Monthly Archives: March 2024

Spying on Our Calling

Wired published an article last year that highlighted  a program run by the federal government that has kept records of phone calls made within the country. The article was prompted by a copy of a letter obtained by Wired from Senator Ron Wyden to the Department of Justice complaining about the program.

The program is called the Data Analytical Services (DAS) and has been available for over a decade for local and federal law enforcement to obtain calling records without needing a subpoena. This program has one added advantage is that it stores older call records. Historically, telephone companies have not kept call records more than two years.

The program is operated in conjunction with AT&T, which is the natural partner since a huge percentage of calls pass through the AT&T network at some point. AT&T owns the vast majority of tandem switches, which are the regional switches used to route both landline and cellular calls. It turns out that most companies that use voice over IP also eventually dump the calls somewhere into the public switched telephone network (PSTN), so these calls are also likely mostly captured by AT&T.

As Wired points out, there is no federal law requiring AT&T to record and store call records, and it seems like it is being done by the company as a money-making venture. What’s interesting about this effort is that it appears to be fully out of compliance with earlier court orders pertaining to telephone records captured and stored as a result of the Patriot Act. The Patriot Act allowed the government to gather large amounts of data from citizens in the aftermath of September 11 and the anthrax attacks in 2001.

However, some of the provisions of the Patriot Act expired. Lawsuits brought by the ACLU forced the NSA to begin deleting phone records in 2018. At the time, the agency said it was deleting over 600 million phone records that were improperly collected. Apparently, the NSA would gather huge amounts of calls that were tangentially related to somebody of interest that were obtained under a warrant. The ACLU ended up suing the NSA almost immediately after the agreement since the agency did not cease the practices that has invited the suit.

The DAS program was originally known as Hemisphere. The New York Times disclosed the existence of the program in 2013. Following the public disclosure, President Barack Obama ordered the suspension of the program and cut off funding. But it seems that the program was renamed to DAS and was instead funded by various law enforcement agencies rather than directly by the federal government. Both the Trump and Biden administration have resumed funding for the program.

To be clear, the data collected with DAS is not wiretapping, which fully records a call. Wiretapping requires obtaining a subpoena, but getting data from DAS does not. Instead, the DAS program records the calling and called parties, and AT&T can apparently run sophisticated software that will show patterns for everybody associated with somebody of interest to law enforcement, including friends and family.

Repeating Telecom History

This is a story I’ve told before, and I repeat it from time to time since I believe we can’t ignore the history of our industry if we want to avoid the worst of it from happening again.

We let the big telcos walk away from their responsibility to maintain rural networks. That resulted in a shameful situation where rural folks were never offered working broadband, and now the telcos are even walking away from landlines. What I find saddest about this, other than the situation this has caused for rural communities across the country, is that we don’t seem to have learned any lessons from the past. It’s likely that we are again going to hand billions of dollars to giant companies to take care of rural networks.

There are a variety of factors that led to the rural mess that created the need for BEAD and other broadband grant programs. While the primary blame goes to the big companies that allowed rural networks to deteriorate, a lot of the blame also goes to regulators and government. So let me talk about them first.

I think the downward trajectory started with the divestiture of AT&T into AT&T as a long-distance company and large regional telephone companies. Regulators had an opportunity to make sure that the regional RBOC companies remained fully regulated with mandates to maintain universal service. But for some reason, regulators did the exact opposite and told each RBOC to thrive in the open market. Companies like Verizon and Bell South quickly got sucked into the Wall Street game of caring more about stock prices than running a good telephone company. I worked at AT&T pre-divestiture, and this was a huge chance after divestiture. The employees of the giant Ma Bell monopoly took pride in doing the right thing for the public. I sat near the person who took the daily calls to the executive help desk – customers could call the top guy in each state if they had a problem, and that almost always meant the problem got solved.

The newly-formed telco lobbied hard to be able to make profits over and above the low, but steady profits that could be earned by a regulated utility. Unfortunately, lobbying works when it’s done right, and the Baby Bells lobbied everybody from city councils to federal legislators. Within a few years after divestiture, the process of deregulating the big telcos began. By promising to keep residential telephone rates low, regulators across the country deregulated the big telcos from their many obligations.

The big telcos ran with the power that came from deregulation. For example, Bell South grew a cellular business that grew to rival the telco business. All the Baby Bells except US West thrived under the relaxed regulatory regime.

I hesitate to say that the folks running the Baby Bells were bad people, but from the perspective of customers, they were. Telcos that once had always put customers first were suddenly obsessed with stock prices and the bottom line. They became just another set of corporations operated by MBAs that valued the stockholder over the customer.

The changes were mostly, but not always, gradual. Verizon was the abruptest of the Baby Bells and decided early on to divest itself of its rural networks. Unfortunately, they weren’t able to sell all rural copper. In places like West Virginia, when they couldn’t find a buyer, Verizon ceased maintaining the network. I saw this happen firsthand, and it was not pretty.

But the other Baby Bells ended up in the same place, just not as rapidly. Year after year, and budget cycle after budget cycle, the big telcos cut back on maintenance. Open technician jobs weren’t replaced, and there were occasionally big layoffs to help maintain stock prices. Hardware wasn’t upgraded when needed, and copper networks went to hell. We finally got to the point where whole counties have no working DSL – the telcos just quietly got out of the business.

We are now poised to do it all over again. We have a gigantic broadband grant program that clearly favors big companies over small ones, companies that can use equity instead of debt for grant matching, and companies with the resources to pursue giant multi-county grants. Big cable companies are joining the big telcos to pursue rural grants. The big cable companies have a similar history to the telcos. One only has to talk to folks in small communities where the cable companies eliminated business offices and cut back on maintenance staff. Cable companies have neglected small markets by not making needed upgrades while bragging to Wall Street that all of their networks are state of the art.

I doubt there is anything that can be done to stop this, but we are on the verge of doing it all over again. Over the last decade we awarded tens of billions of subsidies to big telcos to improve rural broadband, and the money mostly got pocketed. I find it impossible to believe that the giant companies are going to care and nurture newly built grant networks any better than they have taken care of rural or small community networks in the past. A few big companies might try to do the right thing. But they will be under pressure to maintain earnings, and over time, they will cut staff, maintenance, and repairs – and the cycle will eventually repeat. It’s virtually impossible to believe that the giant ISPs will devote the needed resources for decades to come to properly support rural networks.

The ironic thing is that we know what works in rural areas  and it’s not giant ISPs. We’ve seen small telcos and cooperatives take care of rural networks while big companies let networks rot in place. But lobbying is still king, and regulators are not brave enough to do the right thing – which is to not give grants to publicly traded companies. Watching this cycle repeat itself will give me fodder to write about how we screwed it all up again – but I’d much rather be writing about rural success stories.

Is There Enough BEAD Funding?

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.

Has Starlink Won the Farming Market?

In a recent press release, John Deere announced an agreement with Starlink to provide broadband for smart farm equipment in areas where cellular coverage is not strong enough. Anybody familiar with rural America understands that there are gigantic holes in cellular coverage, so this arrangement puts Starlink in a strong position with farmers.

The decision means that John Deer will include a Starlink receiver in smart farm equipment along with a 4G LTE receiver. This technology will be available for both new and older Deere machines. They expect the satellite connectivity to be effective in the second half of 2024.

John Deere says that smart machines will first try to connect to LTE and then automatically roll over to Starlink as needed. This means that a farmer with a large property might be connected to LTE on one end of the property and to Starlink on the other. Today, the lack of 4G coverage makes it hard for this farmer to take full advantage of precision agriculture.

The press release doesn’t explain how farmers pay for the wireless broadband. My guess is that farmers must subscribe to the local cellular carrier and connect in the John Deere app. I envision that John Deere is paying for the satellite broadband and will bill farmers for the usage. A farmer doesn’t need connectivity all year long, just in those months when they are working in the fields.

The John Deere press release cites a lot of advantages to this new arrangement. They say that this finally enables full connectivity for all smart machines made by the company. Deere says that the broadband connection will enable technologies like autonomy, real-time data sharing, remote diagnostics, and machine-to-machine communications.

John Deere was recently recognized for its innovations with smart agriculture when it was awarded an honoree designation at the CES Innovation Awards this year. Smart farming equipment already contains a lot of technology. Machines are equipped with cameras and sensors that transmit information to John Deere through the AWS cloud. Critical data is processed in real time and sent back to farmers. Deere also provides mountains of analytical data on issues like the need for watering and fertilizing fields in specific locations.

Having guaranteed bandwidth will enable another big goal for John Deere. The company already has a few applications where smart machines can do tasks like plow and till field with no human driver. Deere has the goal to fully automate all steps of smart farming like tillage, planting, fertilizing and harvesting by 2030.

This arrangement does not solve the broadband needs for the farm operations outside of the smart machines. In my experience, farmers engaged in smart farming want as much broadband as they can get for their homes and farm offices. Many farmers already subscribe to Starlink, but they are the first in line to move to FWA cellular broadband or fiber when it becomes available at their location.

My consulting firm interviews a lot of farmers every year. One of the most interesting things we hear repeatedly is that farmers today often feel like they are IT guys as much as they are farmers. They utilize a lot of software to manage many aspects of the modern farming business.

The Advantages of Equity Funding

A large majority of ISPs seeking BEAD grants will be financing matching funds using loans. Matching funds are the contributions expected from ISPs – a 75% grant means 25% in matching funds. Very few ISPs carry enough cash on hand to consider using equity to pay for broadband expansion. It’s possible that banks might require a small ISP to provide a small amount of equity, so the ISP has some skin in the game – but most matching funds will be borrowed.

This contrasts significantly with large telcos and cable companies that will be pursuing BEAD grants. It’s likely that most giant ISPs will be financing grants with equity. Using equity makes a gigantic difference in the approach to considering BEAD grants.

Below is a chart that is based on a real rural broadband market. The grant opportunity would bring fiber broadband to 2,700 locations for a total investment of $30.7 million. That’s a cost per passing of a little less than $11,400.

The following chart assumes that ISPs would seek a 75% grant and require a 25% match. The graph looks at the method of financing the matching funds – and ranges from 100% bank loan to 100% equity.

This graph demonstrates the huge benefit of using equity financing. The bottom blue line shows the expected accumulated cash for the small ISP that would use debt to cover the grant matching. For many years, the project just barely breaks even, but over twenty years, the project eventually accumulates over $2 million in cash.

An ISP that can finance with equity will generate far more cash. An ISP that could use 100% equity would accumulate over $16 million in cash over 20 years. The extra cash comes from the savings on debt payments over the life of the project.

This chart demonstrates a few things. First, it explains why ISPs that will be using equity can consider building in rural areas. In places where an ISP using debt financing can barely keep its head above water, an equity-funded ISP can generate significant cash.

The second benefit is that an ISP using equity can win the BEAD grant by accepting less than a 75% grant. In this example market, the ISP using debt financing cannot consider accepting less than a 75% grant. If they take a smaller grant the project will lose money every year. However, an ISP using equity could easily accept a 60% or 65% grant – which would almost certainly win the grant if competing against an ISP using debt.

I’ve said for years that the big ISPs are mostly going to go to the big ISPs, and funding is perhaps the major reason for this. But other grant rules also favor big companies over small ones.

But there is one more issue to consider that makes me wonder why the big ISPs are pursuing BEAD. An ISP that would use 100% equity for this particular project would see a return on Investment (ROI) over ten years of 19% and over 20 years of 88%. That is considerably lower than the returns the big ISP could earn by instead building fiber in larger communities. And those returns will drop significantly if the ISP accepts less than a 75% grant.

I’ve wondered since the day the BEAD grants were announced why big ISPs would pursue rural grants. It’s just as hard for them to service rural customers as it is for smaller ISPs. Rural BEAD projects will not earn the same kind of return that big ISPs get from investing elsewhere, and they are taking on serving areas that require a lot more work.

In many cases, the reasons for pursuing rural grants are likely strategic rather than economic. For example, Charter and Comcast seem to be panicking about the prospect of losing broadband customers, and pursuing rural markets can help to soften the losses. The big telcos like Frontier, Brightspeed, and Windstream already operate in rural areas and want to claim monopoly areas again. But in a decade, all of these companies will be complaining to the FCC about how expensive it is to operate in rural areas – and they’ll have their hands out asking for subsidies.

Danger Of Forcing Low Rates

Some State Broadband Offices are taking a stab at social engineering by trying to force BEAD grant winners to offer low broadband rates. I understand the sentiment behind this because everybody in the industry involved with digital equity issues hears stories about homes that can’t afford broadband even when it is available. It’s a serious issue, and a Pew Research Center study in 2021 showed that only 57% of homes with household incomes less than $30,000 had broadband, compared to 92% of homes with household incomes over $75,000.

It’s natural for folks in a grant office to want to use the power of grant awards to do a little social engineering and force lower rates for ISPs that accept BEAD grants. I know this feels like a broadband office is doing something good, but there are a number of reasons why this is a terrible idea. The first is simple since Congress specifically prohibited the NTIA and States from regulating rates in the BEAD grants.

I’m guessing that States will argue that they are not regulating rates. States are instead tying the number of grant points that are awarded to broadband prices. I’m sure the rationale is that the State isn’t forcing low rates and that ISPs are voluntarily lowering rates. But that is clearly not true when low rates earn a lot of grant points, and any ISP that doesn’t lower rates can’t win a grant. No matter how you try to justify it, this is rate regulation.

The more important reason why rate regulation is dangerous with BEAD is that many rural business plans are highly stressed and will have a hard time just breaking even with normal rates. The BEAD grant process adds a lot of cost to an ISP by using prevailing wages, requiring a letter of credit, requiring expensive environmental studies, and mandating smothering reporting. BEAD is hitting the market at a time when interest rates are at the highest levels we’ve seen in well over a decade.

The operating costs after building networks are also high. A technician in a rural market might be able to visit only half as many customers in a day compared to a similar technician in an urban market – and the rural tech will expend a lot more vehicle resources during the day.

I don’t think that many of the folks in state broadband offices understand the rural business plan and that just breaking even is a decent goal. Even a slight change of rates can have a huge impact on cash over time. Consider the following graph. This is from a real business plan for an ISP considering a BEAD grant. The grant application would cover almost 5,000 rural passings. It’s in a relatively poor area, and the ISP hopes to eventually attract 60% of the residents to the new network.

The yellow line represents rates that range from 100 Mbps for $60 per month to a gigabit priced at $90. At those rates, this ISP will just barely keep its head above water for the next twenty years. Raising rates by $5 can add a comfortable margin over time, but a $5 decrease in rates would absolutely sink this ISP.

Some States have a grant point structure that rewards rate far lower than what is used in this example. I recently noticed a state where the maximum grant points are awarded for offering a $65 gigabit product. I didn’t even bother to show the impact of that rate since the losses are so large that the ISP would likely have to walk away from the market in few years.

I know that broadband offices want to do social good, and I applaud them for the sentiment. High rates are a problem. But it’s irresponsible to put the full burden on ISPs to solve the digital divide with low rates. It’s irresponsible to force low rates in rural areas where costs are high while the ISPs serving metropolitan areas can charge high rates with impunity.

Any State broadband office that thinks ISPs can easily absorb a big rate decrease does not understand the reality of operating a rural broadband network. They clearly believe that ISPs are secretly making obscene profits and can easily lower rates if pushed.

Driving down rates without understanding the consequences is a terrible idea. I think the best strategy for a grant office is to award BEAD funding to responsible ISPs who will commit to providing long-term great service. Forcing down rates will drive away the ISPs a State is hoping for. Grants will instead go to the giant ISPs that will pay lip service to low rates for a while but will raise rates over $100 per month as soon as possible.

Update on Dish Cellular

I recently checked on the status of Dish, which is trying to become the fourth major cellular company in the country. Dish entered the cellular business in 2020 as a consequence of the merger of Sprint and T-Mobile. Sprint already owned a lot of spectrum including 600 MHz and 700 MHz spectrum that covers most of the country, along with 1,700 MHz AWS spectrum that is the workhorse in cellular networks. Dish was also able to buy Sprint’s 800 MHz spectrum.

Dish was already under pressure at the time from the FCC to use its spectrum portfolio, and the FCC gave Dish until June 2023 to cover 70% of the U.S. population with cellular facilities. Dish got a jump on the business side of things by buying Boost Mobile for $1.1 billion.

Dish took a big chance on network construction and pursued an open RAN architecture, which has the goal of using off-the-shelf generic hardware instead of the proprietary gear offered by the handful of industry vendors. Dish ended up building a network that was a mix of open RAN and more traditional gear, but its attempt to use open RAN slowed network construction. However, Dish was able to meet its commitment to the FCC after having spent over $6 billion on the network. The company is expected to spend about $1 billion in 2024 and spend an additional $1 billion in the first half of 2025 to meet the next FCC commitment.

Dish struggled, and only has about 7.5 million customers left from its acquisition of 9 million Boost Mobile customers in 2020. The company has had little luck adding customers to the new network. Dish became authorized to sell the iPhone in late summer 2023, and hopes that will help sales.

A lot of analysts are pessimistic about Dish’s future, and some of them expect the company to eventually go bankrupt. However, Dish has the resources to make it until the end of 2026. Its chances were increased by a recent merger with Echostar, where Dish now has a minority position. Echostar had $2 billion in cash reserves that will buy time for Dish.

Some analysts think that Dish’s spectrum is worth more than its debts, and liquidation could result in net positive equity for Dish owners. However, the likely buyers are the three big cellular carriers, and there are challenges for each of them to buy more spectrum today. In fact, they are all sitting on excess spectrum, which is part of the reason they are all pursuing FWA wireless.

Dish is now at the point where the company needs to acquire customers. This is going to be a challenge in a market when the other three cellular carriers are all in full marketing mode. The big cellular companies are marketing heavily to stave off the large cable companies that have entered the cellular market.

Becoming a Dish customer is an interesting option for customers. There are a lot of advantages of being on a large empty network, something experienced by many in the first year when the other carriers opened their new 5G networks.

It would seem like a logical opportunity for Dish to pursue FWA home broadband like is being done by the other carriers. However, Dish has not constructed the extra antennas needed at its cell sites needed to support the home broadband product. Dish is interested in pursuing FWA using 12 GHz spectrum, and the FCC is investigating that use of the spectrum. Last summer, Dish considered buying some of the assets of UScellular, which are largely underutilized and deployed in rural areas where there is not a lot of other competition.

It’s going to be interesting to watch Dish for the next few years. Charlie Ergen has been often quoted as saying that he’s spent much of his career managing companies with his back to the wall, and he’s still optimistic that Dish can reach profitability. I think it’s still a little early to bet against him.

The Buy America Waiver for BEAD

If there is any upside to the interminable delays in the BEAD grant process, it’s that American manufacturers have had the time to gear up to build the components needed to build broadband networks in the U.S.

When the BEAD grants were first announced, there was a widespread expectation that the industry was going to need a lot of blanket waivers from the tough Build America, But America (BABA) rules. But in the last two years, a wide range of equipment manufacturers have begun making gear in the U.S. and gone through the process of being approved as a BABA vendor.

Early in the process, the NTIA announced that it hoped that as much as 90% of the materials needed to build networks would be made in the country. At that time, that sounded like an impossible goal. But vendors of all sorts now have an American-made product. In a recent NTIA blog, NTIA claims there are now reliable sources of fiber, fiber cables, electronics, and enclosures – the key elements of a fiber network.

The  Department of Commerce just announced a minor BABA waiver for BEAD that recognizes that U.S. chip manufacturing will not be ramped up in time to supply the millions of chips needed for BEAD. The limited waiver also covers some non-optic glass inputs that are used in the glass manufacturing process. The limited waiver will recognize the chip issue by relaxing the rule that 55% of optical terminals and optics must be U.S.

The bottom line of the limited waivers is that NTIA is still estimating that 90% of the materials used to build BEAD networks will be America-made. That is phenomenal, and it’s great to see a big chunk of the $45 billion in grants supporting American manufacturers.

This is a drastic change since the $2.5 billion BTOP grant program in 2009 that was funded by the American Recovery and Reinvestment Act. Those grants had to issue widespread waivers of the BABA requirements since there was not a lot of American manufacturing of fiber components at the time.

One of the best long-term consequences of the BEAD effort is that U.S. factories and jobs can continue to make network components in the U.S. The determination to adhere to the BABA rules is also being applied to a wide range of other components that are being funded by the Infrastructure Investment and Jobs Act. That’s going to pay dividends in the U.S. economy for decades to come.

 

Gaming the BEAD Maps

From all over the country, I’m hearing stories about ISPs who are gaming the FCC broadband maps in order to block area from being eligible for the BEAD grants. It’s relatively easy for an ISP to do this. All that’s needed is to declare the capability to deliver a speed of 100/20 Mbps in the FCC maps.

ISPs can largely do this with impunity since there is nothing wrong with them doing this. The archaic FCC rules allow ISPs to claim ‘up-to’ marketing speeds in the maps, and ISPs can self-determine the speed they want to declare.

A lot of ISPs decided to start claiming 100/20 Mbps capabilities in the last update to the FCC maps. This is being done across technologies. We’ve suddenly found rural DSL claimed at speeds of 100/20 Mbps and faster. Older DOCSIS 3.0 cable networks that previously declared upload speeds of 8 or 10 Mbps are suddenly in the FCC maps with 20 Mbps upload speeds. Some WISPs and FWA cellular carriers are claiming speeds of 100/20 Mbps across a large geographic footprint that doesn’t match the capabilities from its tower locations.

It’s not hard to understand the motivation for this. We’ve seen this before. Just before the FCC was to announce the eligible areas for the RDOF reverse auction, CenturyLink and Frontier declared that tens of thousands of Census blocks suddenly had the capability to deliver speeds of 25/3 Mbps. This was the speed in the FCC maps that would have made these areas ineligible for the RDOF auction. The FCC rightfully rejected these last-minute claims. But if the telcos had been less greedy and had declared a smaller number of Census blocks, they may well have gotten away with the deception. The motivation of these telcos was obvious – they didn’t want anybody else funded to bring broadband to their monopoly service territories, even though they were not delivering decent broadband.

The motivation to do this today is identical. When an ISP declares 100/20 Mbps speed capability, the area is removed from BEAD grant eligibility. The ISP operating in that area will have squelched a new competitor from entering the market using BEAD grants.

The ISPs aren’t finished with this effort. I know several communities where the cable company recently knocked on the door at City Hall to say they are going to upgrade the cable networks this year. These communities are expecting that the cable companies will try to kill BEAD eligibility by declaring the upgrades in the upcoming BEAD map challenges being done in each state.

The NTIA’s and the FCC’s response to this issue is that it is the responsibility of communities to police this issue and to engage in the upcoming state BEAD mapping challenges. I can barely talk about that position without sputtering in anger. Most counties are not equipped to understand the real speeds that are available from an ISP. From my own informal survey, I don’t think that even 10% of counties are considering a map challenge.

But even communities willing to tackle a map challenge will find an incredibly difficult time. First, many states only have a 30-day long map challenge process, and some of the challenges are already underway, with many more challenges to start very soon. Communities have to somehow convince customers of the suspect ISPs to take a speed test multiple times a day in a specific manner. That is hard to do under any circumstances, but particularly hard to do considering the short time frame and specificity of the challenge process.

Consider a real-life example of the difficulty of doing this. I know a county where a WISP claims 100/20 Mbps speed for over five hundred homes in a corner of the county. The county purchased trailing 12-months of Ookla speed test data, and there was only one speed test for this ISP in that area in the last year. If the State Broadband Office won’t accept that as proof for a valid challenge, the County can’t convince nonexistent customers to take a speed test.

This feels like another example of the NTIA ‘protecting the public’ by requiring a lot of proof for a map challenge. The fact is that the folks living in rural areas know the ISPS that work and don’t work. If a ISP appears with decent speeds in an area with no good broadband, word of mouth spreads quickly and a lot of people try the ISP. If a new ISP gains almost no customers, they are either making bogus claims of speed capabilities or they have prices that nobody can afford. Market success should be one of the criteria for a map challenge, and States should invalidate claims by any ISP who have only a sprinkling of customers in an area from blocking BEAD grants. Unfortunately, the FCC does not gather actual customer data in the same detail as the FCC maps – they only gather the speeds claimed by ISPs and the supposed capability to connect customers within 10 days.

The bottom line of all of this is that map manipulation is going to mean that a lot of areas will be excluded from the BEAD grants. Counties are ill-equipped to do the map challenges, and even motivated counties will have a hard time mounting a successful map challenge.

I expect my blogs in a few years will be full of stories of the neighborhoods that got left behind by BEAD and which still won’t have an ISP option with decent speeds. I’m predicting this will be millions of homes. Unfortunately, those homes will be scattered, and it will not be enough homes to drive another big grant program. I fear these folks will be left behind, served only by the ISP that exaggerated the speeds in the FCC map. In the case of the FCC maps, it seems that cheating pays.

The Sudden Mad Rush of BEAD

From an ISP perspective, the BEAD grant program has progressed at a glacial scale. The BEAD grants were signed into law on November 15, 2021, as part of the Infrastructure Investment and Jobs Act. The general anticipation is that it would take a year before State Broadband Offices would begin seeing the first 20% of funds and could begin awarding grants. Folks in the industry assumed that BEAD would follow a timeline similar to the earlier grants that were awarded using federal CARES and ARPA funding.

Certainly, the entire vendor community thought grant awards would start in 2023 with construction already underway this year. Fiber and electronics vendors cranked up production to meet the expected rush of orders. Construction contractors started freeing up slots in their work plans to accommodate BEAD grants. And then nothing happened.

The BEAD process got bogged down in paperwork and bureaucracy. The reliance on the new FCC maps has been a complete boondoggle, and the maps are still terrible in many ways. The NTIA required states to write extensive grant and policy manuals which were never required for earlier state grant programs. The paperwork process for states has been numbing.

So here we sit 28 months after the announcement of the grant program and no grant money has flowed to states. Communities who heard about possible federal broadband grants at the end of 2021 are still waiting for the grant process to start and much of the public now believes these grants will never happen.

What is most mind-boggling is that BEAD is part of an infrastructure program, and the whole point of the IIJA was to spend money quickly to improve infrastructure and spur the economy. There has been pressure from the White House since the beginning to get the BEAD money spent and broadband networks under construction.

After the delays and endless paperwork, States will now be under tremendous pressure to award the grants and quickly shove the money out the door. It’s scary to look at the proposed timelines in most states. Some States are proposing steps like announcing the geographic boundaries where they will accept grants and then expect grant applications a month later. ISPs will have to somehow scramble to determine the cost and economics to build to specific geographic boundaries in a timeline that most will not be able to meet. This one requirement will be the final straw for many ISPs since they can’t get the engineering and business plans done that quickly. Even the giant ISPs are going to get overwhelmed by the proposed short timelines.

If there is any one part of a grant program where the process should be careful and deliberative, it’s the process of choosing grant winners. States are now expected to rush through that process and award grants as soon as possible this year.

This is ironic in a program where the NTIA took a lot of slow and deliberate steps to craft policies that would shield them from states making bad grant awards. But it’s almost guaranteed that State Broadband Offices are going to make big mistakes when rushing through grant applications from ISPs that they really don’t know. Anybody who has ever reviewed grant applications knows that every application paints a picture of an ISP that walks on water, and it’s not easy for inexperienced reviewers to distinguish good proposals from shoddy ones. A fast award process means less time for due diligence.

Even after States pick winners, there is a huge amount of work to do before construction can begin. Some State broadband offices have a ponderous process for negotiating and approving contracts with grant winners. I’ve seen examples where this process took almost a year. Once a grant contract is in place, many BEAD grants will require that time-consuming environmental studies be performed before any work can begin.

There might be a few tiny BEAD projects that will start construction before the end of this year. If so, NTIA and politicians will make a big splash with ribbon cuttings to show that the BEAD process is working. But most BEAD award winners won’t be able to start design engineering and order materials until 2025. Then, the giant industry crush that everybody feared will begin. Vendors will get overwhelmed with orders, and we’ll suddenly hear stories of supply chain issues again.

I always expected that the States would be under very different timelines, which would have strung out the impact on the industry over several years. But every grant office is now using the same starting gun, and all are going to race to get grants awarded at the same time.

As many have already predicted, a hurried process this year will make it even easier for State Broadband Offices to take the safe pick and award money to the giant, well-known ISPs. Giving large grants to big companies means fewer contracts to negotiate and a lot less paperwork. The pessimist in me wonders if this has been the plan all along.