State Broadband Offices and the BEAD grant process have designed grant rules that put pressure on ISPs to provide inexpensive rural broadband. But in doing so, I’m not sure that they understand the high prices that rural folks are paying for broadband today.

To provide an example, my consulting firm just finished a statistically valid broadband survey in a rural county. Most of the rural folks in this county are already spending more than $100 per month on broadband. The incumbent telephone company has largely walked away from the county, and there is no DSL available in most of the rural parts of the county. There is only one cell tower that has been upgraded to offer FWA broadband. This means that most rural residents only have access to expensive broadband.

There is one WISP that covers only a small portion of the county. The WISP’s rates are high, with a 10/1 Mbps product for $76 and faster speeds cost more than $100.

Cellular hotspots are expensive. For example, T-Mobile has hotspot plans that vary in price from 5 gigabytes of data for $20 to 50 gigabytes of data for $50. AT&T and Verizon have similar prices for hotspots. Thos rates sound low until you realize the cost of buying broadband over the data caps. For example, Verizon offers 150 gigabytes of data for $110.

The data caps on hotspots put horrendous pressure on a household. OpenVault recently said that the average U.S. home uses 641 gigabytes of data per month. It’s hard to imagine trying to restrict a home to using less than 100 gigabytes per month to keep the bill under $100 per month. During the pandemic, I talked to several parents of students working from home using a hotspot who were paying more than $500 per month through extra bandwidth fees to get the same kind of bandwidth that homes with unlimited bandwidth take for granted.

Satellite broadband is mostly over $100. Starlink prices start at $110. HughesNet advertises unlimited data, but their plans have data caps for all practical purposes. For example, a plan with 200 gigabytes of priority data costs $109.99. They label the plan as unlimited usage, but data usage above 200 gigabytes is choked to extremely slow speeds. All plans require a 2-year contract.

Viasat is even more expensive. For $119.99 per month a customers gets 100-150 gigabytes of high-speed data and then unlimited choked and slow broadband. 500 gigabytes of usage is $249.99.

In this county, most rural residents are already paying over $100 per month for broadband. Since many of the plans include data caps, 4% of residents report spending more than $150 per month.

There are state BEAD rules that are trying to force rates down to rates between $50 and $75 per month for gigabit speeds. I find several faults with these rate-setting efforts:

• The rates the Broadband Offices are seeking are typically far cheaper than what the large cable companies charge – the companies that have the most customers in almost every state. It’s hard to think of a reason why grant offices want rural rates to be lower than urban rates, particularly when operating costs are higher in the rural areas.
• The low rates don’t acknowledge that rural residents are already paying a lot more for inferior broadband. Do we really need to cut what folks are paying in half if they are going to upgrade from crappy broadband?
• The high rates are counterproductive. I talked to an electric cooperative this week that has zero interest in BEAD grants due entirely to the insistence on low rates. They understand the rates necessary to win BEAD would create a losing business plan.
• Probably most important is that the IIJA legislation strictly forbid NTIA and the States from using the grants for setting rates – and yet States are openly doing it anyway. Why isn’t the NTIA rejecting these rate plans?

This is one more issue that I find ironic about the BEAD process. The Department of Commerce and NTIA have repeatedly said that BEAD grant rules are conservative to protect taxpayers. However, putting tremendous pressure on ISPs to have low rates does the exact opposite and will put ISPs at risk for failure after taking the grant funding. There seems to be an underlying assumption that ISPs have unlimited and hidden profit reserves and can absorb whatever penalty grant folks want to invent. That may be somewhat true for a few giant ISPs, but it sure isn’t true about everybody else.