One of the trends that is a concern for ISPs is plans by State Broadband Offices to force BEAD winners to charge low rates for broadband. I understand some of the rationale behind these attempts.

One argument for lowering rates is that the government is paying a big portion of the cost of building the broadband networks, and it ought to be able to extract concessions from the ISPs for taking the grant funding. That sounds like a reasonable argument until you take a harder look at the places where BEAD funding is going to be used. In most places, BEAD will be used for the most sparsely populated places, which in many instances also have the toughest topography and construction challenges.

The other argument I’ve often heard is that ISPs can provide lower rates because ISPs make a lot of money and can afford it. This might be true for the large national ISPs that can average the revenues from BEAD areas across larger markets with higher margins. But big ISPs don’t want to take on markets that lose money, and they might pass on accepting BEAD in states that insist they charge low rates. Any assumption that smaller ISPs can afford to lose money on a property is badly misplaced – this is like expecting your favorite restaurant to provide low menu prices for a significant percentage of their customers. Such a restaurant won’t be in business for long.

BEAD grants are being offered to ISPs just to get them to consider building networks in places they would otherwise never consider. In many cases, the business case for coming to a BEAD area can barely reach profitability even with a large grant. This is not true of all BEAD places, and there are still some areas covered by BEAD with decent housing density. However, most BEAD areas are high cost to build and high cost to service and maintain after construction. I fully expect a bunch of ISPs who are wading into BEAD to wonder in five years why they ever went through the effort.

What the ISPs are providing as the quid pro quo for the grant funding is building a fast network that can bring a remote rural area into parity with urban broadband. There will be no excess margins in most BEAD business plans that can somehow cover low-cost broadband prices.

The other interesting point that most people are missing is that, for the most part, rural broadband rates are higher today than urban rates. Most areas that get a BEAD network will see lower rates along with a new faster broadband network. How can I say that? Consider the broadband alternatives that exist in rural areas that are BEAD-eligible.

• Most people using Starlink are now paying $120 per month after shelling out for the receiver.
• High-orbit satellite broadband is expensive. Consider Viasat. The base plans range from buying 40 gigabytes for $69.99 up to buying 300 gigabytes for $299.99. Extra usage after the data caps can be purchased in small bundles ranging from $9.99 for 5 extra gigabytes to $99.99 for 80 extra gigabytes.
• Cellular hotspots can be incredibly expensive. The base fee for hotspots sounds reasonable, but the data caps are tiny. Consider AT&T. It sells a hotspot with either a 15-gigabyte data caps for $35 or a 100-gigabyte data cap for $55. The killer is that the overage fee for exceeding those data caps is $10 per gigabyte. Hotspots for T-Mobile, Verizon, and UScellular are similar. I still hear horror stories of families with school children who pay hundreds per month for a hotspot. The only way not to spend money with a hotpot is to greatly curtail broadband usage.
• While not universally true, many rural fixed wireless providers have high rates. It’s not hard to find rates over $100.
• The only ‘affordable’ rural broadband alternative is DSL. But it’s getting exceedingly difficult to find or sign up as a new DSL customer in most places, and in many cases the speeds are too slow to be usable. There are exceptions, of course, but most rural folks I’ve talked to tell me that DSL is no longer an option.

Many of the companies building BEAD networks will have rates significantly lower than the current rural rates cited above. BEAD networks will not have data caps, which eliminates the worry spending more than the basic rate. Most rural folks offered BEAD are going to be relieved if asked to pay a decent fixed rate for a connection that is far faster than what they had before. A huge percentage of rural households will see a significant monthly cost decrease just by paying the normal prices of the companies that build BEAD networks.

In saying this, I’m not ignoring the fact that there are households that can’t afford the normal prices charged by ISPs – but those folks also can’t afford the broadband prices available in rural areas today. Rural ISPs can’t shouldered with providing the low rates so that folks can afford broadband. ISPs can’t be forced to somehow fund the end of the ACP – particularly in rural areas. Anybody who has ever operated any business knows that operating with too-low rates is a road to eventual financial disaster.