Most States have now sent final BEAD proposals to NTIA with a list of the proposed ISPs to win BEAD funding for every eligible location. The next step is for NTIA to review grant applications, which is now underway. The agency has already been contacting States and establishing a cost cap for each State based on the CostQuest cost models.

Several States have reported that NTIA is instructing the State to outright reject any proposed award that is more than 85% of the cost cap. States are to ask any ISP with a proposed BEAD cost between 65% and 85% of the cost cap to lower the BEAD award to 65% or else default the grant. Any proposed BEAD award below 65% of the cost cap is apparently safe for now. This may not be the last step, and NTIA has set a deadline for itself for December 4 to review all grant awards.

The current process is clearly aimed at lowering the amount of funding awarded by BEAD. The Benefit of the Bargain round of BEAD grants has already drastically lowered the amount of BEAD grants. For the States that have reported to NTIA when I wrote this blog, States have awarded $16.1 billion for grants, and those same States are not spending $17.9 billion of unassigned funding. We have no way of knowing NTIA’s motivation – is this purely to save federal grant monies or to give more money to satellite.

I understand the desire to save federal grant money. However, Congress created the $42.5 billion BEAD program with rules intended to spend all of the funding, either for infrastructure grants or for broadband-related uses. With the current awards, almost 53% of the funding will go unspent, and that percentage will climb as States implement the cost thresholds.

There are several reasons why using CostQuest cost studies to establish the cost caps doesn’t make much sense. By definition, a huge percentage of BEAD locations are more costly to reach with a wired technology than the average cost to reach everywhere in a State. I would hope NTIA took that into consideration when setting the cost caps.

Statewide averages costs don’t make sense for states that have a wide range of topology and household density. I look at my own state of North Carolina, which goes from the ocean coast, through urban centers, into the Piedmont hills, and finally into Appalachia. I remember when Minnesota used average costs from the CostQuest models as a way to validate the magnitude of grant requests. The State calculated a different average cost for each County, which makes a lot more sense than applying a single cost cap for a whole state.

There is another issue that might be the most important reason why it makes no sense to look at CostQuest model numbers. In most places in the country, the BEAD location map is comprised of a mixture of BEAD-eligible locations and locations that either have good broadband or are supposed to get it. There are myriad examples where a BEAD eligible-location sits next door to one that is not eligible. In many cases, this hodgepodge represents an error in broadband mapping more than any reality in the real world – but that is a topic for another blog.

Picture having to build into a small rural neighborhood where only half of the homes are BEAD eligible. This results in a cost per passing that is likely almost double what it would be if every location were BEAD-eligible. This situation is found all over the BEAD map, everywhere I’ve looked. The folks who designed BEAD understood this because it was widely publicized how RDOF awards had carved up the broadband landscape into Swiss cheese rather than into contiguous grant areas.

All of these reasons mean that applying a single statewide cost cap to judge BEAD locations  is nothing more than an exercise to lower grant spending. I’m just speculating, but this seems to be a tool to get the broadband office to cancel grants rather than NTIA having to be the heavy. What’s clear is that the bottom-line result of applying a cost caps will mean a lot more locations awarded to satellite or other low-cost technologies.