There is a tendency to think of high-cost areas – places where it’s expensive to build fiber as only being in remote places with tough terrain. As companies start filing BEAD grants we’re going to see a lot of other cases of high cost locations that I think are going to surprise State Broadband Grant offices. There are many reasons that drive up the cost of building a landline network.

Some places are high-cost by definition. For example, I know of a small town in Arizona that is fifty miles away from the nearest other people. Building fiber to this town means building middle-mile backhaul, which in this case is through tough terrain and faces the extra burden of aging poles.

The condition of poles can be a huge cost driver anywhere. I’ve worked with several rural communities where more than 90% of poles need major work to add fiber. This is clearly the fault of the electric company, but an ISP building fiber is expected to pay to rebuild the poles. The new FCC pole rules might make this a little better, but even those rules can’t make costs reasonable when all of the poles are bad.

In Appalachia, I’ve seen places where pole lines have not been maintained and the poles are now in the middle of the woods. For purposes of adding fiber, these poles might as well not exist.

The issue that is going to blindside a lot of grant offices is housing density, measured by the number of residences per mile of road. States have been operating state broadband grants that invited ISPs to seek funding to build the parts of counties with the highest route density. The same thing happened with federal broadband grants. ISPs carefully crafted grant areas where the construction costs were the most reasonable.

The billions spent by state broadband grants using CARES and ARPA money were awarded to the most densely populated rural areas. This was bound to happen with grant programs that expected fairly high matching contributions from ISPs. ISPs carefully carved out proposed grant areas that avoided high cost roads, and state grant rules rewarded grant applications that served the most locations per grant dollar. This was a smart use of state grant funds, but the end result of the many state grants is that the remaining rural locations in many counties are those places where costs are the highest.

Another factor that is driving up costs is the way that the FCC awarded RDOF. I’ve been talking for years about how the RDOF awards chopped many counties into swiss cheese serving areas, with seemingly random areas that got RDOF next to areas with the identical broadband options that didn’t. I’m working with a county where RDOF and State grants covered about 80% of rural residents. In doing so, RDOF left behind scattered pockets of the least dense homes. The cost to build the entire rural area that includes RDOF is around $6,000 per passing – a cost that could be comfortably handled by BEAD grants. However, the remaining 20% of locations have a cost per passing over $10,000.

Another major issue to consider is the degree to which inflation and BEAD grant rules are driving up the cost of construction. BEAD rules can easily add up to 30% to the cost of building a rural network due to factors like prevailing wages, letters of credit, and environmental studies. Most engineers I know estimate that inflation has increased costs by 15% to 20% since the date when BEAD grants were announced.

Finally, I think broadband offices are relying too heavily on using fixed wireless as the solution for high cost areas. There are places where fixed wireless is a good solution, but plenty of others where it is not. Areas with rough terrain can be a nightmare for a WISP that is required to reach every home. Some of the small pockets left behind by RDOF and other grants are isolated and not near any WISP markets – and no ISP wants to take on tiny pockets of customers that are far from existing networks.

Hopefully I’m being pessimistic, but I fear that states are often basing their estimates of how far BEAD grants will stretch based on the cost to build to rural areas with State broadband grants. When I look at real counties, I’m seeing that the areas that are left behind by earlier funding efforts are the most expensive places to reach. I cringe when I hear States that say that they have enough money to build fiber everywhere before they have received grant applications.