There is one interesting aspect of the BEAD grant rules that I’ve never written about. There is a provision in the BEAD rules that say that if no ISP seeks funding in an unserved or underserved area, a State broadband office may engage with ISPs to find somebody willing to serve such areas.
In order to make this work, States are allowed to offer additional inducements, such as providing additional state matching funds for the grant areas. State broadband offices would also be able to provide some kind of extra scoring points during the grant processes to make such grants eligible – with all of this being done with total transparency.
A State is first required to put out a general request for ISPs to serve such areas, a step that I assume would mean issuing an RFP. If that effort fails, the State can reach out and negotiate with specific ISPs to serve the unclaimed areas.
This option is driven by the overall goal of the BEAD grants to bring broadband to everybody who is unserved or underserved. This requirement will only kick in for states that have leftover money after trying to satisfy BEAD grant applications.
It’s an interesting process, but one that I think will be needed for various reasons. First, the RDOF subsidies created what the industry is calling swiss cheese or checkerboard coverage areas, which created little pockets that are geographically separated from other likely grant areas. The FCC RDOF maps really made a mess of the rural areas of many counties, where it will be a challenge to find a solution for every one of these pockets.
There also might be parts of counties that are particularly high cost that ISPs might not pursue. The BEAD grants can award up to 75% of the cost of a grant area, but there are many rural places where 75% grant funding is not enough. My back-of-the-envelope math says that areas with costs higher than $10,000 per passing might need more than a 75% grant – and there are a lot of rural areas with costs higher than that. I think the NTIA and State broadband offices will be shocked to find out how many grant applications fit into the high-cost category.
The BEAD rules allow States to make exceptions for grant applications for high-cost areas that need more than 75% grant funding. But the rules are not ISP-friendly and allow a State broadband office to seek alternate proposals or to allow other technologies for such areas – such as fixed wireless using unlicensed spectrum or satellite broadband. It’s not hard to imagine ISPs deciding to pass on a BEAD application for grants greater than 75% if a State broadband office can ignore such grants because of the high cost.
These rules add one more layer of complexity to an already complex grant program. This adds to the calculus an ISP must do in order to decide if it wants to seek a BEAD grant in high-cost areas. Does an ISP put in for a grant request of greater than 75% with a chance that the State will instead seek a lower cost solution? Or should an ISP wait until the State broadband office is soliciting ISPs to serve the high-cost areas? I guess it will all boil down to the philosophy of each State broadband office – and they are not likely to say ahead of time how they feel about high-cost areas.
I get a little more upset every time I write about the BEAD rules. Many states have already held state broadband grant programs of the size of the money they’ll get from BEAD, and those grants have probably a tenth of the rules of the BEAD grants. These grants were processed quickly, and projects tend to start construction the year after the grant award. I have to imagine that State broadband offices are intimidated by the BEAD rules – it puts them on the spot to do everything perfectly and meet all of the NTIA rules – and that’s probably not possible.