When I first read the IIJA legislation that created the BEAD grants, my first reaction was this was going to be a grant program that a whole lot of my clients would choose to ignore. There are so many tough requirements described in the legislation that it seemed overwhelming. But over the last year, my opinion mellowed because I assumed that State Broadband Offices would soften some of the rough edges of the federal rules. SBOs were supposed to meet with ISPs and other constituencies to hear their concerns, and since ISPs are the ones that ultimately will accept the BEAD grants, I assumed that SBOs would try to make rules that will lure ISPs to participate. Unfortunately, this doesn’t seem to be the case – and many States are layering on additional rules that make these grants even less attractive to ISPs.

Consider the simple concept of establishing a grant study area – the area where an ISP proposes to seek grant funding. ISPs generally choose grant serving areas to meet a couple of operational, functional, and financial parameters.

• Most ISPs want to serve grant areas that are adjacent or nearly adjacent to existing service areas. This allows for efficiency in the long-term operation of the grant area through the best use of locating technicians, hub offices, etc. BEAD grant areas are, by definition, rural and low-density, so taking advantage of existing operations is essential for an ISP to be financially successful in serving rural areas.
• ISPs don’t want to have to construct middle-mile to reach pockets of unserved customers if there aren’t other opportunities along those routes – this drives up costs but not new revenues.
• Some ISPs have a very specific agenda, such as an electric cooperative whose Board is only willing to build broadband to its current members using its existing poles.
• Most importantly, ISPs choose grant areas they can afford to tackle. BEAD, like all grants, has a matching fund requirement, and ISPs can’t tackle a grant serving area or project that is larger than they can afford to finance.

I was frankly shocked to see State BEAD grant plans where the State dictates the grant serving areas. No ISP, large or small, wants the State to dictate where they can expand. Consider the following examples of ways that States are getting involved in defining study areas. This is just a sample of such rules and there are other states doing similar things.

As an example, Georgia’s grant scoring wants ISPs to agree to tackle an entire county. Florida says it will dictate study areas that haven’t yet been defined. Any grant rules that define study areas create massive heartburn for ISPs:

• Dictated study areas ignore every basic principles that ISPs would use in designing their own study areas.
• This feels like RDOF all over again, but is even stranger as States use various criteria to carve rural areas into study areas that make sense to them (without consulting ISPs).
• A grant area, like a whole county, that covers both urban and rural areas is a nightmare scenario for every ISP. Every city and county seat has some unserved areas that the incumbent cable company has ignored for some reason – often because it is extremely costly to reach or has some construction impediment like a difficult right-of-way issue. Nobody wants to be forced to tackle these urban pockets along with rural areas in a single grant application. This has to be making even the giant ISPs shudder.

Other States are proposing rules that chop up the awards into pieces so that ISPs might end up being offered incoherent and unfeasible grant areas. For example, Virginia and a few other states will require ISPs to pre-file their proposed grant areas. Any place where more than one ISP is proposing to serve will be designated as a separate grant area, meaning a separate application and a separate scoring and grant award. It’s not hard to imagine an ISP only being offered a portion of the grant area it really wants to serve. If that occurs, expect a lot of ISPs to reject the offered grant if the study areas make no sense. At the end of a day, a grant area has to make operational sense.

I understand why State Broadband Offices are taking this approach. They are under pressure from the NTIA to get the money out the door quickly – and they think these rules will speed up the grant process. Unfortunately, these rules are not going to create the results that SBOs are hoping for. For example, I think a lot of ISPs, including the giant ones, might decide to pass on the countywide rules in Georgia – nationwide ISPS can take their money to another state. Grant rules that require multiple grant applications to cobble together one study area are too cumbersome and costly for ISPs, and I expect a lot of smaller ISPS are going to decide that this is the extra rule that makes BEAD too hard to consider.

It’s clear that these states did not sit with ISPs and discuss their ideas before publishing them. That is mindboggling because, at the end of the day, ISPs are the ones that can accept and implement grants. If grant rules don’t work for ISPs, they don’t work at all.