Charter CFO Jessica Fisher recently announced that Charter will spend substantially less on pursuing BEAD grants than the company spent on RDOF. This is big news, because a natural assumption in some state broadband offices is that Charter would likely be a big player in the BEAD grant process. Charter has been a major participant in pursuing and winning State broadband grants funded by ARPA and the Capital Projects Fund.
To put this into context, Charter won about $1 billion in the RDOF reverse auction. Substantially less than that would make Charter a minor participant in the BEAD process. Fisher said part of the reason for not strongly pursuing BEAD is the unfavorable BEAD grant rules.
This will be a problem for some states if Charter doesn’t play at all. Anybody who has looked closely at the RDOF award areas understands the issue that RDOF funding was often awarded in a way that the coverage could best be described as Swiss cheese. In states where Charter won a lot of RDOF subsidy, the company is the only sensible ISP to pursue a solution for the ‘holes’ inside the current Swiss cheese areas – because if they don’t, it will be virtually impossible for any other landline ISP to affordably reach the small pockets of BEAD areas surrounded by Charter fiber areas.
Nobody outside the company knows the real motivation and decision-making process inside a company like Charter. Certainly, the complexity of applying for the BEAD grants and then reporting afterward is a believable reason for walking away from BEAD. In comparison, RDOF has very few rules other than requiring a specific technology, meeting construction goals over a long timeline, and providing a letter of credit to support each project. Charter is probably considering other issues too. For example, the company has been losing customers to FWA and due to the end of ACP. A decision not to pursue BEAD might simply be a reaction to tightening its focus on current markets.
The real concern for State Broadband Offices is that Charter might not be the only large ISP thinking of ignoring BEAD. Most states are counting on large ISPs like Charter, Comcast, Frontier, Windstream, and Brightspeed to pursue BEAD.
After anticipating the matching fund requirement, the total awards for BEAD projects will be more than $50 billion. If the big companies don’t participate, there may not be enough financial capacity in the rest of the industry to take on the matching requirements for winning BEAD grants.
Consider Comcast, which said in 2023 that it remains return-driven and will have a high bar for participating in BEAD. Comcast didn’t participate in RDOF, but it did pursue and win a substantial amount of state broadband grants.
I doubt that anybody knows what the Verizon and Frontier merger will mean in terms of BEAD. Verizon said when the merger was announced that it wants Frontier to continue with any BEAD plans. But Verizon has historically been the most disciplined fiber builders in terms of staying within a defined construction budget. It wouldn’t be shocking to see Frontier pull back from BEAD to some extent.
A lot of industry folks have predicted that a handful of big companies would win the majority of the BEAD funding. Perhaps many of them will sit it out, making it even more likely that large portions of BEAD might go to Starlink or wireless ISPs.
Great article! On a related note, I was on with representatives from two state broadband offices yesterday, both from “square states.” They mentioned that their initial rounds have closed, but bids came in to cover only about 60% of their BSLs. They believe it’s very likely that they—and other states east of the Mississippi—will need to conduct a second outreach focused on covering the remaining BSLs and actively promoting the adoption of alternative technologies.
so this basically implies that the goal is to have a single ISP serving an area. That lack of competition is a big part of why broadband growth is so slow.
That ‘swiss cheese’ approach I would characterize the same as the land ownership checkerboarding model, where you (very rich person) can buy just the white squares on the land ownership map and get exclusive access to all the black squares because you’re denying anyone else from reaching them practically.
Great article.
Another factor to consider… Charter has had capital intensity very high since it began high split/Docsis 4.0 spend ($5.5B across the footprint), plus RDOF and state grants (billions more). Investors have been expecting, and mgmt has guided, that capital intensity will taper off with the conclusion of D4.0 rollout by EOY 2027. So the BEAD comment adds credibility to that guidance, and allays investor fears that BEAD participation could drive CAPEX higher again.
Charter still sees value in these low/no competition rural markets, but the juice may not be worth the (CAPEX) squeeze everywhere, particularly as network upgrades enable symmetric upload speeds, and the company introduces new pricing and packaging and customer commitments, all of which should help Charter to better compete against Fiber/FWA in legacy markets.