I’ve written about this topic before. Everywhere I look I see BEAD grant rules that are doing what I call regulating by grant. State Broadband Offices are creating grant rules that go far beyond adhering to NTIA guidelines. They are insisting on grant rules which are intended to achieve social policies.

Today I’m highlighting a few such items buried inside the BEAD rules for Iowa. Note that there is nothing extraordinary about Iowa’s requirements and there are similar requirements found in many other states.

The two requirements discussed today are listed in Notice of Funding Availability (NOFA #009). This is a document included as Appendix A of the Volume II grant rules. The NOFA clarifies some of the requirements of the grant listed in Volume II.

The first requirement is in paragraph 1.3.18 of the NOFA and concerns having a low-price option for low-income subscribers. The price required is $40, and an ISP must offer a speed of at least 100/20 Mbps with no data caps or other fees or taxes added to the $40 fee. The most extraordinary thing about the fee is that it must be fixed for three years and then only increased in the future by inflation as measured by the Consumer Price Index.

Other states are requiring, or strongly suggesting similarly low rates. But Iowa has gone beyond requiring a low rate for some just a few years and mandates a permanently low rate that can only be increased in the future by inflation. The kicker is that the ISP will be expected to eat any fees or taxes that a State or the Federal government might place on broadband in the future.

This is a textbook case of rate regulation, and Iowa, and other states are using the grant to mandate broadband rates. This example is for a low-income rate, but other states are setting a cap on the rate for gigabit broadband. This is a clear violation of the original Congressional language in the Infrastructure Investment and Jobs Act that contained the following language, “NO REGULATION OF RATES PERMITTED.—Nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service.”

Another interesting provision of the Iowa grant rules is included in paragraph 1.6.3.5. of the NOFA. This requires any BEAD project that will be laying a fiber optic cable or conduit along a roadway must build either an extra conduit or else use at least a 2-inch conduit. The extra conduit or space inside the primary conduit are intended for, “interconnection by unaffiliated entities”.

This is an extraordinary provision. It adds tremendous cost to building a fiber network. It costs a lot more money to pull a second conduit when using boring. Cable plows are not set up to pull two conduits at the same time. It seems unlikely that this could be achieved with microtrenching. BEAD networks are expensive enough, but this provision adds tremendous cost to an already expensive network.

The worst thing about this provision is that it’s unnecessary. If Iowa’s intention is for BEAD networks to allow other carriers to pass through the networks at an affordable cost, it would be easy enough to mandate this for both aerial and buried fiber. ISPs can easily create an interconnection point almost anywhere in the network. Many other federal grants require grant recipients to provide affordable wholesale transport through grant-funded networks. This requirement seems to be requiring that grant recipients allow competitors into a BEAD network – funded by the grant recipient.

Again, this blog is not intended to highlight Iowa. Almost every state has BEAD rules that could be classified as trying to regulate ISPs through grant rules. I can imagine the conversations that led to these kinds of rules. “Broadband rates are too expensive, particularly for low-income households, and we have a chance to do something about it.”

I certainly understand the sentiment, and if I was in a State Broadband Office, I might be considering similar things. But it’s unfair to regulate BEAD grant recipients without applying the regulations to other ISPs in a State. The only way for regulations to be fair is to have them apply to all ISPs in a state, not just to the ISPs serving the most rural parts of the state – and regulators would never consider requiring such rules for everybody. I predict that some of the states trying to regulate through grants will find that ISPs won’t be interested in the BEAD funding. It’s already too complicated and expensive to comply with BEAD grant rules, and it makes no sense to layer on additional permanent regulations.