Let the BEAD Grant Process Begin!

The Notice of Funding Opportunity (NOFO) for the $42.2 billion BEAD grants came out late last week. I expect there will be dozens of summaries of the key grant rules published, and I’m not going to repeat that effort. Instead, I’m going to write a series of blogs that explore some of the nuances that potential grant applicants need to understand. Today’s blog is a high-level summary of the issues I’ll be exploring in more detail.

The Grants Draw a Firm Technology Line. The NOFO uses the term ‘reliable broadband service’ to mean existing technologies that are considered to be broadband. This includes only fiber-optics, cable company hybrid-fiber coaxial technology, DSL, and fixed wireless service supported by licensed spectrum. Every other technology does not count as broadband in terms of defining areas eligible for the grants. The NOFO means that grants can be used to overbuild areas served by satellite broadband or by WISPs using unlicensed spectrum – regardless of the speeds being provided.

The Grants Are Complicated. When I started to make a full list of all of the grant requirements suggested by the NOFO, I realized that these are going to be the most complicated broadband grants ever – more complicated even than ReConnect grants. It looks like the NTIA made a list of everything that could possibly go wrong with a project or an ISP and made each into a grant requirement.  Here are just a few of the new requirements I’ve never seen in a grant before: a cybersecurity plan, a climate resiliency plan, a supply chain risk management plan, a middle-class affordability plan, and a project workforce continuity plan if not using union labor.

The Grants Add a Lot of Cost to Projects. These grants layer on a lot of costs onto broadband projects that would not be there for an ISP building a rural project on its own. Some of the big ones include environmental and historical preservation studies; prevailing wages for grants over $5 million; bank letters of credit and a legal opinion on the lines of credit; construction contractors must certify commitments to workforce development, including participation in apprenticeship programs; buy America requirements that will drive up the cost of materials; heavy-duty reporting requirements that layer on work after taking the grant. Additionally, grantees must fund all non-grant eligible assets and costs, as would be expected. I also should remind folks that grant funds are going to be considered a taxable income by the IRS. The bottom line of all of this is that the real cost of taking one of these grants is going to significantly exceed the supposed matching fund percentage.

The Grants Are Clearly Stacked Against New ISPs. This is ironic because the rules as written by Congress and alluded to throughout the NOFO talk about favoring what the NOFO calls non-traditional broadband providers like non-profits, electric cooperatives, local governments, public utility districts, and Tribes – but the detailed grant rules are stacked against new ISPs in a dozen places.

The Grants Want to See Skin in the Game. While grants can be as high as 75%, the NTIA expects States to award grants to applicants that ask for the lowest amount of grant funding. And while the grants allow for matching funds from ARPA and state grants, the rules will favor ISPs who supply their own matching funds.

There are Some Gotchas In the Financial Requirements. There are financial requirements that are going to stop a lot of entities from requesting the grants. An applicant must get a bank letter of credit just to apply for the grant – something that’s expensive and not easy for many entities to get. This is then followed up with an irrevocable standby letter of credit for the full matching funds (even if some of those funds are being supplied with other matching funds or with in-kind matching. The NTIA also gives the government a lien on assets until the end of economic life – something that some commercial lenders will refuse to allow for loans.

This is Going to Overwhelm State Broadband Offices. Remember that these grants are going to be administered by fifty separate grant offices. The complexity of the grant rules will overwhelm most state grant offices, which are often newly staffed. I think the NTIA thinks all of the extra requirements will make it less likely to make bad grant awards. I expect the complexity will do the opposite since inexperienced reviewers will have trouble distinguishing the few requirements that really matter from the many that are peripheral.

Penalties for Non-performance. The grants seem to have some teeth for non-performance, something that’s been lacking in grants in the past. Penalties against non-performing grant recipients can include the imposition of additional award conditions, payment suspension, award suspension, grant termination, de-obligation/clawback of funds, and debarment of organizations and/or personnel from using future federal funds. We’ll have to wait to see if these penalties are actually ever imposed, but it’s promising that the penalties are listed.

An Advocate for Municipal Broadband

From a lobbying perspective, municipal broadband providers have never had a seat at the table. In any given state, a municipal broadband provider might get its voice heard through organizations like the League of Cities and Counties – or whatever that is called in a given state. But municipal broadband ISPs have never had a national voice to push back against the hard lobbying that has been leveled against them for the last few decades. As an example, USTelecom recently came out with its lobbying position on broadband grants and is advocating that the federal grant rules be changed so that no funding goes to municipalities, non-profits, or electric cooperatives.

This changed with the formation of the American Association of Public Broadband (AAPB). This new group was announced at the Broadband Communities Summit and raised over $100,000 within a few days. The group was formed to make sure that municipal broadband has a voice in Washington D.C.

Having an industry advocacy group is an effective way for an industry group to get its message heard. I point to WISPA as an example of an advocacy group that has benefitted its members. Until that group started to loudly lobby, wireless ISPs had no visibility in D.C. and their issues were never considered. Now, many FCC orders include footnotes that recognize comments made by WISPA. WISPA has made sure that the position of wireless ISPs is known for any topic that affects wireless ISPs.

Municipal ISPs are probably the largest ISP community that doesn’t have a seat at the table in national debates. The FCC, NTIA, and Congress regularly hear about the positions of small telcos, large ISPs, wireless ISPs, fiber overbuilders, and cable companies. The Communications Workers of America regularly lobbies on behalf of technicians. NATE regularly lobbies on behalf of contractors.

As mentioned in the opening paragraph, municipal broadband providers have borne the brunt of heavy lobbying and disinformation efforts in the past. The big ISPs, in particular, have missed no opportunity over the last decades to ask that municipalities be kept out of the ISP business. They have regularly sponsored whitepapers that malign municipal ISPs, and that claim that municipal ISPs are all failures, when it’s obvious that they are not.

In addition to a lobbying role, AAPB will also act to provide expert advice on broadband policy, and will start to track federal and state developments that affect municipalities. The organization already has some resources on the website, like a list of the restrictions in various states against municipal broadband.

The new group obviously has a big challenge in front of them. They claim that big ISPs are spending $8 million per week just to lobby in Washington D.C., and it’s obvious that they will never match that effort. But the success of trade associations like WISPA shows that smart advocacy can get positions heard and can sway D.C. decision makers. I find it refreshing to hear another voice in the debate, which I must admit is a little selfish on my part. I learn a lot about what is happening in D.C. by following what the various trade associations are doing – and I look forward to hearing about issues from the perspective of municipalities.

A Disturbing View of Future Cable Broadband

There was a recent article in FierceTelecom that quotes a leading cable company consultant as saying that cable companies are not likely to universally upgrade broadband networks in the future. The consultant is Sean McDevitt, a partner at Arthur D. Little, a consulting firm that largely works for the giant ISPs.

In the past, when a cable company migrated from DOCSIS 1.0, to 2.0, and to 3.0 everybody in a community was upgraded to the latest technology. He says going forward that it’s almost certain that there will not be across-the-board upgrades. He says there will be neighborhoods upgraded to fiber, neighborhoods migrated to the next-generation DOCSIS 4.0, and neighborhoods that will see no upgrades at all.

I label this as disturbing because it raises the possibility of digital redlining in communities if cable companies start upgrading selectively. The upgrades to fiber or DOCSIS 4.0 will bring faster upload speeds to match fast download speeds. Any neighborhood left on the current DOCSIS 3.1 platform will be stuck with inadequate upload speeds, which was the predominant problem with cable broadband during the pandemic and continues to be a problem for the millions who want to work from home.

I suspect his statement was made to point out that companies will be prudent with capital spending – something that sounds like smart business. Both technology upgrades will be expensive, and a cable company could save a lot of capital spending by not upgrading everywhere. Perhaps he didn’t realize that he was outlining a plan for future discrimination against lower-income neighborhoods. Selective upgrading is also a scary possibility for towns outside the major metropolitan areas, and markets like county seats might get left behind.

In the past, all discussions of digital redlining were leveled against the big telcos, which often clearly upgraded to faster DSL in neighborhoods with higher household incomes. McDevitt outlines a future in which the cable company would likely be making those same kinds of selective upgrade decisions.

To be fair, cable company broadband networks are rarely the same today across larger communities. When we’ve helped communities take speed tests, we’ve often seen that performance on cable networks varies from neighborhood to neighborhood. This seems to mostly be due to varying conditions of the [hiscal plant. Some of the neighborhoods that got cable in the 1970s have much older coaxial cables than neighborhoods built more recently. Many cable companies have been loath to rip and replace wires for whole neighborhoods. It’s also likely that cable companies have taken shortcuts during upgrades, which require replacing all repeaters and power taps if done right. We also see cable markets are configured in what is called cascading, where neighborhoods are daisy-chained together – something that was probably done to save money in the past but which contributes to degraded broadband performance today.

It will be ironic if a decade from now, we’ll be talking about digital redlining from the cable companies while the telcos will have upgraded to symmetrical fiber. That would be a complete reversal of past history.

3Red8

A new long-haul fiber provider is entering the market. 3Red8 has announced plans a plan to build across the U.S. The initial network to be completed by 2027 is shown on the map below. The network is starting in North Carolina, South Carolina, and Virginia. The first route will be between Myrtle Beach, SC and Ashburn, VA. Myrtle Beach will connect to undersea fiber routes, and Ashburn is one of the major Internet hub sites for the east coast, along with New York City and Atlanta.

This is good news for the whole country. At the exponential rate of broadband growth, we don’t have enough backhaul fiber in place to handle the volumes of Internet traffic that will be carried a decade or two from now. It’s great to see new providers jumping in to fill that need. I wrote a blog earlier this year about a similar effort by Zayo, which is beefing up a lot of its existing fiber routes to 300 Gbps transport while also investing in new fiber routes. Level 3, AT&T, and others are also making investments.

3Red8 will act like all long-haul fiber networks and will sell transport to the big carriers that want to transport data between data centers, for cellular networks, and for similar large broadband uses.

However, 3Red8 has a business plan that is unique among long-haul fiber providers. Like all long-haul fiber, the new network will have fiber repeater huts roughly every fifty miles along the network to boost the fiber signal – something that’s mandatory to send fiber signals for long distances. 3Red8 says it will make each of these locations available to connect to small ISPs, communities, and other local needs for connectivity along the routes. Many long-haul fiber providers do not like making small connections on long-haul routes because the revenue is so good from the long-haul business that they don’t want to set aside any fibers for this kind of business.

But that’s only the beginning of the 3Red8 story. The company plans to give back to the communities it passes with its networks. 3Red8 plans to partner with ISPs and communities along its routes to help solve the digital divide. It will do this in several ways. First, it will offer affordable connectivity to local ISPs willing to serve last-mile broadband. That’s going to be a valuable benefit where the network passes through places like Appalachia and other unserved and underserved communities.

If that’s all that the company planned to do, it would be a boon to many local communities. But 3Red8 plans to go a lot further. The company is already working to establish a revenue-sharing arrangement where communities along the fiber will be funded with some portion of the revenue generated by the long-haul network. This funding can be used to support local ISPs, cooperatives, or municipalities to help find long-term broadband solutions. It will be up to communities to decide to best use this funding. One community might use this funding to help support broadband to farms. Another might use it to extend broadband into rough mountain terrain. Communities might use the funding for digital literacy programs.

I’ve already seen that this program is real because the company is already meeting with communities in North Carolina and nearby Virginia. I know that some of the communities along the fiber routes are excited about a collaboration with 3Red8.

It’s wonderful to see a company that gets it. Most of the large ISPs have a charitable arm, often through a foundation funded by the corporation. I don’t want to denigrate the charitable efforts of any big corporation, but they tend to give money away in public ways that make for good photo ops. 3Red8’s vision is different – they are going to be profitable from transporting Internet traffic from coast to coast, and they want to use some of that profit to make sure that everybody close to their fiber network can get the full benefits of good broadband.

Is Your Broadband Getting Cheaper?

Since the national dialog has suddenly fixated on inflation, the big ISPs decided to jump into the discussion by claiming that broadband prices are falling. You need to watch this short video from USTelecom to see the ridiculousness of their claim.

The big ISP industry has been trotting out this untruth for the last several years. This is the latest permutation of the claim that broadband prices are falling. What underlies this claim is that the cost per megabit of speed has been falling as ISPs increase speeds. By definition, when an ISP upgrades a customer from 100 Mbps to 200 Mbps, the cost per megabit drops. While the cable companies have been unilaterally increasing speeds, consumers have not seen the check they write each month drop. There is no consumer who wouldn’t think that “broadband prices are falling” to mean that monthly bills are dropping.

Just the opposite is true for most ISPs. The cable companies have been raising rates steadily for the past five years. Charter has raised broadband prices by $5 per month in each of the past three years. Those rate increases were far higher than the rate of inflation in each of the three years. Comcast seems to have slowed a bit on rate increases, but this is after many years of rate increases that have pushed the cost of basic broadband to around $90.

This assertion doesn’t even consider the quiet rate increases. Consider ISPs like Comcast that bill for overages on data caps. As recently as the beginning of 2018, OpenVault said that about 4% of all households used more than 1 terabyte of data per month. In the most recent report for the end of 2021, OpenVault says that 15.1% of households routinely use a terabyte of data per month and 2.5% now use more than two terabytes. That means a lot more customers than in the past are getting dinged for exceeding data caps.

However, this USTelecom claim is not aimed at consumers who would laugh at the idea that their bill for broadband has gone down. Recall that USTelecom is the lobbying arm of the big ISPs, and this claim is aimed at politicians and policymakers. Rolling out the cost-reduction canard coincided with a change of Chairman at the FCC. The big ISP quake at the idea of regulators ever considering any form of rate regulation. This misinformation campaign is mostly a strategy to plant the idea that broadband rates don’t need to be examined.

What might be the most ironic about this campaign is that prices really might start dropping. The big cable companies have been able to maintain high stock prices for a decade due to the incredible annual growth fueled by luring customers away from telephone company DSL. But we’re seeing broadband customer growth slow and stagnate for cable companies that are smaller than Comcast and Charter. Charter has adopted a strategy of passing millions of new homes with fiber as a way to try to keep growth going. Comcast just announced last week that it intends to edge out to at least 800,000 new passing this year – something it could have done any time over the last decade.

We are starting to see the beginning of real competition for urban broadband. T-Mobile says it expects to gain millions of customers this year for its FWA wireless broadband that uses cellular frequencies. Verizon is also starting to aggressively market its FWA product. Later this year, Dish will be hitting the market hard. AT&T says it will finally roll out its FWA product next year. While the low prices of FWA are aimed at luring remaining DSL customers, the speeds are good enough to be attractive to cable customers. Verizon is peddling FWA for as low as $25 per month for Verizon cellular customers. The regular price for all of the carriers selling the product is in the $50 to $60 range – far less than the cost of standalone cable company broadband.

If the big telcos stick to their business plans, millions of urban and suburban homes will be overbuilt with fiber in the next few years. So far, fiber prices have been lower than cable company broadband prices.

I’m really curious to see if the big ISPs stick with this story of falling broadband prices if their rates actually start dropping. That doesn’t seem like a story they will want to emphasize for Wall Street analysts.

Lobbying for Grants

As you might expect, the lobbying is becoming hot and heavy to position ISPs to win the $42.5 billion of Broadband Equity, Access, and Deployment (BEAD) grants that will likely start being awarded in 2023. This is one of the most interesting lobbying challenges I’ve ever seen because there is no one central place that will be awarding these grants.

Congress gave the responsibility for these grants to the NTIA, but the money is going to flow from them to the states. There seems to be a lot of lobbying happening with state legislators, but even that might not be very effective. States must file broadband grant plans that largely follow the rules established by Congress as interpreted by the NTIA. States will have some leeway on how to award grants, but states will still have to follow the basic NTIA rules.

I fully expect many states will have bias. This could mean favoring grants for the large incumbents or favoring grants for cooperatives or municipalities. But even states with a bias will have a hard time turning down solid grant applications that includes a significant amount of matching funding from a local government. This raises the big question of who should be lobbied – the NTIA, state legislators, or individual communities? From what I’m seeing, the answer seems to be all of the above.

We’re starting to see the lobbying position of some of the major industry players. Trade associations have filed comments with the NTIA outlining how they think grants should work. Open letters are being sent to legislators, and to state and federal agencies arguing for various positions. Happening more quietly is one-on-one meetings with local and state government officials. Following are a few of the lobbying positions that I’m starting to regularly see.

The Wireless Internet Service Provider Association (WISPA) represents ISPs using wireless technologies to reach customers. The gist of the WISPA comments is that BEAD funding should not be used to overbuild broadband in any area where an ISP is already delivering broadband of at least 100/20 Mbps service. This position is making the argument that grants should not be used to overbuild any technology, including wireless broadband, that is delivering adequate speeds. It’s easy to understand this position since there has been a lot of discussion about basing grant eligibility on the fastest landline broadband options available today and ignoring the speeds of existing wireless broadband.

The NTCA – The Rural Broadband Association represents independent telephone companies. Its filed comments voice a similar concern against overbuilding but are not quite as rigidly opposed to some overbuilding. NTCA said it is opposed to providing funds to overbuild areas that already have technologies capable of 100/20 Mbps. However, the association said it is open to the idea of combining funding from the BEAD grants to supplement existing federal or state grants if the extra grant funding will boost the speeds of existing technologies to 100/100 Mbps or gigabit speeds. This concept is being referred to as the ‘layering of grants’ to describe combining federal, state, and local grants.

USTelecom, the lobbying arm for the big telcos recently issued a letter to everybody in DC with its thoughts on the best way to administer the grants. They ask to rescind any grant rules that favor municipalities, cooperatives, or non-profits. They want money to go to communities only through partnerships with ISPs. They want past experience as an ISP to be the most important factor in judging who can be funded. This is clearly a wish list that would blatantly slant the money towards the big ISPs.

The Fiber Broadband Association (FBA) represents ISPs that build gigabit fiber networks. The association argues that fiber is the ultimate broadband technology and that federal grant money should not be used to fund any technology that does not create a long-term benefit to a community. This argument is best summarized by saying that grants should only be used to support technologies that are future-proof.

Interestingly, I’m not hearing any lobbying coming directly from the big cable companies – and that makes sense.  For example, Charter is clearly chasing grant money across the country and is promising to build fiber if awarded grant funding. But Charter can’t be publicly talking about how fiber is a future-proofed technology when it owns huge hybrid fiber/coaxial networks.

I think the big ISPs also understand the nuances of the BEAD grants the best. I’m starting to see the big ISPs show up in local communities asking to create partnerships. There is not a lot to be gained by Charter of AT&T lobbying the NTIA or state grant offices to get the policies they want, although I’m sure they are doing so quietly. The best way to win the BEAD grants is to go arm-in-arm with a local community partner to ask for the funding.

The Upcoming Marketing Wars

In April 2019 my daughter and I were watching the NCAA final between Virginia and Texas Tech (and rooting for her school TTU). We noticed about halfway through the game that practically every ad we had seen was about 5G. Verizon was busy showing us speed tests from millimeter-wave cellphones receiving gigabit speeds. Not to be outdone, there were a ton of commercials also from T-Mobile and AT&T.

I found it extraordinary that the cellular carriers would spend that much money to buy premium-rate ads for a major sports event. We now know this was part of an all-out blitz on 5G to put pressure on Congress and the FCC to give them more spectrum.

I think that by this fall we’re going to wish we could go back to the 2019 level of ads because I’m predicting by this fall that all we’re going to hear about is cellular and broadband. A lot has changed in the industry since 2019. In more recent sporting events, I noticed that a lot of the ads were from the cable companies touting low-cost cellular service. The cable companies view bundling with cellular as one of the best ways to retain broadband customers – bundling means that when a customer drops broadband they will also lose cheap cellular service.

Dish network will be hitting the market sometime this summer, promising a rollout in a hundred smaller markets and 25 large markets in June. The company already owns Boost Mobile, but Dish is going to spend a lot of money to convince America to consider it for cellular service. This means mountains of advertising to make us aware that Dish is now a cellular company. Dish promises to be aggressive with pricing, so expect this advertising effort to set off a price war from the other carriers.

T-Mobile has already been blitzing the air this year in an attempt to sell its cellular broadband product. The company picked up 400,000 new cellular broadband customers in 2021, most at the end of the year. T-Mobile has a goal to pick up several million new broadband customers this year. T-Mobile’s ultimate goal is to reach 6 to 7 million FWA customers by 2025.

Verizon is also selling fixed wireless broadband and plans to hit the market hard later this summer. The company has a goal to reach 4 to 5 million FWA customers by 2025.

AT&T isn’t going to hit the national market with a push for FWA until some time in 2023, but there is no way that the company is going to sit by and watch the other cellular carriers lure away its customers. Expect AT&T to also be on the air nonstop.

It’s hard to think that national advertising this fall will be much more than cellular and political ads. I’m warning you now to find an outdoor hobby if you don’t want to hear any more about 5G.

We’re also going to see an unprecedented marketing blitz from cable companies and fiber overbuilders. All of the big telcos are furiously building fiber this year. There are aggressive plans to build fiber underway from AT&T, Verizon, Frontier, Windstream, Consolidated, Ziply, Lumen, and many smaller fiber builders. Much of the construction this year will be in cities and county seats, and that is going to mean a whole lot of advertising.

We’ve not seen a lot of national advertising about home broadband, and the marketing wars will likely be local. That’s going to translate to salespeople knocking on doors and a lot of mailers about fiber broadband.

There was some unexpected growth in cellular customers last year. For example, in the third quarter of last year, there was a net addition of 2.3 million new nationwide cellular customers. Industry analysts are chalking this up to businesses buying cell phones for remote employees and more students buying phones because of remote learning during the pandemic.

This kind of market growth is not sustainable since most people have cell phones. That means that the coming cellular marketing wars will largely be a zero-sum game. The only way for a cellular company to grow will be to take customers from another carrier. That’s going to lead to some real desperation – and even more ads. When you watch the first football game this fall, don’t say I didn’t warn you.

Home Broadband and the Cloud

I’m not sure that most people understand the extent to which our online experience has moved to the cloud – and this movement to the cloud means we’re using a lot more bandwidth than in the recent past. A huge number of online functions now reside in the cloud, when only a few years ago a lot of processing was done on our computers.

Take the example of Twitter, where I keep an account to upload a copy of my blog every day. The Twitter platform exists in a series of interlinked data centers. When I open Twitter to look at my feed I see comments made by people I’m following on the platform. What is extraordinary is that Twitter sends me constant real-time updates of the status of all of those comments. I can see instantly when somebody has liked or has commented on each of the many tweets included on my feed. Twitter is constantly streaming me data that updates the statistics for each tweet on my feed. That’s a constant downstream feed that happens whenever the supplication is open. If I keep Twitter open all day in the background, these updates happen constantly, regardless of whether I am looking at Twitter.

The same thing now happens to all of the software in my Microsoft office suite. Every change I made to a document or spreadsheet is constantly saved in the cloud. It seems like a big benefit because I never have to worry about losing work, but the autosave function on my desktop used to perform the same function, and I rarely lost any work due to an unexpected event like a power outage.

The real advantage of cloud documents is for collaboration. I mostly work alone, but I recently edited a document in real time with a client and it was interesting seeing both of our keystrokes appearing in the document in real time. At least in my world, this is still not a common way to work, mainly due to the fact that people are using a wide array of different software platforms. But I could understand the power of this tool working inside a corporation where employees are scattered and not in the same office.

All sorts of other software have quietly edged into the cloud without us noticing it. As an example, updates are now made to online banking and credit card accounts as transactions occur. It wasn’t long ago when updates were batch processed and not done live. These companies have changed the software so that when they see any update for our accounts we are linked instantly to that change. The cloud version of the online banking portal doesn’t look any different than the old one – the change is in the background where data is shared instantly.

The industry with the most dramatic shift to the cloud is probably gaming. The ability to play games online with others has been around for a decade, but the gaming companies have beefed up data centers so that interactions between gamers happen as quickly as possible. Serious gamers know that a difference in milliseconds can provide an advantage over gamers using a slower broadband connection. The even bigger change in the industry was putting the game software in the cloud. This means instant gratification since a new game can be played within minutes rather than having to go buy a CD or having to download a huge file.

The shift to the cloud is still an ongoing transition and there are still plenty of software packages that are not processed in the cloud, but it’s obvious that everything will eventually be in the cloud.

Having software and applications in the cloud has made a big change in home bandwidth usage. If I have Twitter open in the background there are constant updates coming to my computer. The industry refers to this traffic as machine-to-machine traffic where updates are made between computers and the cloud without users taking any active steps to request an update. I read recently that Cisco says that this is the fastest growing segment of broadband usage as more and more functions are migrating to the cloud. It’s unlikely that cloud traffic will ever come close to overtaking video traffic in terms of the number of bits being sent, but it’s one of the reasons that homes are using more broadband every year.

Let’s Sue!

One thing that is extremely rare in the broadband industry is lawsuits between ISPs concerning unfair trade practices. Big ISPs bully and compete unfairly against small ISPs all of the time, and yet you don’t hear of many cases where a small ISP sues the big ISP.

There are several reasons for this. One is simple to understand – the big ISPs have a flock of in-house lawyers who can overwhelm anybody who sues them. Little ISPs don’t generally have the deep pockets needed to last through a long, protracted lawsuit.

But the harder reason to understand is that the law is basically not on the side of the little guy in this kind of lawsuit. There are a series of laws associated with unfair competition. However, these laws are specific about the kinds of behaviors that would enable a suit based upon the claim of unfair competition. Unfair competition laws mostly have to do with practices like trademark infringement or selling counterfeit products. You can sue another company if they violate a non-compete clause or break a contract between the two parties. You can sue a competitor who steals trade secrets. A small ISP could sue a bigger ISP for trade libel/slander if the big ISP advertised in a way that ruins or harms the smaller company’s reputation.

Even if a competitor can prove these kinds of bad behavior, they have a secondary burden of proving that they suffered monetary harm from the behavior of their competitor. It’s incredibly hard to quantify things like sales never made, and so proving harm is difficult unless a big ISP were to somehow drive somebody completely out of business. This did occur a few times in the days when the big telcos purposefully tried to squash dial-up ISPs, but anything short of that makes for hard proof.

The fact is that ISPs don’t engage in the kind of behaviors that these laws are designed to prohibit. No small ISP ever tried to peddle their own broadband as coming from AT&T or Comcast. No small ISPs ever pretended to be a larger ISP to customers. The very idea of an ISP doing these sorts of things is hilarious to contemplate.

Interestingly, big ISPs make quiet legal threats against small ISPs all of the time. I’ve had many clients who got a letter from the legal department of a big ISP telling them to cease false advertising against the big ISP. This normally comes from advertising that says that the small ISP has faster broadband, a higher quality connection on fiber, or some claim that distinguishes the small company broadband from the big ISP products.

Most of my clients who get such letters back off on the tone of their advertising. They are cowed from the threat of an expensive legal fight, even when there doesn’t seem to be anything untruthful in their advertising. However, I’ve had a few who ignored such warnings, and I can’t recall that the big ISPs ever took any further action. I had one feisty client who sent back a letter and said he invited a jury trial to debate in public who had the better broadband product.

Big ISPs attack each other all of the time over the issue of false advertising. They constantly challenge the ads of competitors, who are often forced to change untrue claims. However, this isn’t done in the courts. The big ISPs have voluntarily joined the National Advertising Division (NAD), which arbitrates disputes between large companies. A lot of the largest corporations have agreed to this process because they realize that voluntary arbitration is a lot less expensive than actual lawsuits. ISPs almost always comply with recommendations made by the NAD.

While the idea of a small ISP taking a big ISP to court to win a big settlement sounds appealing, the reality of winning such a suit is remote. The big guys have monopoly market power, and small ISPs have to accept that as part of competing against them.

Get Ready for Middle-mile Grants

Alan Davidson, the Administrator of NTIA, recently held a press conference and webcast talking about the $1 billion middle-mile grant program. The biggest takeaway from that conversation is that the NTIA is likely to make these awards much sooner than the awards from the $42.5 billion BEAD grants for last-mile broadband. Mr. Davidson was not specific about the dates of these grants, but anybody wanting to request one of these grants should start getting ready.

It’s worth noting that the last-mile BEAD grants will not fund middle-mile fiber. The early NTIA rules indicate that the grants will expect any constructed fiber to have closely-spaced and regular access points. This is what distinguished last-mile fiber from middle-mile fiber. Middle-mile fiber is aimed at connecting two points, be that fiber huts, electric substations, core fiber sites, or two communities. It’s a lot more expensive to build fiber that has a lot of access points. It costs labor and extra materials every place that fiber is spliced off to a handhole or MST. While a fiber route can be built to serve both purposes, the assumption of the BEAD grants is that the fiber is used to serve those living close to a fiber route.

Recent experience from both state and federal grants shows that the entities awarding grants are allowing for a relatively short window from the date of announcement of a grant until grants are due. On state grants, I’m seeing grant requests that are due within six weeks of the announced opening of a grant. The NTIA grant window will likely be a little, but probably not a lot longer.

This means anybody interesting in the grants should already be figuring out the engineered cost of the desired middle-miles routes. You are not going to have time once the grants are announced to determine costs.

More importantly, anybody wanting the middle-mile grants needs to craft a good story about why a specific middle-mile grant is needed. $1 billion might sound like a lot of money, but on the national scale, it’s not a lot. This works out to an average of only $20 million per state. If you assume an average cost of middle-mile fiber at between $35,000 and $50,000, that’s only 400 – 575 miles of new fiber, on average, per state. To put this grant program into perspective, California has established a $3.5 billion middle-mile grant program just for within the state.

Another thing that must be considered is that the NTIA has a history of making fewer numbers of larger grants rather than a lot of little grants. It’s hard to picture the agency awarding hundreds of grants because the work needed to administer the grant is nearly the same for a small grant and a large grant. If that history holds true, these funds are more likely to go to larger projects that connect distant rural communities than to projects that connect places relatively close together in a middle-mile project. I picture grants that connect a dozen communities being far more attractive to the NTIA than a project connecting a dozen local fiber nodes or electric substations.

Finally, it’s fairly clear that the NTIA is currently favoring non-profit entities more than commercial ISPs. I’m sure some of this grant will go to commercial entities, but I’m going to bet that collaborations of local governments will have a better chance of winning these grants. I’ve written a few times about project THOR in northwest Colorado, which is a consortium of local governments that built middle-mile to connect 14 communities with fiber. The benefits of this fiber for anchor institutions like hospitals were seen almost immediately after the first fiber routes were connected.

https://www.nwccog.org/programs/broadband-program/project-thor/

I envision that the projects with the biggest chance of success will be similar to Project Thor, which was organized by local communities, or to projects done by states to reach remote areas like is being done by ConnectMaine.

https://www.maine.gov/connectme/home

People are often surprised about the lack of middle-mile fiber in rural places. It’s hard to justify building last-mile fiber to an unserved rural community if there is no affordable way to connect that community to the Internet. I’m guessing that the NTIA will look hardest at projects that can make these connections.