Monthly Archives: September 2023

Childcare and Working From Home

The childcare industry in the county is on the verge of a major collapse, and this could mean millions of families will be looking for jobs that allow them to work from home. That will mean a lot of additional demand for decent broadband.

The childcare industry ran into troubles at the beginning of the pandemic, and over 20,000 childcare centers, or about 10% of the total, closed within a short time after the onset of the pandemic. At the time, this resulted in about 40,000 lost daycare jobs.

As the pandemic started to ebb, Congress provided $24 billion in subsidies to bolster salaries to keep people interested in taking the high-stress jobs of childcare. That funding is going to end this month. Several non-profits that concentrate on the sector say that the end of the subsidies will likely cause another 70,000 childcare centers to close – about one in three of the remaining centers. That will kill another 230,000 childcare jobs, but more importantly, will mean that around 2.3 million families will be confronted with some difficult childcare choices.

Many families will suddenly be without childcare because they won’t be able to find an alternative. It seems likely that without the subsidies, that the remaining childcare centers will raise rates – and, in many cases, making childcare costs too high to justify working.

Some families that lose childcare will find a more expensive alternative, but many will not. The loss of 70,000 childcare centers is going to affect most communities in the country. It might seem logical that some of the childcare workers who lose a job could start taking care of children in their own homes – but that is not practical in most communities. Most places now require all childcare facilities to be licensed, and any home or location used for childcare must meet a lot of requirements that are expensive or impossible to meet for the average home.

Childcare workers who lose their jobs can hopefully find employment somewhere in the overheated job market. But families who decide that a parent must stay at home without access to childcare are likely going to be looking for jobs that can be done at home – and probably online.

This raises all kinds of issues. Many of the families that are suddenly back in the home to take care of their own children will not be proficient with computers. Many will unfortunately live in places where the broadband is not good enough to support working from home.

I wonder if there are enough virtual jobs available to meet this new influx of workers seeking online work? There is a well-known national trend that many Gen X and Millennial workers prefer online work, and new job seekers will be competing with folks who have more computer skills and experience. We’re also starting to see some of the largest employers, including the federal government, starting to insist that workers come back to the office. This is likely going to make it even more competitive to pursue the remaining online jobs.

But there is still a vibrant work-from-home economy. The Bureau of Labor Statistics recently reported that 34% of workers did at least some of their work at home in 2022, down from 42% in 2020 and 38% in 2021. But those same statistics showed that getting work from home is highly correlated with the level of education – 54% of those with a bachelors degree or higher work at home some of the time compared to only 18% for those with a high school diploma or less.

Cox to Use Coop Fiber Network

As recently as a few years ago, I was able to say that the large ISPs never used networks owned by somebody else. But that is no longer the case, and we’re starting to see partnerships with big ISPs spring up around the country.

The most recent announcement of a fiber partnership is between Cox and the Indian Electric Cooperative in Oklahoma. The cooperative is building a fiber network to connect its substations and other key electric system components to fiber. The cooperative will lease the remaining fiber capacity to Cox to provide last-mile broadband connections to cooperative members. The partnership will start in the small town of Fairfax, with the intention of going cooperative-wide, if possible.

The cooperative is borrowing the money to pay for the first 80 miles of fiber backbone. The coop has already applied for grants and expects to aggressively pursue more grant funding. Cox will pay for the infrastructure to connect customers as well as all of the electronics. There are also several tribes located in parts of the coop area, and the coop hopes that some of the tribes will pursue grants and follow the same partnership model.

The announced partnership model is that Cox will pay a fee to the cooperative for every customer connected to the network. In rural areas with no other broadband alternative, it’s hard to think that this won’t eventually mean 70%, 80%, or more of households getting broadband through the partnership.

This kind of partnership makes sense for both parties. The cooperative gets a modern smart grid network that is going to be essential in the long run for all electric grid. Smart grids protect against outages, allow for faster repairs when there are problems, and allow for the seamless integration of alternate energy sources – something that is a lot harder than might be imagined.

Cox gets access to customers but saves on building the expensive fiber distribution network that goes up each street. It becomes a lot more feasible for Cox to consider rural markets when it doesn’t have to cover all of the construction costs. Both parties benefit from grant funding, which can reduce the cost of fiber to make a feasible business case.

These kinds of partnerships with giant ISPs are still not common, but they are popping up more and more. CenturyLink (now Brightspeed) is sharing a municipal network built by the City of Springfield, Missouri. Windstream announced a deal similar to this one with an electric cooperative in Georgia. Consolidated Communications has partnered with some cities in New Hampshire. Mediacom is placing fiber in the conduit system built by the city of West Des Moines, Iowa. I’m aware of discussions of several other partnerships with big ISPs that are under consideration.

The biggest hangup for these kinds of partnerships is that the big companies are highly leery of using a fiber network where somebody else operates the electronics, controls the installation process, or maintains the network. It’s a lot harder to attract a big ISP partner if the network owner wants to keep control of the fiber deployment and maintenance.

There are a lot more partnerships being formed between municipalities, cooperatives, and smaller ISPs. I’m aware of dozens of such relationships and wouldn’t be surprised to find that there are hundreds of partnerships operating, with many more underway due to grant funding.

BEAD and Buy America

The NTIA recently issued a clarification of its intentions for the Buy America rules that are part of BEAD. In a blog released on August 22, the NTIA said that it still plans to take a strict approach to enforcing Buy America. In practical terms, that means that NTIA intends to only seek minor waivers from the Buy America rules.

NTIA first adopted a strict position on Buy America after the State of the Union address this year, when President Biden stressed that one of the key principles behind the Infrastructure Investment and Jobs Act, which funded the upcoming BEAD broadband grants, was to use American materials and labor.

As a reminder, the rules that determine if something is manufactured in America are included in Section 70912 of the Build America, Buy America Act. The Act requires that the iron, steel, manufactured products (including fiber-optic communications facilities), and construction materials used in a federally-funded project are produced in the United States unless a waiver is granted. That Act defines to be produced in the United States if the final product is manufactured in the United States and that at least 55 percent of the total cost of components are mined, produced, or manufactured in the United States.

The NTIA is proposing that 90% of the materials used to construct BEAD projects meet that definition. The NTIA made this recent announcement to provide incentives for fiber vendors to bring manufacturing to the U.S. for key broadband components. The NTIA says it will be leery of asking for waivers for materials that meet the following criteria:

  • Strategically important technologies that ensure the security, integrity, and reliability of network data should be produced in America.
  • If a product’s domestic manufacturing line can be scaled quickly, it should be produced in America.
  • A product, like fiber-optic cable that comprises a significant portion of the overall network cost should be produced in America.

The NTIA recognizes that some of the chips needed for broadband might not be manufactured here in time to support that BEAD grant implementation and may file a limited waiver for chips. However, there is a lot of progress being made to move chip manufacturing to the U.S. But chip factories tend to specialize in specific kinds of chips, and there may not be anybody making enough chips here for fiber electronics in time to meet the BEAD timelines.

The good news is that there is a lot of movement to build fiber electronics in the U.S. to meet the BEAD requirements. For example, both Nokia and Adtran have announced manufacturing plans in the U.S. Calix doesn’t have a U.S. solution yet but recently announced it should have one by the time that BEAD grants are awarded.

There are new fiber cable facilities being constructed by Corning, CommScope, Prysmian, and Superior Essex.

Overall, the Build America requirements don’t appear to be the big bottleneck that was feared a year or two ago. It will remain to be seen if the new U.S. manufacturing will be able to keep up with the demand from BEAD. It looks like most states are going to try to award as much money as possible in 2024, which means that construction for BEAD grants across the country will all start within a fairly narrow time window.

Broadband for Low-Income Housing

In April of this year, Kathryn de Wit of the Pew Charitable Trusts released what I consider to be the definitive article defining the broadband gap in low-income housing. I’ve discussed her paper before, but as we finally approach the start of the BEAD grant process, I wanted to highlight the findings from her report. While BEAD grant funding is supposed to be available to bring broadband to unserved and underserved homes everywhere, I have to wonder how much funding will be provided in most states to tackle this issue – which is mostly found in cities.

I think its universally understood that homes need broadband to take part in modern life. Just in my own life, it seems that month after month and year after year, that more of the functions I do now involve broadband. Just one example, I recently had some doctor visits, and a lot of the process is now online to register prior to the visit and to get my results from lab tests. This was not part of the process for my doctor just a year ago – but seemingly everything we do is migrating online.

Pew interviews with low-income households showed that some of the most important benefits of broadband for low-income homes include reduced isolation and increased social connection, support for aging in place, access to education, health care and wellness, job training, financial services, and the opportunity to apply for and find jobs. Several major studies have documented the positive impact for students who have broadband and computers in the home.

The Pew paper describes the lack of broadband for low-income housing as being the result of several issues. First is that ISPs, in many cases, are not building fiber or other modern infrastructure to subsidized housing. When an ISP builds fiber near a low-income apartment building, it often bypass the building and don’t offer fiber. While ISPs won’t publicly say it, this is due to an expectation of low returns on the investment of building a fiber drop, wiring the units, and providing the electronics.

Another issue is a shift away from community technology centers – places where WiFi broadband and computers are made available to the public. This is a movement that was already underway before the pandemic and which became the norm during COVID shutdowns. This means there must be a bigger emphasis on getting broadband and computers into living units.

But the biggest issue continues to be affordability. Pew research from 2021 showed that 43% of households with incomes under $30,000 did not have a broadband connection – which compares to 8% for homes with incomes over $75,000 per year. 45% of people without home broadband said they can’t afford a monthly broadband subscription, and 37% said they can’t afford a computer. The household income issue is even more acute in public housing, where the average household income in a 2016 study was just over $14,000 per household.

A large survey conducted by the NTIA of homes without broadband showed that the average amount that those living in subsidized households said they could afford was just $10 per month, although over half of homes said they couldn’t afford any amount. A 2021 survey by Everyone On shows that 40% of households with incomes of $50,000 said they can’t afford broadband, while 22% said they could afford to pay as much as $25 per month.

As you might imagine, there are a lot of challenges in getting better broadband to public housing:

  • Broadband subscriptions are not included in the HUD utility allowance. This is a funding mechanism that covers electricity, gas, and water fees in public housing. It’s time to recognize that a broadband subscription is a household need and not a luxury.
  • While BEAD grants theoretically cover bringing broadband to apartment buildings that need it, it’s a challenge to prove the areas are underserved since urban maps often claim ubiquitous broadband coverage from cable companies. The BEAD process is also incredibly unfriendly for filing grants for small areas like a single building due to the complexity of the requirements.
  • ACP funding has allowed many low-income households to get broadband. But unless Congress acts soon, that fund will run dry by next spring. The ACP rules also require individuals to apply for the subsidy. In a low-income housing building, everybody qualifies for ACP by definition, yet there is no mechanism for enrolling a building in ACP. Most other benefits for low-income housing are funded by the building instead of by individual tenants.

I’ve predicted for the last several years that the next big push for broadband connectivity will be in cities. As states start allocating rural grants for BEAD, it will likely become obvious that little has been done to help most cities. I think this is going to be a harder issue to solve than the rural broadband gaps because the big cable companies are going to fight anybody that tries to bring broadband into what they consider as their turf – even where they aren’t serving. But if the goal is to get everybody onto broadband, this is an issue we need to tackle and solve.

FWA Cellular Speeds

One of the most interesting things about getting access to a lot of speed tests is that it provides a way to test broadband issues you always suspected but couldn’t prove. If you can collect enough speed tests, you might find proof of a lot of different things. For example, speed tests might show that a broadband network is slower in the evening than during the night – something that customers have always complained about. Speed tests might show that an ISP delivers speeds that are far slower than what an ISP claims on the FCC broadband maps.

I’ve been trying to understand the speed characteristics of FWA cellular wireless. I’ve been interviewing folks for a few years who have FWA wireless, and they all told me that speeds are fast for those living close to a tower but slower as the distance to the tower increases. For example, the first customer I talked to who was using the FWA broadband from T-Mobile is a farmer who had a T-Mobile tower on his property and got almost 300 Mbps download speeds. He was thrilled with the product compared to the much slower WISP he had been using. But when he recommended the FWA wireless to his neighbors, they received a far different bandwidth product. A neighboring farm a little over a mile away was getting speeds closer to 100 Mbps, which they also thought was good. But some farms further away said that the FWA broadband was too slow.

I heard similar stories from elsewhere, but it’s hard to make any universal statements about the FWA product based on a handful of anecdotes from different parts of the country. I recently got access to enough speed tests to understand the performance of the FWA cellular wireless product.

The map below shows a lot of speed tests from Verizon tower in a suburban county. The yellow dots on the map are the locations of actual speed tests. The colored circles on the map show the distance from a cell tower – with purple showing locations within a mile of the tower, red showing locations between 1 and 2 miles, blue/greed showing speed tests within 2 and 3 miles, and the surrounding white areas at more than 3 miles. I didn’t cherry-pick this particular tower as the best example – there are more than a dozen other Verizon towers in the same county that show similar speed test results. I must note that speed tests are not a prefect indicator of broadband performance, and there might be explanations behind some of the slower readings. But I have to think that seeing this same speed pattern around multiple tower sites is a good indication that this is how the technology works.

This map demonstrates what the farmer told me to a tee. There are some locations close to the tower getting 300 Mbps. Customers just over a mile from the tower are getting slower speeds, with the highlighted ones around 75 Mbps. By the third mile band, speeds have dropped a lot closer to 25 Mbps download, and outside the three-mile circle, speeds drop significantly. There is no easy way to tell if the customers with slower speeds are buying FWA wireless, which uses the spectrum that Verizon labels as 5G, or the older Verizon hotspots that use traditional LTE spectrum.

On the FCC map in this county, Verizon reports two speeds – 300 Mbps or 50 Mbps. It’s not easy to understand how Verizon makes the distinction, but it seems like locations for a fairly good distance around towers are claimed at 300 Mbps.

Somebody who doesn’t understand the FCC mapping rules might think that Verizon is breaking the rules by reporting 300 Mbps speeds in places where actual speeds are a lot lower. But the FCC allows ISPs to report marketing speeds for the FCC maps as long as Verizon is advertising the claimed speeds. But that doesn’t mean that the Verizon FCC reporting is ethical. Customers who might refer to the FCC map when looking for an ISP, or customers that see Verizon advertising are hoping to get something close to the 300 Mbps speed – and many will not.

I have some major concerns about cellular FWA technology related to the upcoming BEAD grants. First, any state broadband grant offices that accept the claimed Verizon speeds in the FCC mapping might not award any grants where a fast FWA speed is claimed. That would be a travesty if folks who can’t get speeds of at least 100/20 Mbps with FWA are denied another broadband option.

It’s also possible that the cellular companies will challenge grants that come close to their towers. I knew this was likely going to become an issue the day that the NTIA said that it considers wireless broadband using licensed spectrum to be broadband for purposes of the BEAD program.

It’s also possible that Verizon, T-Mobile, AT&T, and others will try to win BEAD grant funding using this technology. At least in this county, there are very few customers outside of one or two miles from a tower who can get the 100/20 Mbps required for BEAD grants.

I hope that state broadband offices take a hard look at this. Many of them have purchased detailed speed test data, and they can search around towers in the same manner done above. I don’t think it will take much investigation for them to be convinced that FWA cellular broadband can meet the speeds required for BEAD – but only for short distances from cell towers. Broadband offices should also take note that both Verizon and T-Mobile warn customers that speeds can be throttled any time there is increased demand for bandwidth from cellphones.

I am not busting on the cellular FWA technology. If I was in a rural area without a good broadband alternative, I’d buy this product in a second. But I’d be unhappy if I was hoping for 300 Mbps and got 25 Mbps. What is being deployed today is the first generation of the technology, and I assume that it will improve over time. My only concern is the timing of the rollout of this new technology and how it might negatively affect an already complicated BEAD grant process.

Reflecting on AT&T

I was talking to somebody about AT&T recently – we both worked at the company before the divestiture of the company into the Baby Bells in 1984. This set me to contemplate the odd path the company has taken since the days when it was perhaps the premier U.S. corporation.

AT&T was divested as a long-distance company in 1984 and thrown into a competitive environment where long distance rates and revenues plummeted. AT&T’s fortunes and status decreased to the point where SBC, Southwestern Bell, was able to acquire the company in 2005 while keeping the AT&T brand name.

The reunited Baby Bell companies and AT&T were far diminished from the days when AT&T was at the top of the world. SBC and the other Baby Bells started to cut back on the maintenance and upgrade of copper infrastructure soon after the divestiture. The companies felt emboldened to do this since divestiture also brought the beginning of telephone deregulation. The big telcos were no longer strictly required to meet quality and performance standards, and they responded by trimming technicians and capital repair and upgrade budgets.

During the 1990s, AT&T turned its attention to becoming the largest cellular carrier. The company spent most of its capital in the 1990s on cellular networks, which was timed perfectly with the explosion of the cellular business where practically everybody in the country came to have a cellphone. But even in the cellular world, AT&T didn’t put as much money into its cellular infrastructure and spectrum as its competitors. When AT&T won an exclusive contract to market the iPhone in 2007, it quickly became clear to customers that the AT&T (Cingular at the time) network was inadequate.

AT&T next made several devastatingly bad investments. It bought DirectTV, which then lost half of its customers in a few ensuing years. AT&T was also apparently trying to keep up with Comcast when it spent $100 million to buy Warner Media. A few years later, AT&T unspun this deal and recognized a $47 billion loss to shareholders.

In the last decade, AT&T has been forced to spend a lot of money to upgrade its 4G and 5G networks. While cellular performance has improved dramatically for consumers, 5G still looks like a business plan looking for a revenue stream. Over the last decade, cellular competition has resulted in lower cellular prices for consumers, and it can be argued net 5G revenues for the industry have been a big negative. And now, the biggest cable companies are siphoning off valuable cellular market share.

AT&T and the other big telcos might also be facing an expensive effort to remove lead cables from the environment. Smaller telcos mostly replaced lead cables a long time ago, but it seems the big telcos never quite got around to getting rid of the lead.

AT&T has finally gotten serious over the last few years about building last-mile fiber networks for the future. The company built 500,000 fiber passings in the second quarter of this year to bring it up to 20.2 million fiber passings – with a goal to reach 30 million by the end of 2025. AT&T added 272,000 fiber customers in the second quarter to bring the company to over 7.7 million fiber subscribers. The company is still losing non-fiber customers and dropped 25,000 net broadband customers in the second quarter.

AT&T is late to the game compared to its cellular competitors in selling FWA cellular broadband and just rolled out its Internet Air product in April of this year. AT&T CEO John Stankey characterizes the company’s FWA plans as being used to replace copper infrastructure and perhaps to bid on BEAD grants in remote areas. But for now, the company is far behind Verizon and T-Mobile in selling cellular home broadband. But AT&T recently announced it now signing a ‘few thousand’ FWA customers daily.

It not particularly easy to equate AT&T with some of the recent events in the company, because for all practical purposes, the company has been run by folks from SBC. But a lot of mistakes have been made in AT&T’s name, and it’s somewhat sad to see how far the company has fallen since the early 1980s. AT&T has made mistakes that would have sunk a lot of other businesses, but it is still diverse enoughto generate the cash to keep trying over and over again.

Is Jitter the Problem?

Most people assume that when they have broadband issues they don’t have fast enough broadband speeds. But in many cases, problems are caused by high jitter and latency. Today, I’m looking at the impact of  jitter.

What is Jitter? Jitter happens when incoming data packets are delayed and don’t show up at the expected time or in the expected order. When data is transmitted over the Internet it is broken into small packets. A typical packet is approximately 1,000 bytes or 0.001 megabytes. This means a lot of packets are sent to your home computer for even basic web transactions.

Packets are created at the location originates a web signal. This might be a site that is streaming a video, sending a file, completing a voice over IP call, or letting you shop online. The packets are sent in the order that the original data stream is encoded. Each packet takes a separate path across the Internet. Some packets arrive quickly, while others are delayed for some reason. Measuring jitter means measuring the degree to which packets end up at your computer late or in the wrong order.

Why Does Jitter Matter? Jitter matters the most when you are receiving packets for a real-time transaction like a streaming video, a Zoom call, a voice over IP call, or a video connection with a classroom. Your home computer is going to do its best to deliver the transmissions on time, even if all the packets haven’t arrived. You’ll notice missing packets of data as pixelation or fuzziness in a video, or as poor sound quality on a voice call. If enough packets are late, you might drop a VoIP call or get kicked out of a Zoom session.

Jitter doesn’t matter as much for other kinds of data. Most people are not concerned if it takes slightly longer to download a data file or to receive an email. These transactions don’t show up as received on your computer until all (or mostly all) of the packets have been received.

What Causes Jitter? The primary cause of jitter is network congestion. This happens when places in the network between the sender and the receiver are sent more data packets than can be processed in real time.

Bandwidth constraints can occur anywhere in a network where there is a possibility of overloading the capacity of the electronics. The industry uses the word chokepoint to describe any place where data can be restricted. On an incoming data transmission, an ISP might not have enough bandwidth on the incoming backbone connection. Every piece of ISP network gear that routes traffic within an ISP network is a potential chokepoint – a common chokepoint is where data is handed off to a neighborhood. The final chokepoint is at the home if data is coming in faster than the home broadband connection can handle it.

A common cause of overloaded chokepoints is old or inadequate hardware. An ISP might have outdated or too-small switches in the network. The most common chokepoints at homes are outdated WiFi modems or older computers that can’t handle the volume of incoming data.

One of the biggest problems with network chokepoints is that any time that an electronics chokepoint gets too busy, packets can be dropped or lost. When that happens, your home computer or your ISP will request the missing packets be sent again. The higher the jitter, the more packets that are lost and must be sent multiple times, and the greater the total amount of data being sent through the network. With older and slower technologies like DSL, the network can get paralyzed if failed packets accumulate to the point of overwhelming the technology.

Contrary to popular belief, faster speeds don’t reduce jitter, and can actually increase it. If you have an old inadequate WiFi modem and upgrade to a faster technology like fiber, the WiFi model will be even more overwhelmed than it was with a slower bandwidth technology. The best solution to lowering jitter is for ISPs and customers to replace equipment that causes chokepoints. Fiber technology isn’t better just because it’s faster – it also includes technology that move packets quickly through chokepoints.

FCC Considering New Rules for Data Breaches

Back in January of this year, the FCC issued a Notice of Proposed Rulemaking in WC Docket No. 22-21 that proposes to change the way that ISPs and carriers report data breach to the FCC and to customers. The proposed new rules would modify some of the requirements of the customer proprietary network information (CPNI) rules that were originally put into place in 2007.

Since the 2007 CPNI order, all fifty states have adopted a version of the CPNI rules as well as rules from federal agencies like the Federal Trade Commission, the Cybersecurity and Infrastructure Agency, and the Securities Exchange Commission. The FCC is hoping to strengthen the rules on reporting data breaches since it recognizes that data breaches are increasingly important and can be damaging to customers.

The FCC completed a round of initial and reply comments by the end of March 2023, but is not expected to make a final order before the end of this year.

The current FCC rules for data breaches require carriers to notify law enforcement within seven days of a breach using an FCC portal that forwards a report to the Secret Service and the FBI. After a carrier has notified law enforcement, it can opt to notify customers, although that is not mandatory. One of the reasons this docket was initiated is that carriers have kept quiet about some major data breaches. The new rules would require carriers to provide additional information to the FCC and law enforcement. The new requirements also eliminate any waiting period, and carriers would be required to notify law enforcement and customers “without unreasonable delay”. The only exception to rapid customer notification would be if law enforcement asks for a delay.

The FCC is proposing new reporting rules that it says will better protect consumers, increase security, and reduce the impact of future breaches. There was a lot of pushback from carriers in comments to the docket that centered on two primary topics – the definition of what constitutes a data breach, and the requirement of what must be told to customers.

The FCC wants to expand the definition of data breach to include the inadvertent disclosure of customer information. The FCC believes that requiring the disclosure of accidental breaches will incentivize carriers to adopt more strenuous data security practices. Carriers oppose the expanded definition since disclosure would be required even when there is no apparent harm to customers.

Carriers also oppose the quick notification requirements. Carriers argue that it takes time to  understand the breadth and depth of a data breach and to determine if any customers were harmed. Carriers also need to be working immediately after discovering breach to contain and stop the problem.

Carriers are opposed to the FCC suggestions of what must be disclosed to customers. The FCC wants to make sure that customer notices include everything needed for customers to react to the breach. Carriers say that assembling the details by customer will take too long and could leave customers open to further problems. Carriers would rather make a quick blanket announcement instead of a detailed notice to specific customers.

One of the interesting nuances of the proposed rules is that there would be two types of notifications required – one for inadvertent leaks and another for what the FCC calls a harms-based notification. This would require a carrier to notify customers based on the specific harm that was caused.  Carriers were generally in favor of the harms-based approach but didn’t want to confuse customers by notifying them of every inadvertent breach that doesn’t cause any harm.

Consumer advocates opposed allowing only the harm-based trigger, because it allows a carrier to decide when a breach causes harm. They fear that carriers will under-report harm-based breaches.

These rules would apply to all ISPs and carriers, regardless of size. While it might still be some months before any new rules become effective, small ISPs ought to use this impending change as a reason to review data security practices and the ability to notify customers.

Revisiting the BEAD Letter of Credit

I recently agreed to sign a letter to the NTIA that asks the agency to eliminate the BEAD requirement that grant recipients must have an irrevocable standby letter of credit (LOC) to apply for a BEAD grant. This letter was signed by over 300 folks in the industry including ISPs, local government, policy experts, and industry associations. I sign very few documents like this, but the letter of credit requirement is a terrible policy – and is a big concern to many of my clients.

To explain an irrevocable letter of credit in plain English, anybody winning a BEAD grant must set aside almost the same amount of cash as the amount of grant matching from the day that the grant is awarded through the completion of the grant construction process.

A letter of credit to satisfy the NTIA must come from an FDIC bank with Weiss rating of B- or better for 25% of the award amount. A letter of credit is a specific kind of negotiable instrument where a bank guarantees that the bank will fund any shortfalls if a grant fails in its financial obligation. If a grant applicant fails to complete the construction of the grant, the money in the LOC would likely be claimed by NTIA or the state grant office (still unclear on the details).

Banks will not issue a letter of credit without having liquid assets or collateral equal to the amount of the LOC. That means a grant applicant must not only have enough cash or borrowing for its grant matching fund commitment, but the applicant must also set aside a large amount of hard cash as a guarantee for the LOC. The letter to the NTIA uses an example of an ISP that want to fund a $10 million project using a 75% BEAD grant. In this example, the ISP would get $7.5 million from the grant. It would need to have $2.5 million available for the matching fund. It would need to set lock up another $2.1 million for the letter of credit. That makes it incredibly expensive for an ISP to seek a BEAD grant. And FYI, this example is too conservative – grant recipients also must finance the operating costs of launching a grant project since those expenses are not covered by grants.

To make matters even worse, banks charge interest on a letter of credit because the bank must set aside a corresponding portion of its own equity to support the letter of credit. The cashed tied up by a bank for an LOC can’t be used to make other loans – so the bank must charge interest.

This is a huge problem for many reasons. Anybody but the largest ISPs will have a hard or impossible time getting a letter of credit. Most ISPs don’t accumulate cash because the best use of cash for most ISPs is to continue to build more infrastructure. A large percentage of ISPs will not have the cash available up front to support the letter of credit. Many cities and municipalities are legally barred from buying a letter of credit.

There is some question if the banking industry as a whole is willing to float over $10 billion in letters of credit for BEAD grants. The banking industry is under a huge amount of stress due to high interest rates. Banks are far less interested in making any kind of infrastructure loans today when interest rates are high – because the bank’s risk is much higher than normal. I know ISPs that have been told by their current bank that they are not interested in issuing a letter of credit – and the chance of getting a LOC from a bank that doesn’t know an ISP is slim.

There is no reason for this requirement – or at least no reason for it to be so draconian. The NTIA is insisting on a letter of credit because it doesn’t want to be embarrassed by projects that don’t get completed. This requirement is a massive advantage for large ISPs over smaller ones, but even large ISPs hate this requirement. There are many successful broadband grant programs that don’t require a draconian letter of credit. There are other ways to provide assurance to a state grant office, like performance bonds or issuing grant funds in tranches as milestones are met.

Hopefully, the press from this letter will get the NTIA to reconsider its position. The requirement for the extreme version of a letter of credit is overkill. The letter of credit is going to stop a lot of ISPs from being able to ask for BEAD funds – the local ISPs that customers prefer. Maybe most germane is that requiring a letter of credit might actually drive more projects to fail as ISPs struggle to support the interest payments on an LOC.

One More Mapping Challenge

There is still one more upcoming map challenge to try to fix errors in broadband maps for purposes of the upcoming BEAD grants.

The NTIA is requiring state broadband offices to have one more mapping challenge at the state level before the state can issue broadband grants. The NTIA issued a sample template for a state challenge process, but each state is allowed to develop its own challenge process. States are not required to wait for an update in the FCC mapping system before using any updated information when awarding grants.

The NTIA suggests that challenges can be made by ISPs who are considering asking for a BEAD grant. NTIA also suggests that states accept challenges from the public, and I assume that includes challenges from cities and counties as well.

This is the challenge that a lot of folks have been waiting for because there are still a lot of inaccuracies in the FCC maps. While some states did a vigorous review of the FCC maps and asked for map updates – many states did not. Some counties also put an effort into correcting the FCC maps – but many did not. This is the final chance to get locations declared as eligible for BEAD grants. I assume that States will not accept locations for BEAD grants that are not in the corrected maps.

This challenge is also the one that folks have been waiting for since the NTIA suggests that there can be a challenge against the claimed broadband speeds. A lot of the early map challenges had to do with getting the mapping fabric right – which is the database that is used to define the location of the homes and businesses in the country.

My consulting firm has been working with communities, and we are still seeing a lot of inaccurate information. In every county we have examined, we find ISPs claiming speeds of 100/20 Mbps or faster that are not supported by Ookla speed tests. We’re also finding coverage errors in the maps where ISPs are reporting homes as covered that are not. A lot of the earlier challenges fixed coverage problems that were grossly incorrect, but it takes a lot more effort to find smaller pockets of ten or twenty homes that can’t buy good broadband but for which some ISP claims coverage.

Many of the problems in the FCC maps are directly due to the FCC rules for ISPs to report broadband for the maps. ISPs are allowed to claim marketing speeds for broadband instead of the actual speed delivered. There are far too many cases where the advertised marketing speed is much faster than what is being delivered. ISPs can also claim areas as covered by broadband where the ISP can supposedly provide broadband in ten working days. Finally, we often find ISPs claiming broadband coverage where an engineering field review doesn’t find any of the claimed technology.

The mapping is only an issue for BEAD because the IIJA legislation that created the BEAD grants insisted that FCC mapping must be used to allocate grants. I’m sure that language was inserted into the legislation at the insistence of the big ISP lobbyists to make sure that grant funds were not used to ‘overbuild’ existing broadband. At the time the IIJA legislation was passed, the FCC maps were atrocious. They have now been improved to the point where I would say they are now merely dreadful – but nobody believes the FCC maps are accurate. Most people only have to look around their immediate neighborhood on the FCC maps to find a few overstatements of coverage. My team has looked in great detail at perhaps a dozen counties and found a lot of mapping errors. I can’t even begin to think what that means on a national scale.

Unfortunately, most people in the country have no idea how this complicated BEAD process works. After the grants have been awarded, I expect we’ll start to hear from unserved homes that are not going to be covered by a BEAD grant. I believe this is going to be a lot more homes than anybody at the NTIA, the FCC, or state broadband offices wants to acknowledge.

Hopefully, the ISPs who want to file BEAD grants will take a shot at cleaning up the map errors now. That’s the only way to get grant funding for locations that are underserved but which don’t show that on the FCC maps. Everybody interested in doing this needs to pay attention to the state broadband office. States will first issue a plan to the FCC describing the way it will conduct the mapping challenge. These plans will likely have a 30-day opportunity for public comments. If you don’t like the map challenge rules, holler! Sometime later, states will hold the mapping challenge, and most will likely have a narrow time window to file challenges.