Tag Archives: BABA

BEAD and Vendors

Today’s blog looks at the impact that the recently announced changes in BEAD funding will have on industry manufacturers. It’s clear that the new NTIA guidelines for BEAD will both significantly pare down the overall outlay from the $42.5 billion BEAD grant program and also will reduce the amount of the grant funding that will be used for fiber construction. To offset the spending on fiber, there should be increases in spending on WISP radios and hardware to support LEO satellites.

We can’t look at the impact of BEAD on fiber spending in a vacuum. While $45 billion is a lot of spending, there is a lot of other fiber construction already underway.

  • There is a huge amount of fiber construction underway from other grants like ARPA, the Capital Projects Fund, ReConnect. RDOF, EA-CAM, etc. I’ve estimated these projects are generating more than $13 billion in fiber construction this year, nearly $11 billion next year, and another $4.5 billion in 2027.
  • The big telcos and fiber overbuilders are busily building fiber in cities and suburbs. Led by AT&T’s announced plans to pass more than 25 million new passings by the end of 2029, there are announced plans of at least 10 million new fiber passings per year from the many other fiber overbuilders. It wouldn’t be surprising if the impacts of tariffs and general financial uncertainty slow some of these plans, but there is an immense amount of fiber construction being planned.

BEAD spending is going to drop in two ways. First, unlicensed WISPs have an opportunity to remove passings from the BEAD process. After that, the States have to start over again with at one round of BEAD. Like everything else associated with BEAD, there is a wide range of opinions on what’s going to happen when the states start over. Optimists are saying that there are ways for States to maintain many of the fiber grants that have already been decided. Others are predicting that fixed wireless and satellite will sweep the grants. The reality is probably somewhere in between.

Any shift away from fiber will have a definite impact on fiber cable vendors like Corning, CommScope, Lightera (formerly OFS), and Prysmian. Fiber vendors love rural projects like BEAD since low population density means a lot of miles of fiber are needed. Losing a lot of BEAD won’t badly hurt these vendors, but they’ll definitely notice the hit.

The impact of BEAD on fiber electronics vendors is also significant. The recent increase in AT&T’s planned passings will largely offset any impact from losing BEAD fiber customers. However, there will be a negative impact on the electronics vendors that specialize in serving rural ISPs. Interestingly, major fiber electronics vendors like Nokia, Adtran, and Calix all announced American manufacturing capability by opening factories here to meet Build America, Buy America requirements for BEAD. However, considering the shift to higher tariffs, those facilities might have a competitive advantage now, even without BEAD.

These aren’t the only impacts of a shift away from fiber. Large ISPs deal directly with vendors, but a lot of the smaller ISPs that might win BEAD buy most electronics and other construction materials through supply houses – and a shift in BEAD from fiber will hurt these companies. Makers of huts and cabinets will see noticeably less demand.

The shift in the BEAD rules probably means a boom for WISP vendors – assuming they don’t get underbid by satellite companies. Build America will be an issue for WISPs. Tarana might have a big edge since it manufactures radios in the U.S., while most other manufacturers make their radios in Asia.

It’s hard to say if BEAD will really increase the overall number of customers for Starlink since the company is growing quickly around the world. It could be that an increase in connections for BEAD just means fewer connections elsewhere for a while. The company that might get a surprising bump from BEAD is Kuiper. The company won a first-round award in the first BEAD process in Louisiana, and the company could try to snag billions to give it a boost during the start-up phase. Build America won’t be an issue since both Starlink and Kuiper manufacture satellites and receivers in the U.S.

Will BEAD Encounter Bottlenecks?

A question I’m often asked is if a big flurry of BEAD grants will encounter any big bottlenecks that will slow down the implementation of grant construction. My response is yes, but maybe not the bottlenecks most people expect.

Before trying to answer the question, we should put BEAD grants into perspective. These grants will bring north of $50 billion in spending to the industry between 2025 and 2029. While that is huge, we can’t forget that there is currently a huge amount of fiber construction going on from the many other broadband grant programs. We also are seeing a continued burst of fiber construction from large telcos converting copper to fiber and fiber overbuilders staking out new markets. BEAD is not going to create the giant blip you might imagine.

But there will be bottlenecks that affect BEAD, and I expect some of the following:

  • Engineering and Design. BEAD means a lot of miles of fiber to design in 2025 into 2026. I’m guessing this could easily result in a 50% increase in demand for the folks who design networks.
  • Environmental Studies. Many BEAD studies will require environmental studies. This is something that is not done for most other fiber construction. I predict a bottleneck for environmental scientists, particularly when BEAD project first get started in 2025 and 2026.
  • Locators. I expect there will be more aerial than buried fiber built with BEAD, but there will still be a substantial need for buried locators. The shortage is mostly going to come from construction in rural counties that don’t have the resources available to handle a big increase in workload.
  • Pole Make-Ready. A lot of people have been yelling warnings about this. The biggest bottlenecks will be from pole-owners that get swamped with huge numbers of requests to get onto poles. Many of these utilities have never seen large numbers of connection requests before. There are regulatory rules that say the process has to be speedy, but that’s not going to matter when the pole owner can’t handle the volume.
  • Permitting and Rights-of-ways. Local governments will be asked to issue a huge number of permits for construction. The problem is going to be similar to the bottleneck with locators in that a lot of this construction will be in rural counties that often have little or no staff. ISPs that are already building in rural counties have been saying that this is an unexpected and sometimes major delay.
  • Fiber Contractors. I believe all BEAD projects will find a construction contractor. The delays will come from contractors trying to keep technicians. The Powers and Communications Contractors Association (PCCA) recently warned the industry that there is a current shortage of 28,000 experienced construction technicians. That shortage will likely by contractors having a hard time keeping staff who are lured away for higher pay. We’ve always seen this in times of big construction demand.
  • Fiber Materials. Vendors have had a long time to get ready for BEAD. But there will still be delays when a huge percentage of these projects want to buy materials within a relatively short time window. I also worry that some of the manufacturers who made a big splash out of opening a U.S. factory will have problems supplying everybody with BABA-compliant hardware.

I do not expect most of these delays to be crippling, and we won’t be returning to the delays we saw during the pandemic when projects shut down for lack of critical staff or materials. The bottlenecks will not affect all projects but will be regional and almost always unexpected. But delays will slow construction at times, and that means extra cost for anybody building a network.

The Buy America Waiver for BEAD

If there is any upside to the interminable delays in the BEAD grant process, it’s that American manufacturers have had the time to gear up to build the components needed to build broadband networks in the U.S.

When the BEAD grants were first announced, there was a widespread expectation that the industry was going to need a lot of blanket waivers from the tough Build America, But America (BABA) rules. But in the last two years, a wide range of equipment manufacturers have begun making gear in the U.S. and gone through the process of being approved as a BABA vendor.

Early in the process, the NTIA announced that it hoped that as much as 90% of the materials needed to build networks would be made in the country. At that time, that sounded like an impossible goal. But vendors of all sorts now have an American-made product. In a recent NTIA blog, NTIA claims there are now reliable sources of fiber, fiber cables, electronics, and enclosures – the key elements of a fiber network.

The  Department of Commerce just announced a minor BABA waiver for BEAD that recognizes that U.S. chip manufacturing will not be ramped up in time to supply the millions of chips needed for BEAD. The limited waiver also covers some non-optic glass inputs that are used in the glass manufacturing process. The limited waiver will recognize the chip issue by relaxing the rule that 55% of optical terminals and optics must be U.S.

The bottom line of the limited waivers is that NTIA is still estimating that 90% of the materials used to build BEAD networks will be America-made. That is phenomenal, and it’s great to see a big chunk of the $45 billion in grants supporting American manufacturers.

This is a drastic change since the $2.5 billion BTOP grant program in 2009 that was funded by the American Recovery and Reinvestment Act. Those grants had to issue widespread waivers of the BABA requirements since there was not a lot of American manufacturing of fiber components at the time.

One of the best long-term consequences of the BEAD effort is that U.S. factories and jobs can continue to make network components in the U.S. The determination to adhere to the BABA rules is also being applied to a wide range of other components that are being funded by the Infrastructure Investment and Jobs Act. That’s going to pay dividends in the U.S. economy for decades to come.