Tag Archives: BEAD Grants

BEAD to Allow Alternate Technologies

The NTIA just released proposed Guidance rules for State Broadband Offices to consider if they want to make BEAD grant awards to alternate technologies (specifically unlicensed fixed wireless and low-orbit satellite service). These are draft rules, and comments are due back to NTIA by September 10.

This is an issue that has been discussed for the last several years. Since states are under an edict to find a broadband solution for every unserved and underserved location before they can award any grants, it’s been obvious for a long time that States would have to rely on alternate technologies to reach everybody. I find it perplexing that NTIA would just get around to addressing the issue this late in the game. A majority of States have already started the 365-day shot clock to award grants, and the proposed rules introduce an entirely new set of processes and timelines to layer onto the hectic BEAD process that is already underway. I’m picturing State Broadband Offices pulling their hair out when they read these proposed rules.

In order for a State to consider an alternate technology, it must invite fixed wireless and satellite providers to basically apply for grant funding. During that process, the alternate providers must be allowed to propose to serve specific locations. Alternate providers must meet a different set of requirements than other applicants related to technical and operational capability. Alternate providers will still be on the hook for many BEAD requirements, like having a letter of credit or meeting any low-rate requirements.

Alternate technology providers must also prove that they have the network capacity to reach everybody in a proposed service area within ten days of a request for service. That will require technical proof that the network has the capacity to provide at least 5 Mbps simultaneously to every home in a service area or be able to provide 2 terabytes of usage per home per month. Grant offices are going to have a huge challenge judging this kind of claim from an ISP. Such a proof will be highly technical and is something that is hard to prove.

There are extra rules for low-orbit satellite providers (which has to mostly be Starlink). A satellite provider can ask for the funding needed to make sure its network will have the capacity to serve BEAD locations during the four-year term of the BEAD grant process. I can’t imagine that there is anybody at a State Broadband Office who will be able to judge such a claim. It also looks like the NTIA is thinking of extending the funding window for satellite broadband up to ten years, but this part of the rules are fuzzy. The document suggests that satellite providers might best be reimbursed for each connected BEAD location, but it holds out other alternatives.

All of this is going to add time and effort for a Broadband Office. A State that wants to do this must first modify its Volume 2 rules to adopt the alternate technology rules. They will have to figure out what questions they want to ask potential applicants and figure out how to interpret the responses. They will have to figure out how to determine the cost of expanding networks to meet the capacity requirements for the next four years. They are going to have to figure out what it means to keep the funding window open for ten years for satellite broadband. And they have to do all of this while trying to hurry through the normal BEAD process.

One of the key requirements for this Guidance is that any funded alternate technology “meets the BEAD Program’s minimum technical requirements of speeds of not less than 100 Mbps for downloads and 20 Mbps for uploads and latency less than or equal to 100 milliseconds.” From what I’ve seen from Starlink speed tests, upload speeds are going to be a problem – average speeds seem to be in the range of 10 Mbps. The download speeds for Starlink seem to vary widely by geography, with some parts of the country seeing median speeds over 100 Mbps but others seeing slower speeds.

One big problem with this new process is that it is being done after most states have finished the map challenges. This Guidance calls for a new process for alternate providers to claim where they can serve – but without an additional chance for others to dispute their claims.

States are not required to participate in this, but since they are required to find a solution for every BEAD-eligible location, many of them will be forced to tackle this. Add this to the list of inexplicable bureaucratic decisions by NTIA that will further delay grant awards.

When Will We See BEAD Construction?

I got feedback from attendees at a few recent industry conferences that there are a lot of folks who think there will be substantial BEAD spending in 2025. I don’t want to burst bubbles, but I just can’t see that happening.

Like every other part of the BEAD process, there are delays coming that are going to drive folks crazy. The rule that is going to cause the biggest delays is that no grants can be awarded in a State until a broadband office has lined up an ISP to reach every unserved and underserved passing.

Most States will need multiple rounds of grant applications to reach every passing with broadband, and most have built those rounds into their Volume 2 rules. One of the oddest things about the BEAD process is the 365-day shot clock where NTIA is pressuring state broadband offices to complete the grant award process within a year of approval of the Volume 2 rules. The entire BEAD process up until now has been extremely deliberate – it’s been clear since the beginning that the NTIA wanted to avoid the problems the FCC ran into with RDOF by awarding funds to unqualified ISPs.

After three years of little happening other than paperwork, the NTIA is suddenly pressuring grant offices to rush through ISP selection – the one step of the whole BEAD process where caution should be taken. The BEAD rules are complicated, and grant offices should be taking the time needed to make sure that applicants really meet the rules and can do what they claim. When I see states claiming they can handle the selection process in a few weeks, it’s clear there will be no due diligence undertaken. Going fast is good for ISPs because it means a grant office will be accepting every claim they make in a grant application without verification or questioning.

Even states that want to move quickly are going to run into problems when there are parts of a state or small pockets of homes that no ISP wants to serve. That’s going to trigger negotiations with grant winners to expand their footprints. If state broadband offices are feeling time pressure, this is where they are going to be tempted to hand a bunch of locations to Starlink, which is frankly a total copout unless the passings are extremely remote. If this process is done in a way to bring a real broadband solution to the small pockets, it’s going to take a while since ISPs are not going to readily accept locations that are hard to reach.

This process is very different from how State broadband grants have historically been handled. If a State historically found a good grant recipient in the first round, the State could proceed quickly to a grant award and get that project started. With BEAD, after a State has fully locked down an ISP for every passing, it must submit a report on the grant award process to the NTIA for approval. The NTIA says it hopes to do that review expeditiously, but it’s hard to think that writing that report and getting approval can happen much faster than two months. Who knows what happens if the NTIA disagrees with some of the grant awards or the award process?

Even when NTIA finally approves the whole grant package for a state, the next step is to finalize a contract with each ISP before a grant is officially awarded. I’ve seen this process for state grants stretch out for three months, and it can take longer. The contract is where the State will try to force an ISP to do things that were not included in its grant proposal. BEAD grant winners will have to fully comply with BEAD rules regardless of what they proposed in the grant application. This is also the stage of the process where ISPs must prove the final availability of funding and letters of credit.

I foresee many ISPs and States getting at loggerheads over some of the BEAD requirements, and it won’t be shocking if some ISPs walk away from BEAD during the negotiation process. States can obviously begin the negotiation process informally before the grant report is submitted to NTIA, but the negotiations won’t happen in earnest until it’s clear that the funds will be awarded. I don’t think anybody knows what happens if an ISP walks away from a grant late in the process.

For many grants, the next step is going to be an environmental study. Since all of the States are on a somewhat similar schedule, I expect there to be a bottleneck of the scientists and firms that do these studies. Typically, no construction work can begin until the study is complete and accepted by a State Broadband Office.

Unfortunately, ISPs are going to find out that BEAD is not the same as other grants they might have won. There will be more hoops to jump through, a more complicated grant contract, onerous reporting, and everything done under the eye of the NTIA.

To answer the question asked in the title of this blog, I see only a tiny fraction of BEAD construction happening in 2025. Perhaps a handful of states will find a quick path through these steps – but most will not.

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 High Cost of BEAD

I keep having a nagging premonition that BEAD grant requests are going to ask for a lot more money than State Broadband Offices are predicting. There are a number of reasons I’m sensing this is what is coming.

First, there has been considerable inflation in the industry over the last two years. Building a new network using any technology is easily 20% or 30% higher than when Congress first established the grant program. Any ISP using debt financing has to be concerned about interest rates, which are way higher than in 2020 when BEAD was first announced.

There are also extra costs associated with complying with the BEAD grant rules:

  • The biggest impact comes from the requirement that BEAD grants must pay prevailing wages. Most State Grant offices have interpreted that to mean Davis-Bacon wages, which can be anywhere from 15% to 20% higher than the labor rates that might be found in the market.
  • Anybody accepting a BEAD grant must obtain an irrevocable letter of credit, which equates to paying additional interest expenses for the BEAD project.
  • In many cases, a BEAD award will require environmental or similar studies prior to starting construction. This adds cost, and also time (which always equates to cost).
  • Buy America Build America requirements will translate, in some cases, to paying more for things like electronics.
  • Many State Grant Offices have proposed a slow reimbursement process for BEAD, which means that many ISPs will need a temporary line of credit to cover labor outlays while waiting for BEAD payments.
  • Most ISPs are going to accept the 2% administrative fee that can be added on top of construction costs to cover the heavy cost of grant compliance paperwork.

There is one impact in the costs of building BEAD locations that I haven’t seen anybody talking about. Over the last four years there have been a lot of other federal, state, and local broadband grant awards in areas that would still be eligible for BEAD if these grants hadn’t been awarded.

These other grants have often been awarded to projects to cover the ‘lowest hanging fruit’. For those not familiar with that slang, state and local grants have often been awarded in areas where the grants had the biggest benefit by covering the most locations possible with grant funds.

It doesn’t take a lot of state or local grant funding to change the cost profile of the remaining locations. For example, I’ve seen a lot of state broadband grants awarded to serve rural towns and villages with 50 to 200 homes. Peeling such locations away from the BEAD-eligible areas leaves a higher cost per passing for the remaining homes. That’s important, because most State Broadband offices will use the average cost per passing as one of the most important factors in scoring grant applications.

On top of all of these factors is the biggest unknown factor – which is local conditions that can drive up construction costs. The two biggest such factors are the cost of pole make-ready for aerial construction and the percentage of rock in the substrate for buried construction. State Broadband Offices have made estimates of the total cost to build BEAD networks. In doing so they had to estimate these kinds of cost drivers. If a Broadband Office estimated that 10% of pole have to be replaced as part of fiber construction, the actual costs for BEAD will be a lot higher if that turns out to be 15% or 20% of poles.

It will be a pleasant surprise if State Broadband Offices have been conservative and have overestimated the amount of BEAD grant they will be asked to fund. But my nagging premonition is that most will have underestimated.

Bottlenecks for BEAD Construction

It’s now clear that State Broadband Offices are going to put a lot of pressure on BEAD winners to spend grant awards and build networks as quickly as possible. ISPs generally have the same goal, because getting customers quickly is the best way to make sure an ISP can pay for the network.

However, there are numerous reasons why BEAD fiber construction might be delayed. Companies building in the northern U.S. must contend with a short construction season that makes it hard to build in the winter. While the whole industry has been gearing up to support BEAD projects, there still might be supply chain bottlenecks that pop up to plague some projects when there is a sudden flood of BEAD projects.  Some projects are going to get bogged down in environmental studies – particularly if the firms that do this kind of work are also swamped by the number of BEAD projects.

There are a few other major and predictable bottlenecks that will delay a lot of BEAD projects. For all construction, a possible major bottleneck is permitting. For aerial fiber construction, there will be delays due to make-ready issues on poles. For buried projects, there will be delays due to locating existing utilities.

Permitting. Contractors must obtain permits to engage in any construction. Since BEAD will largely be constructed in rural areas, the expected problems will come from county governments that are not ready to process permits that could cover a huge portion of the geography in a county. Counties might also be simultaneously dealing with projects funded by the FCC’s RDOF program, the FCC’s EACAM program, ReConnect grants, State broadband grants, and ARPA-funded grants. A lot of rural county’s have only a handful of employees and are not prepared for an onslaught of permitting requests.

Make-Ready. Make-ready is an industry term used to describe any work that must be done first to enable adding fiber to a pole. The effort required with make-ready can range from fairly simple work like trimming back tree branches that would interfere with the construction to the complex effort required to replace poles that can’t accommodate an additional fiber.

The process of putting fiber onto poles is highly regulated, and various States either have their own pole regulations or follow the FCC rules. Pole rules generally set a shot clock on how long a pole owner has to respond to a request to get onto poles and then complete any needed make-ready work. But for various reasons this process doesn’t always go smoothly, and there is a litany of things that can slow down the process. Some pole owners cooperate in the process while others quietly resist. Notably, State and federal pole rules don’t apply to poles owned by cooperatives and municipalities. Some poles are owned jointly by an electric utility and a telephone company and require that both parties buy off on requested changes. Pole replacement usually brings in the existing utilities that have wires on a pole – some of which will be competing with the new ISP. I could make a pages long list of specific ways that getting the make-ready work done could cause delays.

Locating. It’s mandatory that somebody locates existing buried utilities and other underground obstructions before somebody tries to bury new fiber. This is both a safety precaution (because hitting a gas or electric line can be deadly) and an attempt to minimize damage to existing underground utilities. It’s likely that you’ve seen evidence of a locate when you see spray painted lines and perhaps a message on streets like shown at the top of this blog.

Locates are not handled the same way everywhere. In some places, each existing utility locates its own infrastructure. In other jurisdiction the local government locates. In some places the locate work has been handed off to a third-party locator that ocates for every utility. The delays from locates are going to materialize when the folks who do the locates are going to be swamped by the sheer volume of miles of roads that must be examined due to BEAD.

Solutions. The NTIA recognized these roadblocks early and encouraged states to develop rules to expedite these processes, at least for the BEAD grant process. Some states have done so to some degree and have done things like tackling updated pole attachment rules. But it’s fairly obvious that most states have done nothing. In many cases the only solution is more money. For example, counties might need to hire additional locators or permitting staff to be ready for the increased workload.

It’s still not too late for states and counties to tackle these issues. I predict that the heaviest BEAD construction is going to be in 2026, meaning these pre-construction issues will hit in 2025. A lot of states have said that getting broadband to rural areas is a high priority – but if they don’t look at these key issues, then state and local governments will be part of the problem instead of the solution.

Regulating via Grants

I’ve written about this topic before. Everywhere I look I see BEAD grant rules that are doing what I call regulating by grant. State Broadband Offices are creating grant rules that go far beyond adhering to NTIA guidelines. They are insisting on grant rules which are intended to achieve social policies.

Today I’m highlighting a few such items buried inside the BEAD rules for Iowa. Note that there is nothing extraordinary about Iowa’s requirements and there are similar requirements found in many other states.

The two requirements discussed today are listed in Notice of Funding Availability (NOFA #009). This is a document included as Appendix A of the Volume II grant rules. The NOFA clarifies some of the requirements of the grant listed in Volume II.

The first requirement is in paragraph 1.3.18 of the NOFA and concerns having a low-price option for low-income subscribers. The price required is $40, and an ISP must offer a speed of at least 100/20 Mbps with no data caps or other fees or taxes added to the $40 fee. The most extraordinary thing about the fee is that it must be fixed for three years and then only increased in the future by inflation as measured by the Consumer Price Index.

Other states are requiring, or strongly suggesting similarly low rates. But Iowa has gone beyond requiring a low rate for some just a few years and mandates a permanently low rate that can only be increased in the future by inflation. The kicker is that the ISP will be expected to eat any fees or taxes that a State or the Federal government might place on broadband in the future.

This is a textbook case of rate regulation, and Iowa, and other states are using the grant to mandate broadband rates. This example is for a low-income rate, but other states are setting a cap on the rate for gigabit broadband. This is a clear violation of the original Congressional language in the Infrastructure Investment and Jobs Act that contained the following language, “NO REGULATION OF RATES PERMITTED.—Nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service.”

Another interesting provision of the Iowa grant rules is included in paragraph 1.6.3.5. of the NOFA. This requires any BEAD project that will be laying a fiber optic cable or conduit along a roadway must build either an extra conduit or else use at least a 2-inch conduit. The extra conduit or space inside the primary conduit are intended for, “interconnection by unaffiliated entities”.

This is an extraordinary provision. It adds tremendous cost to building a fiber network. It costs a lot more money to pull a second conduit when using boring. Cable plows are not set up to pull two conduits at the same time. It seems unlikely that this could be achieved with microtrenching. BEAD networks are expensive enough, but this provision adds tremendous cost to an already expensive network.

The worst thing about this provision is that it’s unnecessary. If Iowa’s intention is for BEAD networks to allow other carriers to pass through the networks at an affordable cost, it would be easy enough to mandate this for both aerial and buried fiber. ISPs can easily create an interconnection point almost anywhere in the network. Many other federal grants require grant recipients to provide affordable wholesale transport through grant-funded networks. This requirement seems to be requiring that grant recipients allow competitors into a BEAD network – funded by the grant recipient.

Again, this blog is not intended to highlight Iowa. Almost every state has BEAD rules that could be classified as trying to regulate ISPs through grant rules. I can imagine the conversations that led to these kinds of rules. “Broadband rates are too expensive, particularly for low-income households, and we have a chance to do something about it.”

I certainly understand the sentiment, and if I was in a State Broadband Office, I might be considering similar things. But it’s unfair to regulate BEAD grant recipients without applying the regulations to other ISPs in a State. The only way for regulations to be fair is to have them apply to all ISPs in a state, not just to the ISPs serving the most rural parts of the state – and regulators would never consider requiring such rules for everybody. I predict that some of the states trying to regulate through grants will find that ISPs won’t be interested in the BEAD funding. It’s already too complicated and expensive to comply with BEAD grant rules, and it makes no sense to layer on additional permanent regulations.

The New FCC Maps

Mike Conlow was amazingly quick as usual and assembled a quick comparison of the new fourth version of the FCC broadband map to the previous third version. The new map reflects data as of December 2023.

The big change since the third version of the map is a big decrease in unserved and underserved locations. Mike’s count shows that total unserved and underserved locations on the map are now 8.8 million, down from 10.1 million. If true, this is a huge change in the rural broadband landscape.

There are a lot of factors that could impact a change of this magnitude. Before discussing these issues, here are the net changes between the third and fourth FCC broadband maps:

  • Total passings increased by 388,222.
  • Served passings increased by 1,644,756.
  • Underserved passings (25/3 Mbps to 100/10 Mbps) decreased by 157,132.
  • Unserved passings (under 25/3 Mbps) decreased by 1,099,402.

The change varies widely by state. For example, Nevada and North Dakota show over a 40%  drop in unserved locations, while nine states saw a drop of unserved locations under 5%. Arizona saw an increase of 8,925 unserved locations. The biggest drops in unserved locations were in Texas (-143,669), Missouri (-59,576), Michigan (-59,384), and California (-58,957).

The big question that must be asked is if these changes make any sense. Let’s start with a list of reasons why passings would change between the third to the fourth FCC maps.

Total passings should increase to reflect new homes being built. I’ve always wondered how CostQwest (the keeper of the FCC mapping fabric) is able to keep up with new home construction by address.

Total passings for a state can also increase or decrease due to corrections in the mapping fabric. In my own investigations, I’ve encountered a lot of homes that are not in the mapping fabric, locations in the fabric where there is no real-world building, and locations like barns that are not an addressable broadband location. I would hope that CostQuest is fixing these over time as they find better data sources. Changes can also come from individual challenges to the FCC maps for folks who complain their home isn’t listed in the fabric.

The biggest change to unserved and underserved passings probably comes directly from ISPs that have changed the way they are reporting in the FCC map. There are a number of reasons why an ISP might change its FCC reporting.

  • An ISP might have built new infrastructure and is properly reporting locations that now have a new source of broadband. New broadband construction might have been funded by state and local grants, RDOF, ReConnect, or other sources. Some ISPs are self-funding broadband expansion.
  • An ISP might have upgraded technology. A WISP might have upgraded radios and speeds. A cable company might have upgraded from DOCSIS 2.0 or 3.0
  • ISPs might have arbitrarily reported faster speeds. In looking at broadband mapping data in different places around the country, I’ve encountered a suspiciously large number of places where an ISP claims exactly 100/20 Mbps capability. That’s a speed that categorizes a location as served and makes it ineligible for BEAD grants and many other grants. I’ve seen the 100/20 Mbps speed claimed for DSL, fixed wireless, and cellular fixed wireless.

Recall that the FCC mapping rules only require ISPs to report marketing broadband speeds. If an ISP markets to customers with speeds ‘up to 100/20 Mbps’ it is not breaking FCC rules to make that claim in the maps – even if it only delivers 30/5 Mbps to a location. This FCC rule to allow marketing speeds instead of some approximation of actual speeds has made a travesty out of the maps.

Is it believable that 1.3 million fewer unserved locations in the country got upgraded to faster technology in a six-month period? Almost by definition, most of the unserved and underserved locations are rural. While there is a lot of fiber construction underway due to broadband grants, it’s hard to picture that grants covered that many new rural locations during a six-month period. Consider the amount of investment that would have required. If the average cost per upgrade was $6,000, this would have meant completing $7.8 billion of construction in the second half of last year in rural areas. It’s hard to think even half of that was spent in a six month period.

That is not a believable number. It seems a lot more likely that ISPs are changing the areas they claim to cover and the speeds they are claiming to provide.

Seeing these big mapping swings while States are trying to launch the BEAD grants is one more sign that BEAD will be a mess. Some states have already gone through the early stages of the BEAD map challenge, and these new changes will not have been reviewed or challenged by anybody. It seems more likely with every big mapping swing that more places will fall through the crack and that deserving locations will get skipped by BEAD.

DOCSIS 3.0 is Obsolete

Most State Broadband Offices have decided that DSL is an obsolete technology, regardless of the bandwidth that it can deliver. This means that for purposes of BEAD grants, homes and businesses served by DSL are considered to be unserved even when the DSL is providing speeds greater than 25/3 Mbps (underserved) or 100/20 Mbps (served).

The reasons for ignoring DSL for purposes of BEAD is that DSL is an obsolete technology. Copper networks are old and dying. Telcos are working diligently to back out of the copper business. Even where DSL might still be working well for customers today, nobody expects those connections to still be functioning a decade from now. States want to make sure that customers whose only choice today is DSL will have a broadband option going into the future.

I think that NTIA and the States should make the same determination for cable networks still using DOCSIS 3.0 technology. There are still a number of small towns and cities where cable networks are deployed with this technology.

DOCSIS technology (Data Over Cable Interface Specification) was created by CableLabs to give cable companies the ability to deliver broadband over a hybrid fiber-coaxial network. There have been several generations of DOCSIS technology. The first generation of the technology was DOCSIS 1.0, released in 1997. This technology allowed cable companies to offer broadband download speeds of 1 Mbps, and was eventually used to boost download speeds to around 6 Mbps broadband.

This was quickly followed by DOCSIS 2.0, released in 2001. This upgrade allowed for more channels to be assigned to broadband and was used over time to offer speeds up to 60 Mbps download. DOCSIS 3.0 was a significant upgrade that allowed the bonding of multiple channels together for the broadband path. This allowed cable companies to increase download bandwidth to several hundred Mbps. But most DOCSIS 3.0 networks have upload speeds under 20 Mbps.

The most commonly deployed configuration of HFC technology in the U.S. is DOCSIS 3.1. This was the upgrade that introduced gigabit download capability. This is the technology deployed in every major city and in most smaller cities and towns. The cable industry is already conducting trials of DOCSIS 4.0. This upgrade will allow for speeds of 5 Gbps download and will also allow for upload speeds of several Gbps. This is the upgrade that cable companies hope will allow them to compete on an even footing with fiber.

It’s not hard to make an argument that DOCSIS 3.0 is obsolete. The technology will soon be two generations of technology behind what will be deployed in most markets. The vast majority of cable customers in the country have already seen an upgrade to DOCSIS 3.1 which brought the ability to buy gigabit speeds. Nobody expects DOCSIS 3.0 networks to still be functioning a decade from now. Any cable company operating this technology will have to eventually upgrade – but until they do, this technology should not qualify for BEAD funding.

It’s possible to tweak and fine-tune a DOCSIS 3.0 network to just squeak by as served for BEAD grants. But in my mind, counting DOCSIS 3.0 as served is equivalent to letting telcos still claim DSL as served.

It won’t take many years for a DOCSIS 3.0 network to degrade in capability as customers use more broadband each year. I always refer back to Open Vault statistics that show that the average usage for broadband customers has increased from 270 gigabytes per month at the end of 2018 to 641 gigabytes per month at the end of 2023. It’s inconceivable to think that a DOCSIS 3.0 network will be able to handle the broadband loads that are coming just a decade from now. That’s the primary reason why the technology is obsolete. If networks with DOCSIS 3.0 technology are classified as providing adequate broadband today, the owners of these networks will have no incentive to make investments to improve the networks.

I’m sure that a decade ago, nobody would have believed that there would be telcos still claiming 100/20 Mbps broadband speeds for DSL today – but I’ve seen pockets of this across the country. State Broadband Offices and the NTIA have recognized that the technology is not sustainable to meet future broadband needs and decided to ignore DSL when defining BEAD-eligible locations. If they apply the same logic to DOCSIS 3.0 networks, I’m positive they will draw the same conclusion.

How the Pandemic Changed Broadband

The Washington Post recently published an article with a series of graphs that shows the impact of the pandemic on a number of economic indicators that range from unemployment, wages, air travel, grocery prices, home prices, and consumer sentiment.

The article got me thinking about the impact of the pandemic on the broadband industry – and there are several important changes that came out of our collective pandemic experience.

Upload Speeds. Probably the biggest change for the industry was that many millions of people suddenly cared about upload speeds as people tried to work from home and students tried to attend class from home. There have always been people who complained about the ability to join a Zoom call, but before the pandemic, ISPs largely ignored them.

The pandemic turned the lack of upload speeds into a crisis. It turns out that upload speeds weren’t just a problem for slow technologies like DSL and hotspots. Cable companies suddenly had a lot of irate customers who were furious that they couldn’t maintain upload connections from home. Cable companies had put a lot of effort over the previous decade into staying ahead of download speed demand. Before customers began complaining about download speeds, cable companies had regularly made unilateral upgrades to download speeds. Every few years, customers would wake up to suddenly faster speeds, and surveys showed that most cable broadband customers were happy with download speeds from cable companies.

But the pandemic suddenly meant that cable technology was seen as inadequate. It was the collective experience of customers during the pandemic that led to the public becoming convinced that fiber is a better technology and that their cable company was behind the times. This prompted the cable companies to scramble to find a faster upload solution, and we’re just now seeing them implement faster upload speeds four years after the start of the pandemic. Only time will tell if current upload speed upgrades will be good enough to turn around the public sentiment that now favors fiber over coax.

Working at Home. The pandemic sent huge number of people home to work, and many of them have never gone back to the office. My consulting firm does surveys, and before the pandemic we rarely saw more than 10% of homes that had somebody working from home even part time. Today, we routinely find communities where 15% or more of homes have somebody working at home full time, and 50% of home have somebody working from home part time.

The main impact for ISPs of having customers working from home is that it created a lot of customers who are intolerant of broadband outages. People who work from home typically lose the ability to work during the outage, and ISPs get instant feedback about outages through complaints and negative online reviews. Our surveys show that intolerance from outages has climbed significantly since before the pandemic. Many customers believe broadband should always work.

Outrage over Lack of Rural Broadband. I’ve been working with rural communities that have been yelling for more than a decade about the problems caused by poor broadband. The pandemic brought this issue to national attention when employers and schools in cities and county seats couldn’t send people home for school or work. There was so much press about the issue that I think this was the first time that a lot of urban and suburban people realized that rural folks don’t have the same broadband.

I firmly believe that the outcry about the impact of the pandemic is what got the BEAD grants put into the IIJA legislation at such a high level of funding. Before the pandemic, the federal government and states would throw a billion dollars or so each year at fixing rural broadband – I used to call this the hundred-year plan to solve rural broadband. It took the pandemic to get bigger dollars thrown at the rural broadband gap. I don’t know if anybody has added up all of the funding, but between state, federal, and local grants, we must be spending nearly $100 billion for new rural broadband networks.

Rural Broadband Is Expensive Today

One of the trends that is a concern for ISPs is plans by State Broadband Offices to force BEAD winners to charge low rates for broadband. I understand some of the rationale behind these attempts.

One argument for lowering rates is that the government is paying a big portion of the cost of building the broadband networks, and it ought to be able to extract concessions from the ISPs for taking the grant funding. That sounds like a reasonable argument until you take a harder look at the places where BEAD funding is going to be used. In most places, BEAD will be used for the most sparsely populated places, which in many instances also have the toughest topography and construction challenges.

The other argument I’ve often heard is that ISPs can provide lower rates because ISPs make a lot of money and can afford it. This might be true for the large national ISPs that can average the revenues from BEAD areas across larger markets with higher margins. But big ISPs don’t want to take on markets that lose money, and they might pass on accepting BEAD in states that insist they charge low rates. Any assumption that smaller ISPs can afford to lose money on a property is badly misplaced – this is like expecting your favorite restaurant to provide low menu prices for a significant percentage of their customers. Such a restaurant won’t be in business for long.

BEAD grants are being offered to ISPs just to get them to consider building networks in places they would otherwise never consider. In many cases, the business case for coming to a BEAD area can barely reach profitability even with a large grant. This is not true of all BEAD places, and there are still some areas covered by BEAD with decent housing density. However, most BEAD areas are high cost to build and high cost to service and maintain after construction. I fully expect a bunch of ISPs who are wading into BEAD to wonder in five years why they ever went through the effort.

What the ISPs are providing as the quid pro quo for the grant funding is building a fast network that can bring a remote rural area into parity with urban broadband. There will be no excess margins in most BEAD business plans that can somehow cover low-cost broadband prices.

The other interesting point that most people are missing is that, for the most part, rural broadband rates are higher today than urban rates. Most areas that get a BEAD network will see lower rates along with a new faster broadband network. How can I say that? Consider the broadband alternatives that exist in rural areas that are BEAD-eligible.

  • Most people using Starlink are now paying $120 per month after shelling out for the receiver.
  • High-orbit satellite broadband is expensive. Consider Viasat. The base plans range from buying 40 gigabytes for $69.99 up to buying 300 gigabytes for $299.99. Extra usage after the data caps can be purchased in small bundles ranging from $9.99 for 5 extra gigabytes to $99.99 for 80 extra gigabytes.
  • Cellular hotspots can be incredibly expensive. The base fee for hotspots sounds reasonable, but the data caps are tiny. Consider AT&T. It sells a hotspot with either a 15-gigabyte data caps for $35 or a 100-gigabyte data cap for $55. The killer is that the overage fee for exceeding those data caps is $10 per gigabyte. Hotspots for T-Mobile, Verizon, and UScellular are similar. I still hear horror stories of families with school children who pay hundreds per month for a hotspot. The only way not to spend money with a hotpot is to greatly curtail broadband usage.
  • While not universally true, many rural fixed wireless providers have high rates. It’s not hard to find rates over $100.
  • The only ‘affordable’ rural broadband alternative is DSL. But it’s getting exceedingly difficult to find or sign up as a new DSL customer in most places, and in many cases the speeds are too slow to be usable. There are exceptions, of course, but most rural folks I’ve talked to tell me that DSL is no longer an option.

Many of the companies building BEAD networks will have rates significantly lower than the current rural rates cited above. BEAD networks will not have data caps, which eliminates the worry spending more than the basic rate. Most rural folks offered BEAD are going to be relieved if asked to pay a decent fixed rate for a connection that is far faster than what they had before. A huge percentage of rural households will see a significant monthly cost decrease just by paying the normal prices of the companies that build BEAD networks.

In saying this, I’m not ignoring the fact that there are households that can’t afford the normal prices charged by ISPs – but those folks also can’t afford the broadband prices available in rural areas today. Rural ISPs can’t shouldered with providing the low rates so that folks can afford broadband. ISPs can’t be forced to somehow fund the end of the ACP – particularly in rural areas. Anybody who has ever operated any business knows that operating with too-low rates is a road to eventual financial disaster.