Category Archives: Regulation – What is it Good For?

Promises Made, Promises Broken

I noticed that the Charter/Cox merger has been approved by the FCC, the DOJ, and the Public Service Commission of New York. The final hurdle is the California Public Service Commission, where Charter is hoping to get a decision by August from the CPUC. In exchange for an agreement for the merger, Charter has promised to spend at least $275 million on network upgrades to achieve symmetrical gigabit speeds across its California footprint within three years. Charter also promises to offer a statewide low-income price plan for five years that includes a $20 plan for 100/20 Mbps speeds, and that would be free for Lifeline Pilot participants. Finally, Charter promises to provide $23 million in support to the nonprofit CETF (California Emerging Technology Fund) for digital literacy and device subsidies, plus $7 million to regional broadband groups.

I had a chuckle when I saw the promises being made by Charter. It reminded me of many times that carriers didn’t follow through on big promises made to regulators. One of the most memorable broken promises came from Verizon in Pennsylvania – a story that has been well documented in a book by Bruce Kushnick, The Book of Broken Promises: $400 Billion Broadband Scandal & Free the Net. In 1993, the State agreed to deregulate Verizon and provide big tax breaks as long as Verizon would deliver 45 Mbps broadband service to the entire state by 2015. By the early 2000s, Verizon reneged on the offer and reduced the promised speeds to 1.5 Mbps. Verizon eventually built FiOS fiber in selected urban and suburban markets and ignored the rest of the state. There were some rural Verizon customers who never even got the slow DSL.

In 1999, the two Baby Bell companies SBC and Ameritech, asked to merge. SBC promised regulators that the merger would spark a new, nationally competitive telecommunications carrier and committed to expand beyond its thirteen-state home region. Within a year of the deal closing, the FCC opened an investigation against SBC for failing to meet its competitive entry timelines and because of growing volumes of consumer complaints about declining residential service quality.

When AT&T asked in 2015 to acquire DirecTV for $48.5 billion, the company promised federal regulators to build out more than 12 million high-speed fiber connections. The company quickly fell short of that promise, and many believed that the company was faking fiber passings by counting apartment complexes that were near to its existing fiber network. AT&T eventually decided that building fiber was its best business plan, but it had totally blown off the 2015 promise.

When Charter asked to merge with Time Warner Cable in 2016, the company promised regulators that it would expand its network to unserved rural areas, that it would hold down prices, and would not implement price caps. By 2020, Charter petitioned the FCC to get off the hook for these promises and called them “unduly burdensome”

In 2020, when T-Mobile wanted to buy Sprint for $26 billion, the company promised it would rapidly expand rural 5G coverage. The company also promised to freeze post-paid rate plans for three years. Soon after the merger, the company said the agreement was no longer feasible.

I could fill a few pages with similar stories. Big carriers make whatever promises are needed to get approval for mergers or deregulation, and then typically proceed almost immediately to find ways to get out of what they promised. It’s hard to predict if California will approve the Charter/Cox merger. But I think California fully understands that promises made related to mergers are rarely promises fully kept.

FCC Questioning State Pole Regulation

The FCC issued a Public Notice with the longest title I can remember: Wireline Competition Bureau Reminds Reverse-preemption States of Obligation to Effectively Regulate Pole Attachments and Seeks Comment on Need for Changes to the Commission’s Certification Rules to Ensure Effective State Pole Attachment Regulation.

The Public Notice asks for comments on the effectiveness of regulations in States that have chosen to regulate pole attachments, meaning rules that regulate how telcos and others get access to poles that are in the public right-of-way. Comments are due on the Public Notice by July 13, 2026.

States were given the right to regulate pole attachments in Section 224 of the 1934 Communications Act. Twenty-three States have elected to regulate poles over the years, and the FCC has created regulations for the States that have not done so. In one of the oddities of regulatory language, States that have elected to regulate pole attachments are said to have “reverse-preempted” the federal pole attachment rules.

The Public Notice is seeking comments on whether States are properly regulating the rates, terms and conditions of pole attachments. More specifically, the FCC is asking what steps it could take to make sure that state pole attachment regulations are “transparent and effective”.

In strongly worded language, the FCC reminds States of the “obligation to effectively and clearly regulate pole attachments in their jurisdictions.” In what feels like a veiled threat, the FCC asks if it should require reverse-preemption States to refile new certifications for FCC review. This could present an opportunity for the FCC to refuse the certifications and take over the pole attachment rules. It will seem likely that there will be lawsuits if the FCC tries to take back jurisdiction of pole attachments, since the state’s right to regulate pole attachments is clearly stated in the Communications Act.

There is one annoying mention in the Public Notice that this is being done to protect the $42 billion BEAD program. NTIA’s Benefit of the Bargain rules cut the amount that will be used for infrastructure in half. Of the remaining BEAD awards, a lot will go to satellite, fixed wireless, or buried fiber construction that will not require the use of pole attachments. If only this was being done to protect $42 billion of infrastructure construction.

I also have to wonder about the timing of this. Many States are in the process of signing BEAD contracts, and some of the earliest steps for an ISP starting a new project is to immediately start the pole attachment paperwork process along with seeking rights-of-way. Even if the pole attachment rules could be better in some states, the FCC’s action would make more sense if it had been started a year earlier.

I think that it would be very disruptive if the FCC chooses to seize pole attachment regulation back from the states. At a minimum, in a state where the regulations reverted to federal authority, it seems likely that pole owners will take some time to fully digest and cope with the change, and to look at forms and processes.

I could be wrong, but this feels more like the FCC trying to take regulatory authority from States more than an attempt to improve BEAD. While BEAD is a large grant program, the many other grant programs in recent years have collectively funded more fiber than BEAD. My guess is that some States will fight to keep their own pole attachment rules, and any attempt to do this will result in a protracted court fight, and that BEAD will be in the rearview window before this is settled.

Walking Away from BEAD

NTIA has released all but four states to begin signing BEAD contracts with grant winners. Mississippi and Oklahoma have gotten final approval by NTIA but are waiting for approval from NIST. NTIA has still not approved the grant proposals from California and Illinois.

Now that the process of negotiating contracts for grant winners has started, news is seeping out of some grant winners backing out and refusing to accept the BEAD grant awards.

The largest BEAD award being rejected is by Astound in Texas, which is walking away from $166 million in grants. The company explained this by saying that it had only won five of the thirty-three project areas it had applied for, and that the remote geographic areas of the awards made no sense without winning more awards. I have to wonder if the company’s pending merger with Google Fiber also played a role in the company walking away. While it isn’t official, I’ve heard through the grapevine that Astound is also going to walk away from $112 million of BEAD grants in Oregon. The company has also tentatively won $100 million in Washington.

Another ISP walking away from a lot of awards is Resound Networks. Resound is walking away from $60.2 million in New Mexico, $23.1 million in Texas, $8 million in Kansas, $5.2 million in Arkansas, and $3.9 million in Colorado. The company also has relatively small grants in Arizona and Oklahoma. Resound is tentatively slated to win $34.4 million in California, which still has not been approved by NTIA.

There are three ISPs that haven’t signed grant contracts in Nebraska: Amazon, Northeast Nebraska Telephone Company, and Pinpoint Communications. I have to wonder what it means for a satellite company to not accept a grant, since the company has grant awards across the country.

There are bound to be other ISPs who will walk away that we haven’t yet heard about, since States have six months to get contracts from grant winners after the State signed a contract with NTIA for the BEAD money. I’ve been hearing about a lot of smaller ISPs that are still thinking about walking away from BEAD. Some will do so because the too-low grant funding means they can’t get a letter of credit.

It won’t be surprising if there are more rejections of BEAD. When NTIA initiated the Benefit of the Bargain rules, it significantly sliced the amount of grant funding per location. Many ISPs had said before Benefit of the Bargain that the long-term math for taking BEAD grants was marginal. That math took a big turn for the worse when NTIA forced the States to further lower the amount of grant awards. Any ISP that stays after the Benefit of the Bargain is accepting a smaller margin than they originally had hoped for.

At the same time that the amount of grant awards has been squeezed downward, ISPs are seeing inflation in the cost of fiber construction – inflation much higher than the rate of increase for the whole economy. The Fiber Broadband Association conducted a survey with members at the end of 2025 and asked about expected increases in construction costs for 2026. 88% of the respondents expected a cost increase for construction in 2026. 62% of respondents expected a ‘slight’ cost increase of less than 10%. 26% expect a cost increase of more than 10%. 9% expect costs to stay the same, and 3% expect costs to decrease by less than 10%.

It will be interesting to see how ISPs respond to this same question at the end of 2026. The industry is being pounded by increases in chip costs due to shortages as chip manufacturers have pivoted to building AI chips. Higher oil prices have affected the cost of shipping and operating work vehicles, and oil is a raw material component of things like fiber sheathing, conduit, and electronics housings. There is a lot of pressure this year from wage increases. The Federal Reserve made it clear last week that it will not be lowering interest rates this year and may have to instead increase them by year’s end.

We’re still seeing defaults six years after the initial RDOF awards, and I expect there will be ISPs that accept BEAD now but realize in a few years that they can’t make the math work.

I feel sorry for State Broadband Offices that are being asked to find replacements for ISPs that reject BEAD awards. It feels unlikely that NTIA will allow States to increase the size of the grant awards after a rejection. Every default could become a windfall for satellite companies, while a lot of communities are losing the chance to get fiber.

AT&T v. California

AT&T filed several petitions at the FCC asking the Commission to override regulations from the State of California. The State is forcing AT&T to maintain copper networks until such time that AT&T can offer the same services to customers using some alternate technology.

The FCC reacted by issuing two requests for public comments related to the AT&T petitions. In the first, the FCC asks for comments related to its ability to preempt California’s regulations related to copper networks. The second asks for public comments related to AT&T being able to walk away from carrier-of-last-resort responsibilities in California as it tears down copper networks.

These proceedings ask some interesting questions, although my hunch is that the FCC already plans to preempt California on these issues and is only going through the formalities first.

One interesting issue raised is whether the FCC can grab regulatory authority from a State. The historic framework for telecom regulation has always been that States are free to regulate anything that the FCC elects not to directly regulate. Back when AT&T was the primary telephone company, every state had numerous regulations related to telephone companies. The FCC established the big nationwide rules, often dictated by Congress, but the States were free to regulate anything the FCC didn’t directly regulate. This usually meant issues like consumer rates and customer service practices. As competition was introduced into the telecom market, AT&T and the various Bell companies were successful in convincing most states to relax regulations, and in some case telcos became almost totally unregulated. California eased some regulations, but still maintains a lot of regulation of telcos. It will be interesting to see how hard California will fight back if the FCC overrides the state’s regulatory authority.

Another interesting request is for AT&T to get out of carrier-of-last resort (COLR) obligations. The petition describes this as AT&T being relieved of ETC status (Eligible Communications Carrier), which is the formal process where states certified companies with COLR status. COLR is an obligation originally created by the Communications Act of 1934, and expanded by the Telecommunications Act of 1996, which said that regulated telcos are required to serve customers located inside their regulated service areas, with only a few exceptions related to customers in remote locations. Telcos have been obligated to connect new customers to the existing networks and to build new networks to meet new homes and businesses. This feels like a quaint concept today, and it’s one of the first things that disappeared as states deregulated telephone companies. I find it interesting that many telcos still have ETC designations and use that status to receive various kinds of universal service funding while only playing lip service, at best, to carrier-of-last-resort obligations. The real question being asked in the FCC proceeding is whether the agency has the authority to override any COLR obligation required by California.

I have to think that AT&T has already been ignoring this obligation for years in California. I recall news stories of AT&T discontinuing rural copper services in rural California with little or no notification to customers. I have to think that it’s been a long time since AT&T has built any new copper infrastructure to reach newly constructed homes and neighborhoods. But there are other obligations related to COLR and ETC status that AT&T would like to have preempted.

It’s going to be interesting to see who, other than regulators in California, responds to these dockets. These particular issues are largely already dead in most of the rest of the country, although some states still maintain greater levels of regulation over telcos than others.

These dockets don’t address the even bigger question, which is whether the state or federal government should be regulating telephone service at all. I think everybody is in favor of the FCC’s efforts to tamp down on robocalls and texts, but how much other regulation of traditional telephone companies is still needed?

What Happened to Spectrum Policy Debate?

There is something that has been nagging at the back of my mind for the last year. In the One Big Beautiful Bill, Congress ordered the FCC to auction 800 MHz of midrange spectrum. This is spectrum that is expected to mostly go to cellular carriers, although at least some will go to others. Since Congress’s stated goal is to raise $85 billion for the U.S Treasury with these auctions, it’s not likely that this spectrum will be priced low enough to be attractive to many users other than large cellular companies, and perhaps large cable companies and satellite companies.

The question that has been nagging me is whether the cellular industry really needs that much new spectrum. I acknowledge there is growth in cellphone data usage, but it is not growing at a rate that justifies the need for this much additional spectrum.

Instead, the new spectrum is needed to support FWA home broadband. At the end of 2025, OpenVault says the average home and small business broadband customer uses an average of 767 gigabytes of data per month. By contrast, the average cellular customer uses perhaps 25 gigabytes per month on the cellular network (most cellphone usage is on WiFi). This means that one FWA home broadband customer uses as much cellular network bandwidth resources as 31 cellphone customers. That may not sound significant, but consider that by the end of the first quarter of this year that AT&T, T-Mobile, and Verizon had collectively added 15.5 million customers to FWA, and have been steadily adding around 1 million more FWA customers every quarter.

All three carriers have plans to continue to add FWA customers. Verizon says its goal by 2030 is 8-9 million FWA customers, and T-Mobile’s goal is 15 million. AT&T hasn’t stated a goal, but it clearly is growing.

If we go back just ten years, there was absolutely zero conversation in the industry about using cellular spectrum to create a major broadband competitor. There was no discussion at any proceeding at the FCC of the need to enable new broadband competition using cellular spectrum. The cellular carriers have offered cellular broadband for many years through the use of hotspots, but hotspot plans were generally capped at a tiny levels of monthly usage, which differs significantly from FWA, which offers unlimited broadband.

The question that has been nagging me is whether FWA is really the right priority use of spectrum. Spectrum is not an unlimited resource. Cities all have cable company broadband, and an increasing percentage of competition with fiber. The federal government just spent billions on grants to get better broadband to rural areas. At the same time, Starlink has demonstrated that satellites can provide at least one broadband option to almost every rural location.

I’m not saying that the competition brought about by FWA isn’t beneficial, because it is. The FWA industry is probably the biggest reason why cable companies have stopped their annual rate increases and are now offering lower-cost packages.

My nagging concern is that a decade from now, we’ll find there isn’t enough spectrum available for the many other uses of wireless technology. I keep wondering how we found ourselves supporting FWA through the One Big Beautiful bill with no national discussion about whether this is the right policy. Congress has unilaterally decided that FWA is the big winner.

I would have thought that cable companies would be distraught by this, and perhaps they are behind the scenes. This decision must drive WISPs crazy, because the three big cellular companies are being given nearly unlimited spectrum to compete against them, while WISPs are limited to a handful of spectrum bands – which might be shrinking if the FCC finds it necessary to raid 6 GHz spectrum to meet the Congressional directive.

I can’t recall any major policy decision in our industry that was implemented with almost no dialogue or discussion. In the past, we decided spectrum issues through massive amounts of discussion from the industry in the FCC comment process. FWA leaped to become a priority through a few paragraphs in the One Big Beautiful Bill. That’s not how sensible spectrum policy should work.

Proposed Changes to E-Rate

The FCC announced in April it would be taking a fresh look at all aspects of the Universal Service Fund (USF). The agency recently kicked off this process for the E-Rate program by issuing a combined Notice of Proposed Rulemaking and a Further Notice of Proposed Rulemaking.

E-Rate is the Universal Service Fund program that subsidizes broadband for schools that have the highest percentage of students who qualify for the federal school lunch program. E-Rate also brings broadband to libraries. The program has been in effect since 1997. In recent years, E-Rate has disbursed around $2.5 billion annually to subsidize broadband bills. There are over 101,500 schools and 11,600 libraries served by the program.

The Notice of Proposed Rulemaking asks for public feedback on some fundamental questions about the existing program. The FCC asks if E-Rate is still meeting the original intent and asks if the program should be narrowed in scope or even ended. The FCC notes that when E-Rate was created, most schools did not have broadband access, but virtually all schools are connected to fiber broadband today. As an aside, I wrote a blog last year that noted that a large percentage of schools now need a lot more than one gigabit of broadband, with many schools now needing 5- to 10-gigabit service.

Most of the NPRM asks questions related to students’ use of broadband. Probably the most controversial question in the NPRM asks if the FCC should somehow try to limit screen time for students. The FCC cites some statistics that say that children ages 5- 8 average about three and a half hours per day of screen time. For students ages eight to twelve, the average is about five and a half hours daily. Finally, teens spend an average of eight hours per day using a screen. The FCC cites an expert who recommends that children five years and older should be limited to no more than two hours per day of screen time.

The FCC asks if it should intervene to try to limit screen time inside schools that receive E-Rate. It’s an interesting question, and I suspect there will be parents who welcome this. When reading the document, it’s easy to think the FCC is leaning towards ordering this. I have a hard time understanding how this is within the FCC’s jurisdiction. The E-Rate rules from Congress give the FCC instructions to make sure schools have adequate broadband, but didn’t give any authority over how schools or students should use broadband. In a related question, the FCC asks if parents should be allowed to opt out of having their children use computers in school. I’m sure teachers are shuddering at the possibility of having a mix of students with and without computers in every class.

The NPRM also asks about stricter regulations to make sure that students with school-supplied computers cannot access harmful information on the web, both when using devices in the school and when taking the devices home. This is a requirement that’s been around since the Children’s Internet Protection Act (CIPA), which was enacted in 1999. Apparently, the FCC is hearing of examples of students able to bypass restrictions on computers.

In the Further Notice of Proposed Rulemaking, the FCC is tackling the issue of better regulating E-Rate consultants. This is due to some recent headlines where consultants defrauded schools and the E-Rate fund. The FCC is suggesting an annual disclosure and certification of E-Rate consultants.

In addition to these proposals, the FCC recently separately suggested that E-Rate service move to a portal operated by USAC, where ISPs could competitively bid to serve E-Rate schools.

New Rules for FCC Maps

At the end of April, the FCC released a Report and Order and a Notice of Proposed Rulemaking related to its broadband mapping processes. There are no earth-shattering changes in the order and this is part of the ongoing process of finetuning the FCC broadband maps.

The following are the changes that were ordered:

  • The FCC ordered that the definition of broadband be the same for the BDC map collection process as the Form 477 process where ISPs and carriers report customers. Currently, there are some types of customers included in the BDC maps that are not included on the Form 477.
  • The FCC is eliminating the process, where an ISP or carrier must be notified of challenges to the map fabric and given a chance to respond. The map fabric is the database of potential customer locations. Eliminating this extra step will hopefully speed up the process of implementing challenges to the fabric.
  • The FCC shifted the responsibility to the FCC staff (or its mapping vendor) to remove demonstrably bad data from the BDC maps rather than requiring the ISP or carrier to make changes.

In the Notice of Proposed Rulemaking, the FCC asked for feedback from the industry on a number of questions:

  • The FCC asks about changing the map restoration This is the process where ISPs or carriers can reenter data into the FCC maps that was removed due to map challenges or other FCC actions. We now know that a lot of changes were made to the maps as a result of the BEAD map challenges, and the FCC is asking if there can be a simpler process for ISPs or carriers to fix the maps.
  • The FCC asks if it should eliminate the requirement for ISPs to report “grandfathered” broadband coverage, meaning locations where maximum download speeds are slower than 25 Mbps.
  • The FCC also asks about eliminating the requirement to report 3G cellular coverage.
  • The FCC asks if the rules for fixed wireless reporting should be changed when reporting the ‘buffer size’, which is the maximum distance an ISP wants to claim to be able to provide service from a tower site.
  • The FCC asks if it should change or relax the assumption that fixed wireless providers should assume the height of a customer receiver at a height no higher than 7 meters.
  • The FCC currently requires BDC providers to retain all of the backup for reported data for three years, and it asks if that should be something different.
  • The FCC is seeking comments on changes that would speed up and streamline the map challenge process. There are questions related to individual map challenges, bulk challenges, and crowdsourced challenges.
  • The FCC asks if there are needed changes to the mobile verification and audit processes.
  • Finally, the FCC asks if certain kinds of data should automatically be considered to be confidential, rather than requiring ISPs and carriers to seek confidentiality with each data submittal.

Proposed New Rules for Federal Grants

The Office of Management and Budget has proposed new rules for the Guidance of Federal Financial Assistance. These proposed rules would apply to a large percentage of federal grants awarded to States or directly to grantees. In the broadband world, the new rules would apply to grants made by the FCC, NTIA, U.S. Treasury, and the USDA. They would also apply to any secondary grants made through states, such as state broadband grants made using underlying federal funds. That means these rules impact BEAD, RDOF, ReConnect, Capital Project Fund grants, and the various NTIA broadband grants. The new rules would also apply to any payments made from federal programs to the public, which are not strictly considered as grants, such as E-Rate payments made to schools and libraries, and Lifeline payments made to reduce broadband bills.

This blog covers a few highlights of the proposed changes. For more details, see this comprehensive summary created by the Benton Institute. Comments on the proposed rules are due by July 13. The new rules are proposed to go into effect on October 1, 2026.

The new rules are intended to meet three objectives. This supposedly will improve transparency, accountability, and oversight. OMB says the changes will reduce recipient burden. Probably most importantly, OMB is taking charge of grants, and what the agency used to issue as guidance will now become binding regulation.

The following are some of the most important changes that could affect broadband:

  • One of the most consequential proposed changes is that the new rules expand the ability for federal agencies to cancel a grant mid-stream. This would apply to all discretionary grants (which are grants where a federal agency chooses the grant winners). There is a carve out and special rules for BEAD, for the CHIPs Act, and for block grants, formula grants, and disaster recovery grants. This is a huge change, because it means the federal government can stop a broadband infrastructure grant at any time – making it even riskier to take grant funding.
  • There would no longer be any fixed amount awards, and all grant expenditures have to be substantiated by invoices.
  • All grant recipients would have to participate in the E-Verify system, which would mean verifying the eligibility of employees and all subcontractors for receiving payments from federal funds. This new requirement also seems aligned with the new requirement that no grant funds can be used to reimburse payments to any person or company from a “covered” country, meaning countries on a list of countries that can be changed at any time.
  • The new rules completely eliminate any grant provisions that would promote DEI (diversity, equity, inclusion, and accessibility) based on race or sex.
  • Agencies and grant recipients will be expected to ensure that federal grant funds are not used to promote or support “theories of disparate-impact liability”. In plain English, that means grants can’t be used in a way that results in any discrimination by race, sex, or other protected characteristics. Grant recipients are also not to discriminate on the basis of “viewpoint, content, or subject matter of speech”, including political, ideological, or religious affiliation.
  • The new rules add a new layer of bureaucracy by requiring that every grant be approved by a senior political appointee. All grant awards are also expected to demonstrably advance the President’s policy priorities.
  • All else being equal, grants should be awarded to entities with the lowest indirect cost rates.
  • Pass-through entities (like a State Broadband Office) must ensure that grant recipients do not take actions that could damage the reputation of the grant pass-through agency or the federal government.

What are the practical results if these changes are implemented? While one stated goal is to reduce the burden on grant recipients, these changes would significantly increase paperwork. The proposed rules also increase the risk of accepting grant funding since a grant can be canceled at any time for violating the new political and social grant rules. Probably the most insidious proposed rules are that grant awards would have to pass several political sniff tests to be awarded, rather than being made on merit.

The big picture is that this is a clear attempt by OMB, which is part of the Executive branch, to take over the grant process. The vast majority of grants are created by federal legislation, and this would allow the executive branch to override grant rules created by Congress.

Sunsetting the High Cost Fund

SpaceX recently filed comments in the FCC’s open docket looking at the Universal Service Fund (USF) with a recommendation that the FCC should sunset the High-Cost Fund and eventually eliminate it. This is one of the four major components of USF, with an annual budget of $4.5 billion.

SpaceX argues that Starlink has now solved rural broadband connectivity issues with ubiquitous broadband available throughout the country. SpaceX argues that ongoing subsidy payments to support rural voice and broadband networks are no longer needed.

To put the SpaceX comments into perspective, let me start by reviewing the stated goals of the High Cost Fund:

  • Preserve and advance universal availability of voice service.
  • Drive universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions.
  • Drive universal availability of modern networks capable of providing advanced mobile voice and broadband service.
  • Ensure that rates for broadband and voice services are reasonably comparable in all regions of the nation.
  • Contain administrative costs and minimize the universal service contribution for consumers and businesses through efficient, effective program management.

The High-Cost Fund is the home to a multitude of different subsidy programs:

  • It’s the home of six different Connect America (ACAM) funding mechanisms.
  • This fund is still making the annual subsidy payments for RDOF, which were spread over ten years.
  • The fund has separate funds to support Alaska, Puerto Rico, and the US Virgin Islands.
  • The fund includes the Mobility Fund that pays subsidies to cellular carriers that operate in very rural markets.
  • There are also legacy funds that provide subsidies to regulated telcos operating in high-cost markets.

SpaceX’s recommendation to sunset the various programs refers to the fact that many of the subsidy programs will expire if not renewed. For example, RDOF payments end after the tenth year of payments.

This is not a surprising recommendation. SpaceX and Starlink have been claiming in other forums that satellite broadband technology has solved the universal service problem and that everybody in the U.S. now has access to broadband. That’s been a problematic argument to some extent, since Ookla has been reporting a lot of Starlink speed tests below the FCC’s definition of broadband of 100/20 Mbps. Ookla reported earlier this year that average Starlink speeds had exceeded the 100 Mbps download test and recently reported that Starlink is close to meeting the uplink speed threshold.

However, there is still one troubling aspect of declaring Starlink to be a universal solution everywhere, which is the affordability issue. It’s hard to argue that a product priced at $120 per month, and which requires the purchase of the receiver, is affordable for low-income households. However, there has been no federal effort to define an affordable broadband rate. In the early days of BEAD, before the Benefit of the Bargain changes, various State Broadband Offices around the country were considering a definition of affordable rates between $30 and $50.

There has been a lot of criticism of some of the High-Cost Fund programs over the years. I wrote many times about the ludicrous billions of dollars paid to the largest telcos in the CAF II program that required that rural broadband speeds be increased to 10/1 Mbps – with payments that started months before the FCC raised the definition of broadband to 25/3 Mbps. But there has also been a lot of demonstrable benefits from some of the programs. You don’t have to look much further than the fiber networks built by numerous rural electric cooperatives that were jump-started with the RDOF subsidy.

Extension of Capital Project Fund Grants

There is a glimmer of hope that ISPs that won state grants that were funded from the Capital Project Fund (CPF) can get an extension of six months to complete grant construction.

The Capital Project Fund was created by the 2021 American Rescue Plan Act (ARPA) and provided almost $10 billion to states and territories for making broadband-related grants. The program was administered by the Department of the Treasury, which gave block grants to States. Each State then made awards through State Broadband grant programs to ISPs. I’ve seen estimates that CPF grants have funded projects to bring new broadband infrastructure to roughly 2 million rural passings. The grants could also be used to purchase devices like laptops and computers for qualifying households. The final approved use of the funds was to construct or improve physical community hubs where citizens can remotely access work, education, and telehealth services.

Many State grants awarded under this program have been constructed and up and operating. But as inevitable, some grant winner had delays and don’t expect to finish grant construction by the end of this year when the funding expires.

On May 6, the Department of the Treasury updated the Coronavirus Capital Project Fund FAQs. The update includes a process where some projects can get an extension to complete construction for six months, until June 30, 2027, under the following new rules:

  • States must make requests for an extension by July 31 of this year.
  • Extension requests are not generic and must be related to a specific project.
  • To be eligible for an extension, a project must have already made material progress toward completion. The project must certify that it can’t complete construction by the legislative end of the CPF program of December 31, 2026.
  • The reasons for the extension must be to extenuating circumstances beyond the grantee’s control. The FAQ lists eligible extenuating circumstances to include, but are not limited to, permitting or regulatory delays, supply chain disruptions, labor shortages, or severe weather events.
  • ISPs can’t ask for an extension for reasons like inadequate planning, project management deficiencies, failure to secure financing, or other avoidable causes.
  • Treasury is not obligated to grant the extensions and will review each extension request based on the specific facts and merits.

This is very good news for projects that were delayed by external events. For example, I know there are CPF projects in North Carolina that were significantly delayed due to Hurricane Helene. The State government here has already started the process of identifying projects that might benefit from the extension.

Note that not all state broadband grants were funded through Capital Project Fund dollars. For example, around $350 billion was given directly to state and local governments to meet infrastructure needs through the State and Local Fiscal Recovery Plan (SLFRF). This covered a lot more than broadband and could also be used for a wide range of infrastructure projects like dams, bridges, roads, etc. I’ve seen estimates that over $8 billion of this money made it into State broadband grant programs.

SLFRF is being administered by NTIA, and at this point, there are no announced plans for any extension of this funding, which expires on December 31, 2026.