Tag Archives: BEAD Grants

Updating My BEAD Bingo Card

When the NTIA made it clear that it was going to change the BEAD rules, I wrote a blog that I called, somewhat tongue-in-cheek, the BEAD Bingo Card. That blog listed a range of options for how NTIA might modify BEAD – from canceling the program to leaving it largely intact.

On June 6, NTIA issued a BEAD Restructuring Policy Notice that defines how BEAD is going to work, and wouldn’t you know it – NTIA went with an option I had not considered. I would classify the NTIA’s solution as “RDOFing the BEAD process.” By that, I think NTIA adopted the worst features of RDOF. The Notice makes the following major changes to the process of choosing BEAD grant winners:

  • Any technology that can deliver 100/20 Mbps broadband today is now eligible to win a BEAD grant. While there is a caveat that a winning technology must have the capability over time to scale to support rural 5G and other wireless needs, there is no specific commitment required by a grant winner to make future upgrades.
  • The new process requires State Broadband Offices to consider eliminating any BEAD locations that are already served by unlicensed fixed wireless. If a WISP already claims a speed of at least 100/20 Mbps in the FCC maps for a BEAD location, the WISP can certify that it is providing served speeds and these locations are removed from BEAD. This could conceivably eliminate millions of BEAD locations from BEAD grants.
  • The primary criteria for picking a winner is the requested BEAD funds per eligible location. Whoever asks for the least amount of money wins. Broadband Grant Offices can consider speed to deployment and broadband speeds, but only if a grant application is within 15% of the lowest bid. This feels like a one-round reverse auction.

Recall that RDOF included a fiber preference, and that preference resulted in a lot of electric cooperatives and others winning RDOF funding to build fiber. Since BEAD will now allow fixed wireless, LEO satellite, and FWA cellular wireless to compete head-to-head with fiber, it seems likely that fiber only wins in places where no other technology is seeking funding. We can only guess how many fiber grant requests that will kill – but it’s not hard to imagine these rules killing 80%  or 90% of fiber awards. It’s going to boil down to how much BEAD funding the wireless ISPs and satellite companies will pursue. The more interesting dynamic will be the bidding battle between fixed wireless and satellite – because both can easily underbid fiber projects.

State Broadband Offices can require wireless and satellite providers to swear they will have the capacity to serve everybody, but every ISP that decides to pursue BEAD will make this promise. They know there will be no realistic consequences of not meeting the commitment five years down the road – there has never been any serious enforcement of federal grant performance in the past, and there is no reason to believe that will change. The BEAD grant will be awarded and built, and everybody will forget about the original intent – except the households who still don’t have good broadband.

This completely tosses away the idea that BEAD would be used to build networks that will last for the rest of the century – some of the winning BEAD projects will be behind the rest of the country the second they are built.

This Notice also ignores the second big purpose of the BEAD grant program – it was a jobs program which was to provide a lot of good jobs to build and operate networks. It’s clear to me that the NTIA wants to spend as little as possible of the $42.5 billion money. The U.S. Department of Commerce wants to take credit for saving money and doesn’t care about getting good broadband to rural areas. This Notice has a clear message: Congress said we have to build broadband everywhere, so we’ll build what is barely adequate for today and ignore what’s needed for the future. This Notice punts the rural broadband gap down the road for the next generation to solve.

There will be lots of articles published today talking about the mechanics and timing of the revised BEAD, and I might write about that in a future blog. The bottom line is that every State that already started the BEAD grant selection process has to start over with a grant round that allows every technology to compete head-to-head.

There are a lot of different issues to unwrap inside this Notice, and I plan to to write a series of blogs looking at the ramifications of this Notice for different national stakeholders. So stay tuned.

Related Blogs:

County Governments and BEAD

BEAD and State Broadband Offices

Full Speed Ahead

State Broadband Offices have seemingly aligned to put pressure on the federal government to get the BEAD awards made and the construction process started this year. While there might be a few exceptions, most State Broadband Offices have accelerated the grant review process and are either ready to make BEAD awards now or soon will be in a position to do so.

This is an interesting strategy because it seems to be coupled with getting State and local officials to lobby for a rapid conclusion of the grant process. County Boards and governors have been asking federal elected officials to let the BEAD process play out.

This is not to say that folks don’t want to see some changes in BEAD. For example, there are popular ideas in the federal SPEED for BEAD Act that would make it easier for ISPs to build. Those kinds of changes could be incorporated into BEAD contracts with grant winners without slowing down the process. Grant Offices and local officials fear a total reshuffling of the rules will force States to start the process all over again. If the decision at NTIA is to change grant scoring metrics, then it probably means changing the BEAD Volume 2 rules and having ISPs file all over again for the BEAD grants. It’s hard to imagine that a change like that won’t add six months to a year to making grant awards and would kill the chance of any broadband construction in 2025.

One of the most convincing things I’ve seen on the topic is a letter published by Broadband Communities Magazine. The letter was written by Josh Etheridge, the Co-Owner of EPC, a fiber construction firm. He pleads with officials to release the BEAD funding in Louisiana and says that delays have already forced him to start laying off some of his 160 full-time staff and an equal number of subcontractors. He makes the convincing argument that BEAD money ultimately gets spent supporting jobs in local communities – which was the stated purpose of the IIJA legislation that created BEAD.

NTIA says it will hopefully be ready to provide new guidance on BEAD around mid-May. So far, everybody associated with the NTIA BEAD process has been completely noncommittal about what changes might be coming. The only thing of substance that has been hinted at is that BEAD awards ought to be more technology-neutral to cut down on amount of grant funding needed. It’s that statement that has the whole industry on edge and on hold.

The BEAD grants were allocated to States in an extremely uneven manner since money was allocated using faulty FCC maps. Some States have enough BEAD money to mostly fund a fiber solution, as has been done in Louisiana. But even there, some of the money went to alternate technologies to serve remote locations. Other states are going to have to make substantial grants to non-fiber technologies to make the numbers work.

Broadband Offices and State and local officials all want to see the grant funding awarded to their states to build as much fiber as possible while still assuring that all BEAD-eligible locations get some better broadband solution. I think the big fear is not only that more funding will go to satellite, but that ‘excess funds’ will be reclaimed by Treasury and not spent on broadband. The phrase ‘once in a generation’ funding has probably been used too often for BEAD, to the point that people don’t really hear what it means. States are doing a magnificent job of spreading the BEAD money to bring as much public benefit as possible – and they are all asking to be left alone to finish the job.

We’ll find out in a few weeks if the strategy of plowing forward will be convincing. It’s certainly the fastest way to turn BEAD grants into construction projects.

Proposed BEAD Legislation

We got a peek at how the BEAD grants might be modified when Representative Richard Hudson of North Carolina introduced the Streamlining Program Efficiency and Expanding Deployment (SPEED) for BEAD Act. Note that these are just proposed changes to BEAD and other changes are not off the table. Many of these changes undo direct requirements from Congress in the original BEAD legislation.

A lot of the changes are largely cosmetic and what the regulatory world refers to as ‘packing peanuts’, meaning the changes make a policy statement but have almost no impact on making the BEAD grant awards. This includes:

  • Changes the acronym for BEAD from ‘Broadband Equity, Access, and Deployment” to ‘Broadband Expansion, Access, and Deployment’.
  • Eliminating topics from the grant application that most ISPs were giving lip service to anyway. ISPs may still care about these topics, but they would no longer be a requirement for States to consider when choosing grant winners. This Act would eliminate consideration for:
    • Diversity, inclusion, and equity
    • A long list of labor requirements including an emphasis on union wages, prevailing wages, workforce composition, and a labor peace agreement.
    • How a new network would address climate change.
    • Grant points for offering open access.
    • Regulation of network management practices, including data caps.

The proposed legislation has a few items of more significant impact that most ISPs will like:

  • Allows ISPs to remove high cost locations from BEAD proposals. Most states have drawn arbitrary required service areas, and this lets an ISP remove location that add too much cost. Presumably those locations would default to a satellite or some other technology.
  • While BEAD would maintain the requirement to offer at least one low-cost broadband plan, states would not be allowed to regulate or otherwise mandate or set such rates or require rates to be capped or frozen for future years.

There are a few major proposed changes:

  • Any unspent BEAD funds would be returned to Treasury. States will be pleased to see that the Act leaves Non-Deployment Funds alone – many feared those would be yanked. Originally, unused funds were to be redistributed to states that didn’t get enough funding. This is bad news for States that hoped to get more.
  • One of the biggest changes is that BEAD funding can’t be used to fund digital inclusion and adoption activities. Funds can still be used for telecom workforce development.

The biggest change is the one we’ve all been waiting for – there would no longer be any preference for fiber, and any broadband technology that meets the speed and latency requirements is eligible for BEAD funding. Of course, this doesn’t answer the big question of what that means. Might this mean that 10% or 20% of BEAD would go to satellite technology, or even most or all of it? As much as folks want an answer to this question, it’s likely to be a while until rules get that specific. That final direction is likely to come from the NTIA in the form of new instructions on how to choose grant winners.

While the proposed Act has the acronym SPEED, it seems inevitable that any changes by Congress or NTIA will require states that have already made BEAD awards, or the many that are currently scoring grants, to start the grant award process over. Some folks have speculated changes could delay BEAD for another year, but I expect many states will be able to make the pivot more quickly.

Commerce Secretary Howard Lutnick recently said he plans to make similar changes and probably others. I don’t understand enough about the new dynamics in DC to know if NTIA can make significant changes unilaterally or if they would want the cover provided by this legislation. The bill undoes provisions that Congress created in the original BEAD legislation, and it seems like Congress ought to be the ones to change them. But Commerce might feel they have the authority to make changes. I guess we’ll find out soon.

Counting Farm Passings

The NTIA recently issued a directive encouraging States to get ISPs to remove locations from BEAD grant applications that can’t be served by broadband. These extra locations might be barns, sheds, or other locations that are not eligible for a BEAD grant. This doesn’t sound like an unreasonable request until you look a little deeper at the issue of identifying and counting passings in farming areas.

It’s been clear to anybody who has looked closely at the FCC mapping fabric in rural areas that there are a lot of errors. The FCC map fabric is supposed to identify every place that is a likely candidate to buy broadband. You can find almost any imaginable issue with the map fabric.

  • There are plenty of places where CostQuest has placed a grant-eligible location in the middle of a field, far from any home or business. Those are clearly not supposed to be there.
  • But there are plenty of locations where there are rural homes that are not identified as eligible in the fabric.
  • The most interesting category are locations that are misplaced, but not really an error. You might find a farm where the barn is considered as the eligible location but not the house. We’ve found places where the identified location is where the farm lane meets the highway instead of at the farmhouse.

The NTIA is asking ISPs to eliminate locations where the maps are clearly incorrect but not letting ISPs add back locations that should be in the fabric. This feels like a way to reduce the amount of grants being awarded instead of trying to get it right.

I’ve had a few ISP clients look at a rural area in detail. Several of them have told me that for every mapping fabric location that doesn’t exist, there is a missing location that should be in the fabric. They’ve concluded that the overall count of BEAD-eligible locations is generally not bad as long as you don’t worry about the errors in both directions.

Local governments and rural ISPs have known about this for a long time. Many local governments tried to fix the FCC fabric during the BEAD map challenge, but were told they couldn’t do it, and that the map challenge was only to identify if a location was served or unserved. State broadband offices told local governments to take such issues up with the FCC – a time-consuming and hit-and-miss process that wouldn’t fix a map in time for the BEAD grant process. Many folks who have tried to fix the FCC fabric have given up because of the complexity of making the requests.

All of this talk about getting the maps exactly right ignores the reality of broadband for farms. I recently talked to the manager of a rural electric cooperative who told me that one of his farmers wants broadband at five different locations, even though he has only one farm house. This farmer is like many others who have fully embraced the benefits of broadband for monitoring sites and performing tasks remotely through broadband. Farmers want broadband at corn dryers, silos, barns, grain silos, feed lots, you name it. I interviewed a farmer last year who told me that he feels more like an IT technician than a farmer most days. Everything this farmer does involves complex software and broadband.

I think it turns out that CostQuest has probably inadvertently identified a lot of farming locations that really are candidates for broadband. Maybe we shouldn’t be in such a hurry to wipe out rural locations on the FCC map.

Constraints on Satellite Broadband

In a 2024 end-of-year memo, Gary Bolton of the Fiber Broadband Association said that FBA had partnered with the consulting firm Cartesian to look at the pros and cons of Starlink in the U.S. FBA says that report shows that Starlink currently has 1.4 million customers in the U.S., and with the current satellite constellation has the capacity to serve 1.7 million customers.

FBA is a pro-fiber trade association, and as such, it probably takes the most pessimistic look at satellite capacity. The short summary I’ve seen of the Cartesian report says that satellite broadband has some natural limitations on capacity. The implied conclusion of the report is that Starlink can’t serve everybody in rural America.

Starlink has never claimed that ability or goal. However, since there are those advocating that most of the $42 billion BEAD grant award should go to satellite broadband, it’s fair to assess Starlink’s capacity.

Starlink currently has 6,957 working broadband satellites with the stated goal is to grow to 30,000 satellites. That would be a 430% increase, and if the FBA claimed limit of 1.7 million U.S. customers is right, that implies a future capacity of more than 7 million U.S. customers when the constellation is completed – which could be even higher if new satellites have more capacity than older ones.

One of the more important FBA claim is that Starlink has a limitation on the number of people that can be served in any geographic area. That seems to be true today as evidenced by reports that Starlink has quietly implemented waiting lists for service in some parts of the country, presumably due to local capacity.

Just as with any ISP, Starlink also has potential limitations due to backhaul. Starlink currently shows 64 working ground stations, with plans underway to complete 99. A ground station is where broadband traffic passes back and forth between satellites and the terrestrial Internet. Starlink can obviously build more ground stations in the future as needed.

Perhaps the biggest constraint on Starlink is getting the needed spectrum to communicate between satellites and ground stations. Roger Entner of Recon Analytics was quoted recently as saying that Starlink doesn’t have enough spectrum today and new spectrum doesn’t seem to be likely over the next several years. Anybody who follows filings at the FCC has seen numerous filings made by Starlink and cellular companies over the last five years arguing about the allocation of spectrum. A lot of the spectrum that Starlink needs is also currently being used by the military and other parts of the government. It seems likely that Starlink will eventually get the spectrum it needs, but spectrum fights have never been resolved quickly, and this will be a slow struggle.

I have to agree with FBA that Starlink isn’t prepared to handle everybody in rural America today – something I’m sure Starlink would acknowledge. The question that FBA is raising is if satellite capacity can grow quickly enough to meet increasing demands from BEAD plus normal growth. The BEAD program gives ISPs four years to implement BEAD awards. Starlink’s first satellite launch was in May 2019. Who knows what the company can do in four more years?

BEAD Alternate Technology Guidelines

In an action that falls under, “ You can’t keep track of the game without a scorecard”, NTIA released guidelines on how States are to incorporate alternate technologies into BEAD. NTIA originally ruled that alternate technologies like satellite and unlicensed fixed wireless were not eligible for BEAD. Then last year, NTIA issued voluntary guidelines on how States could allow satellite broadband. This new set of rules is mandatory for all States, other than those that have already made grant awards.

Unlicensed Fixed Wireless (ULFW – a new acronym!). NTIA made it very clear from the start that grant money cannot be used to build unlicensed fixed wireless networks, and NTIA declared from the start that the technology does not meet the reliability test described in the legislation. BEAD still can’t be used to build ULFW. However, there are now circumstances where the presence of ULFW could block another ISP from getting a BEAD grant.

  • BEAD can’t be awarded if there is an outstanding grant award to build ULFW, and that grant includes a requirement for future proof of speeds. This has to be a fairly rare circumstance.
  • Before awarding BEAD grant, a State must look at the FCC map to see if a WISP is claiming unlicensed wireless speeds of at least 100/20 Mbps. If they are, the broadband office must give the WISP an opportunity to prove it is capable of meeting the speeds – and if it can, then BEAD will not be awarded.

I find this to be an outrageous change. My outrage is due to NTIA making this change in January 2025. If this was going to be the rule, it should have been done two years ago. Had this been the rule from the start, then other ISPs and local governments would have taken a harder look at unlicensed fixed wireless providers during the BEAD map challenge. But nobody did, because unlicensed wireless wasn’t part of the BEAD universe. With this change, NTIA has given unlicensed WISPs veto power over competing BEAD grants.

I don’t envy State broadband offices that have to somehow judge the speed claims of WISPs – something that most broadband offices will struggle to do. I’ve seen dozens of counties where WISPS claim huge coverage areas with unlicensed spectrum – and nobody ever bothered to check if the coverage is real since it hasn’t mattered for BEAD. But presto – it now matters since 100/20 Mbps ULFW can block another ISP from winning a BEAD grant. I see this as another last-minute disincentive for ISPs to apply for BEAD.

LEO Satellite (Starlink and Kuiper). States can make BEAD grants to the LEO satellite providers, and the first states to make awards have done so. A satellite provider isn’t eligible to receive the funding until it can certify that it is capable of connecting everybody in a given grant area within ten days of a request for service. The satellite provider has up to four years to make this declaration and to start the funding. The satellite provider will then have to conduct the same ongoing speed tests as other BEAD winners for ten years.

There are two tricky parts to giving BEAD to a satellite provider. The satellite company must demonstrate that it has set aside the capacity to serve the study area – since the cost of reserving the capacity is what BEAD is paying for. I’m doubtful that any broadband office is capable of understanding the complexities of the capacity of a worldwide satellite network to be able to judge the satellite company claims.

I’m also curious about all of the satellite customers already served in a grant area. A consultant for the Fiber Broadband Association recently estimated there are already 215,000 Starlink customers in BEAD areas – I can’t imagine how they could know the number. I’m curious when a State makes a BEAD grant for satellite how it will deal with the existing customers.

BEAD Spending in 2025

I’ve seen some vendors speculating that BEAD is finally going to unleash a big pile of spending in 2025. I don’t want to be the one to burst their bubble, but even if the BEAD grants continue to move on the current path, there will not be a big wave of construction from BEAD this year. All bets are off on BEAD spending if the new administration pauses or majorly reworks BEAD.

It’s easy to understand the renewed enthusiasm, because the BEAD process recently went into overdrive. The coming change of administration has loosened the paperwork at NTIA and there are a ton of states rushing to open grant portals. In most states, the timeline recently got shortened by at least a few months.

There is still a lot of paperwork to get through before we see construction. The process for a State that is just now opening its BEAD portal is as follows:

  • A State has to accept, evaluate, and tentatively accept grant applications. If there are locations not awarded in the first round, most states have already scheduled a second round of grants. The grant process doesn’t end until a grant office has an ISP willing to serve every BEAD-eligible location. While having satellite broadband in the mix can speed up this process, some states are going to want to use a second, or even a third round if their goal is to maximize fiber construction.
  • Once a state has tentatively chosen an ISP to serve every location, it has to write a voluminous final report to the NTIA that describes, in detail, how the State followed the NTIA rules in making the grants. The NTIA recently relaxed the rules for writing this final report, but States still have to take the time to describe everything they did in the grant process.
  • The final reports have to be sent to NTIA and be approved, and NTIA is going to need some time to review the reports – with likely a lot of new people.
  • Next, the State broadband office has to finalize a contract with each ISP. NTIA has been encouraging states to negotiate contracts while the final report is pending. But contracts can’t be finalized until NTIA blesses the final report, and contracts would have to reflect any NTIA comments about the final report. Any actions by Congress or NTIA to relax the rules will definitely delay the contract process.
  • The press release day comes when ISPs sign the contracts. Some ISPs will sign contracts quickly, but others will balk at some of the provisions in the State grant rules.

The press release day does not mean construction starts immediately. ISPs next have to proceed with environmental studies, start lining up rights-of-ways and easements, and doing field engineering along roads to get ready. Anybody building fiber on poles will have to get that process rolling, and it’s hard to envision that finishing quickly except in places where poles are nearly perfect – meaning not in rural America. Depending on the size of the grant, these activities could well take up much of 2025 for most grant winners. NTIA is encouraging ISPs to start these construction process before they have a signed contract, but I can’t envision any ISP willing to do that.

Construction can’t start until the environmental study has been approved, and I’ve been hearing rumblings that some parts of the country are going to see a backlog of environmental scientists who are also doing similar studies for roads, bridges, and dams approved by the same giant pile of federal money.

States with seasonal construction due to winter weather will have a particularly hard time starting any meaningful as we reach the end of 2025.

One issue that will flummox vendors is that some states have announced a painfully slow process for reimbursing ISPs for construction costs. ISPs in that kind of environment are not going to rush to pre-buy materials if they won’t reimbursed until construction is completed.

This is not to say that there won’t be some construction done in 2025, but it is not going to be the floodgate the vendors are hoping for. The doors should be wide open for spending in 2026 and 2027, when most of the BEAD money will be spent.

I’ve always predicted that no more than perhaps 5% of the BEAD money will be spent in 2025, although the current rush to get grants awarded could goose that little higher. I can already hear the booing from every vendor reading this – but there doesn’t look to be any easy way to get the plows in the ground.

When To Use In-Kind Matching

A lot of ISPs that seek grant money take advantage of in-kind matching rules. In-kind contributions recognize non-cash benefits of property, goods, or services that will benefit a grant project. Many grant programs allow in-kind matches to be used in calculating the matching funds being provided by a grant applicant.

The BEAD grant process explicitly allows for in-kind matches. The use of in-kind matches for any federal program is described in federal regulation § 200.306 – Cost Sharing or Matching. I must warn you that the federal rules for in-kind matches are confusing, even for accountants.

The FAQ for BEAD lists the following kinds of in-kind matching that might be allowed: employee or volunteer services, equipment, supplies, indirect costs, computer hardware and software, use of facilities, access to rights of way, pole attachments, conduits, easements, and access to other types of infrastructure.

In-kind matching does not automatically help a grant applicant, and in some cases, it can make it harder to win a grant. It all boils down to how a specific grant program scores and chooses grant winners. Consider how in-kind matching affects two different kinds of grant scoring.

Scoring Based on Percent Matching. There have been a number of state broadband grants that reward ISPs for taking a smallest percentage of grant funding. Consider a grant that requires that an applicant provide at least 50% of the matching funds, and further rewards them for providing even more matching.

In this kind of grant, using in-kind matching funds is a direct benefit. The percent an ISP would be matching is calculated as follows:

Dollar Matching plus In-kind Matching / Total Grant Infrastructure plus In-kind Infrastructure

In this situation, in-kind matching can increase the calculated percent matching as long as some of the matching is comprised of existing assets. Using matching would decrease the calculated percent matching if all of the in-kind is from expenses and not in-kind infrastructure.

Scoring Based on Cost per Passing. Many State BEAD grant rules award a lot of grant points based on the cost per passing. That cost is calculated as follows:

Total Grant Infrastructure plus In-kind Infrastructure / Grant Passings

With this scoring, using any in-kind matching from assets will increase the cost per passing. If your BEAD grant is in a competitive area, adding in-kind matching could push your costs higher than your competitors. In-kind matching could also push a BEAD grant into a high-cost situation where States might consider alternate technologies.

The bottom line is that in-kind matching could be a detriment in a BEAD grant application. But this depends on the specific state grant scoring. In-kind can help if a state focuses on the percent of ISP matching and can hurt if the state focuses on cost per passing.

NTIA Proposes BEAD Performance Measurement Rules

One of the many requirements for BEAD winners will be to regularly report customer speeds after networks are built. NTIA recently issued a draft of the measurement requirements, and the final rules should be similar.

Following are a few highlights of the measuring requirements:

  • Tests have to be done twice per year through the federal interest period. That means ten years for fiber, with the ten years starting when a network is completed.
  • At least 95% of speed tests must meet 100/20 Mbps for normal residential and business passings and 1/1 Gbps for anchor institution passings.
  • Latency must be under 100 milliseconds.
  • ISPs must provide outage reports that show that the network were out of service no more than 48 hours during a year.
  • Speed tests can be done using the MBA testing program (which the FCC has discontinued) or can rely on network management tools and software that allows for testing.
  • Tests are to be administered to 10% of the customers of a given ISP across a whole state for each technology deployed. If an ISP deploys both fiber and fixed wireless across multiple projects in a state, it would have to test 10% of the fiber customers and 10% of the wireless customers. ISPs can elect to test more than 10%.
  • The customers for the speed tests must be chosen at random, using a publicly available random sampling program.
  • ISPs must upgrade customers to the target speed during the speed test period. If an ISP offers a 50/10 Mbps package, the customer must be updated during the testing period to 100/20 Mbps. This same rule applies to anchor institutions that might be buying something less than a gigabit product.
  • One requirement that will drive folks crazy is that test locations must match the FCC broadband map – and every ISP understands there is a difference between the FCC maps and real life.
  • Tests are to be done between the customer gateway and an Internet exchange point in the closest of New York City, Washington DC, Atlanta, Miami, Chicago, Dallas-Fort Worth, Los Angeles, San Francisco, Seattle, Denver, Salt Lake City, St. Paul, Helena, Kansas City, Phoenix, or Boston, MA.
  • The testing period is one week, with tests required between 6:00 PM and 12:00 AM (local prime time). Testing must be done every hour. Tests should last at least 10 to 15 seconds.
  • To comply with the speed standard, certified test results for each state or territory and speed tier, must show that 80% of the speed tests are at or above 80% of the required speed. For example, for projects that have committed to 100/20 Mbps, 80% of measurements must meet or exceed 80/16 Mbps.
  • ISPs that don’t pass the test requirements must report to the State within 15 days of completing the tests and must begin testing quarterly.

There are some interesting aspects of these rules. Reporting goes to State broadband offices, and this assumes these offices will remain staffed for the next decade. A lot of states only created a broadband office due to the Capital Project Funds and BEAD funding, and this requirement implies they would have to maintain some staffing for a long time. This also implies that States must have somebody on board who can verify that ISPs are testing properly. It’s not hard to envision that some States will lose interest in broadband once most rural areas are served.

The tests should be no challenge for a fiber network since tests are to the router and don’t include the impact of indoor WiFi. It almost seems like a waste to make a fiber network do these tests for ten years. But there will likely be wireless networks that will not meet the test requirements everywhere, and it will be interesting to watch satellite performance over time.

The biggest question not addressed in the rules is what States will do if ISPs fail the test. Experience from past federal speed tests is that there will likely be little repercussions unless somebody fails dramatically.

One of the parts of the test program that ISPs are going to find troubling is that NTIA seemingly wants them to provide a detailed list of every customer and they speed they are buying. ISPs have never been required to submit data to that level of detail for the basic reason that a customer list is probably the most important trade secret for every ISP. I have to think this will change before implementation.

Government Lien on BEAD Assets

The headline of the blog isn’t entirely accurate because of the use of the word lien. However, the government maintains what it calls a property trust relationship in assets constructed with federal grant dollars, which is similar to, but not the same as a bank lien. In the case of BEAD, the government interest in grant assets would be held and managed by each State Broadband Office, under the auspices of the NTIA.

The trust will last through the useful life of the asset, as determined by the government. The useful lives of assets for BEAD are not the same as the depreciation lives of the assets. NTIA has set the longest life for BEAD at 10 years. Normally, per the federal guidelines the lives are fiber (20 years), buildings and large huts (20 years), power equipment (10 years), towers and poles (20 years), general fiber and wireless electronics (7 years), software systems (10 years), vehicles (5 – 10 years). Other assets like customer modems and computers have short lives of 3 – 7 years.

The rules governing the government’s interest in grant-funded assets are described in 2 C.F.R. § 200.316. There are a number of consequence of the government interest:

  • A BEAD grant recipient would need to get permission to sell or dispose of a grant-funded asset during its useful life.
  • The exception to this rule is that an asset with a remaining useful value under $10,000 can be disposed of without government permission.
  • Disposing or selling a grant-funded asset might require getting a certified appraiser. There aren’t many of those in the broadband world, and this can be expensive.
  • Anybody disposing of or selling a grant-funded asset might have to return a proportional share of the original grant funding to the government to cover the remaining useful life. This is the part of the government interest that feels like a lien.
  • The grant recipient must keep a detailed inventory of the federally-funded assets and must submit the inventory as part of BEAD reporting on an annual basis. A lot of ISPs are sloppy with paperwork concerning assets, and this requirement puts them on notice to create meticulous records.

This is not a new rule and has been applied to other federal grant programs. One of the biggest consequences of these rules is that some lenders are uncomfortable with the government’s interest in the assets, and some lenders will bulk at lending to an ISP when they find out about this. This is old news for companies that have gotten grants for years, and some of the biggest lenders in the industry, like CoBank, are comfortable with the government interest in the assets. It can be a shock to a grant recipient if their lender gets cold feet over the issue.

Another consequence is that these rules add an administrative effort and delay for disposing of a grant-funded asset. I helped an ISP buy a fiber route that was originally funded by BTOP. It took almost a year to get permission from NTIA for the transaction, which included having to get an appraisal of the asset.

This means that there will be at least some BEAD reporting every year for the useful life of the assets.

The issue matters to some ISPs, and I’ve known ISPs who have not pursued federal grants due to this one issue.