Big Telcos and the BEAD Grants

We’re finally starting to gain a picture of the plans of the big telcos for the upcoming BEAD grants. The bottom line is that some of the big telcos seem to be prepared to pursue the upcoming grants in a major way. Consider the following:

  • At a recent industry conference, Frontier’s CFO said that Frontier has ambitious plans to pursue grants for all of the three to four million rural homes that it serves today with DSL.
  • When the BEAD grants were first announced, AT&T added five million new passings to its goal for 2025, all due to pursuing rural grants. AT&T hasn’t said much about grants since that early announcement.
  • Brightspeed, which purchased twenty states of copper networks from CenturyLink, has made it clear that it will be seeking state and federal grants to build as much fiber as possible. CenturyLink has been aggressively pursuing grants in the states sold to Brightspeed, for the obvious benefit of the new company.
  • Windstream was a big winner in the RDOF reverse auction and has been aggressively pursuing ARPA funding. It seems obvious that the company will also pursue BEAD grants.

The two big telcos that have not said much about grants are CenturyLink and Verizon. There are rumors that CenturyLink is seeking somebody to buy the rest of its copper lines, but it also would not be surprising to see the company come out swinging for grant funding if a sale isn’t forthcoming. Verizon abandoned a rural strategy years ago, and it would be surprising but not impossible to see the company tackle grant funding if the math is good.

The other big ISP that has aggressively been pursuing grant funding is Charter. It would make sense for the company to pursue BEAD grants to fill in around where it has already won the RDOF auctions.

This is an interesting dilemma for rural communities. The telcos all say they will be building rural fiber with grant funding – which is what rural America most desires. But a lot of rural folks blame the big telcos for the current miserable state of rural broadband. It’s the big telcos that stopped maintaining copper, reduced staffing drastically, and basically walked away from rural America. I know a lot of folks who hope that anybody other than the big telcos wins the grant funding in their area.

There are several big fears that I hear voiced about the big telcos winning the grant funding. One is that the big telcos will not follow through after winning the grant funding. Many communities remember how some of these telcos walked away with huge amounts of CAF II funding without doing the promised DSL upgrades. I think the fear is that the big telcos might cut corners and not build to the most remote households in a grant award area. I’ve also heard the fear that the big telcos will accept grants and then decide not to build some areas in a state.

Perhaps the biggest fear about big telcos building rural fiber networks is that we’ll see a repeat of the past. They will build the new network as funded. But if the telcos don’t hire enough technicians or cut corners on maintenance, the fiber networks will deteriorate over time.

This is a real concern because there is a big difference between copper networks and fiber networks. It’s been possible to keep a copper network limping along for decades with minimum maintenance. This is due to the relative simplicity of the DSL technology. There are twenty-year-old DSL cards still limping along, long past the expected economic life. But fiber networks are not likely to be so tolerant. Fiber technology is complicated and precise, and when a card starts going bad, it most commonly means the fiber will go dark. I think the big fear in rural America is that the big telcos will build fiber but let it go dark in 10 or 15 years if they can’t get additional subsidies. This is an impossible scenario to imagine the big telcos demanding future subsidies to keep networks working.

One of the most important aspects of the BEAD grants will be community approval and partnerships with the grant applicants. It will be curious to see if the big telcos seriously court local support for grant applications or do little more than ask for a letter of support when it’s time to file grants. If a community really wants to keep out the big telcos, the best strategy is to partner with somebody you trust more.

One thought on “Big Telcos and the BEAD Grants

  1. Doug: I think there’s a fundamental issue underlying the concerns you raise in this post: the granting of what is very likely to be unregulated monopoly control over core infrastructure in currently unserved areas to a private company. My reading of history is that these risks are very real and their harms potentially severe if the unregulated infrastructure monopoly is granted to a large national corporation with publicly traded stock, where stock buybacks may (and history suggests often will) have priority over affordable pricing, customer service and network maintenance and upgrades.

    In Michigan, where I live and work, this issue is made even more problematic by the fact that the state recently created a $250 million grant program that’s likely to issue grants before BEAD grants, and that this program explicitly excludes public and educational entities from directly or indirectly receiving grants.

    This raises important questions–especially in states like Michigan with laws that constrain the role of public entities–about how to balance the public benefit goals of local governments, schools, residents and businesses in an unserved community with those of a privately owned ISP. When I hear the term Public Private Partnership used by large telcos and cable MSOs, I’m inclined to translate this to mean “the public pays and the ISP gains monopoly power to funnel overpriced high-margin subscriber fees into stock price-boosting dividends and stock buybacks.”

    I think your last sentence (especially in states like Michigan) points in one potentially helpful direction: “If a community really wants to keep out the big telcos, the best strategy is to partner with somebody you trust more.” What I’d add to that is that this trust needs to apply not only to a private partner’s intentions, but also to its financial, technical and operational ability to execute throughout the life of the partnership, from planning and grant-seeking through construction and network operation. And, to be fair, it also requires trustworthiness, cooperation and flexibility on the part of the public entity in terms of the commitments and contributions it makes to the partnership.

    I also wonder if it’s possible to create a PPP with a large publicly-traded ISP that includes provisions that protect against the risks you discuss. My fear and my reading of history, however, is that the latter may require a larger legal budget to defend these provisions than a rural community can support. I hope I’m wrong.

    My own preferred model for addressing these and other issues is an open access network that leverages network virtualization and software defined networking technology to reduce costs and improve functionality for network operators, ISPs and network users, and encourages healthy competition and innovation among service providers. Unfortunately, this model doesn’t seem like a very good fit with the patchwork gap-filling approach reflected in current public policy.

    While the term open access seems to be an immediate turn-off for most ISPs, I think this reaction, while understandable for ISPs whose experience has been limited to the single-ISP network model that’s dominated the US market, is–at least for some of them–premature and shortsighted. In Michigan, MSU’s Center for Community and Economic Development, which I’m affiliated with, presented a webinar on what we called a Community Empowerment Network model, which employs the same automated open access software technology first used in Ammon, Idaho. I’d like to think it provides a good introduction to why this model can empower local communities as well as ISPs ready to consider a less capital-intensive and more agile business model than they’re used to.

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