedural step.

But the proposed legislation adopts some language that is clearly in conflict with the funding rules established by the U.S. Congress. Some of these conflicts include:

  • Excluding local government from grant eligibility. Congress clearly stated that this funding is available to all sorts of entities including local governments.
  • Uses the funding only in unserved areas. This violates a few of the goals established by Congress such as making sure that public anchor institutions get access to gigabit broadband. This would also likely restrict funding from going to low-income areas in cities that have poor broadband adoption rates.
  • The law would oddly eliminate from BEAD grant eligibility any entity that has partnered with the state in setting goals and priorities for broadband access and deployment.
  • Eliminates any rate regulation, meaning that grants can’t consider an ISP’s willingness to participate in programs for providing discounts for low-income households.
  • Doesn’t allow the layering of grants. Congress explicitly intends for BEAD grants to supplement both state grant awards and local grant awards using ARPA funding.
  • The state BEAD grant couldn’t be used to enhance or expand current grant-funded projects.
  • Finally, the new law would limit the awards to $10 million per ISP. That’s absurd when the cost of bringing broadband to the rural area in many counties is far more than that. This would also stop ISPs from participating in partnerships with multiple counties.

It’s hard to imagine that the NTIA could approve the BEAD funding to Illinois if this law passed. The law is contrary to almost every key position taken by the federal legislation that approved the BEAD program.

Illinois is not the only state facing this problem. There is new proposed legislation in New York (S 8008 B) which could be a problem. Other states, including North Carolina, where I live, have existing prohibitions against local government funding and building broadband infrastructure. NC and other similar states will have to make a legislative exception to current state rules to be eligible for the BEAD grant funding. It will not be surprising to see some legislatures decide that sticking with existing state laws is more important than getting the grant funding.

I’ve been advising communities to get active and to make sure you know where your state stands in the ability to receive the BEAD grant funds. I believe that funding of the magnitude we are seeing now may not come along for another decade, if ever. A future Congress might not be sympathetic about providing broadband funding to states that turned it down this year.

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