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Regulation - What is it Good For?

Another Red Flag – the BEAD Labor Requirements

The BEAD grant rules established by the NTIA are going to be a difficult hurdle for many ISPs to cross. I think most ISPs reading the NTIA’s Notice for Funding Opportunities (NOFO) will find things on the list of requirements that will be hard or difficult to meet. If you are thinking of applying to BEAD, you should read these rules carefully after reading this blog. The rules start on page 56 of the NOFO.

Without trying to sound too critical, the labor requirements sound like something written by bureaucrats who are designing a hypothetically perfect labor system instead of written by folks who have ever built a broadband network and have dealt with broadband contractors. Let’s run through some of the requirements to make this point:

Those seeking grants must demonstrate that they intend to comply with federal labor and employment laws. I think every grant I’ve ever worked with has this same requirement, which is usually satisfied by having an officer of the applicant attest that they will follow the law. However, the NOFO goes much further than that. A grant office must obtain an applicant’s record of compliance with federal laws, as well as the records of any entities that will participate in the project, including contractors and subcontractors.

This will require an ISP to specifically identify contractors and subcontractors before filing for a grant. All of these entities must prove their past compliance with federal labor laws. This is not how the industry functions. The entire industry works on a system of primary construction contractors and a host of smaller subcontractor crews. Big ISPs like Charter and Frontier can easily identify their primary contractor because they will have them under contract to handle whatever future work comes along. Smaller ISPs typically find a primary contractor after they know they have a project – like after they win a grant.

I wrote a recent blog that talked about the problems that small ISPs are having in getting projects constructed. I gave an example of a financially stable ISP that couldn’t find a contractor in today’s market to build a few small projects funded by ARPA grants. This difficulty came after the ISP already had the projects and funding in hand. I can’t imagine rural contractors that will be willing to sign on to a grant project at the application stage when they don’t even know if the ISP will win the grant. This requirement shows a total lack of understanding of how small construction contractors function. Their number one goal is to always keep crews working. They choose projects based on the timing of the work, the level of payment, and the location.

It’s inconceivable to me that the typical contractor will agree to sign onto a grant project even before the grant application – that is forcing contractors to pick ISPs they think will win grants. This NTIA rules seems to want to make sure that all work is done by quality contractors by making applicants and contractors pair off even before winning a grant. I can think of a dozen ways how this can backfire on a contractor that agrees to work for a given grant project when it can’t possibly know if and when that grant will be awarded and when construction will start.

This requirement also shows a lack of understanding about the makeup of the construction companies that build broadband infrastructure. Underneath the prime contractors are normally a host of smaller subcontractors – even for projects built by the giant ISPs. Subcontractors are often single crews who hire on to projects. These small crews come and go. I’ve never heard of any sizable broadband project that could identify the small subcontractors that would eventually work on the project. Crews regularly leave and get replaced as needed during most projects. There is no way that these small 6-technician crews will sign on to theoretical grant projects two years before the start of construction. Only in a fantasy world can a contractor promise the make-up of the subcontractor workforce over the life of a multi-year construction project.

The NOFO suggests ways around this requirement, which it knows is hard, by suggesting that ISPs directly hire the labor force. I laughed out loud at that idea in an environment where ISPs are having trouble keeping existing staff or hiring new staff. Trying to build a grant project with employees might be the riskiest strategy of all. Most ISPs I know have an ethical problem hiring crews that will be let go in three or four years at the end of grant construction – and it’s hard to envision that an ISP can attract technicians who understand that work will be temporary.

Building networks with employees will also require buying expensive construction equipment that would have no use past the term of the grant. This idea is impractical since there is still a multi-year backlog in the supply chain for specialized fiber construction equipment. Plus, do we really want to require that an ISP must buy a million dollars of boring equipment just to win a grant? Can the NTIA please invent more ways to make it even more expensive to take the BEAD funding?

The NOFO also has a strong preference for using unionized contractors and getting a labor agreement specific to the grant project. The NOFO even suggests labor peace accords where workers agree to not strike or disrupt work during the life of the grant. It seems like a big stretch to get unions to make such agreements for theoretical grant projects that may not be built for many years into the future.

The NOFO also places a huge emphasis on having an “appropriately skilled and credentialed workforce (including by the subgrantee and each of its contractors and subcontractors)”. This means using a workforce where all members of the project workforce will have appropriate credentials, e.g., appropriate and relevant pre-existing occupational training, certification, and licensure.

For projects that don’t use union labor, NTIA wants to see that every employee, including contractors and subcontractors, has safety training, certification, and/or licensure requirements (e.g. OSHA 10, OSHA 30, confined space, traffic control, or other training as relevant depending on title and work), including whether there is a robust in-house training program with established requirements tied to certifications, titles; and information on the professional certifications and/or in-house training in place to ensure that deployment is done at a high standard.

Whoever wrote the NOFO has no understanding of the construction crews who build networks. There has been only a handful of certification programs around the industry for decades, and only a small percentage of technicians who build networks have any formal certification. I think every ISP will agree with me that they want a crew made up of construction veterans with a decade or two of experience rather than a crew that has technicians with newly minted certifications.

It’s hard to know if this is intentional, but like many of the BEAD requirements suggested by NTIA, these labor requirements greatly favor large ISPs over small ones. I think most smaller ISPs will be unable to identify contractors and subcontractors ahead of time and convince contractors to provide their history of adherence to federal law, have all certified employees, and jump through a mountain of paperwork. If I was a contractor, I wouldn’t touch a BEAD grant project with a 10-foot pole – there is plenty of other work available.

I hope that State Broadband Offices push back hard on these requirements to make them realistic. That won’t be easy because some of these rules seem mandatory – but not all.  I strongly urge State Broadband Offices to sit and talk with local ISPs and construction contractors about the hurdles created by these rules – because these requirements will stop quality ISPs from pursuing the BEAD grants.

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Regulation - What is it Good For?

The BEAD NOFO – A New Definition of Broadband Technology

The Notice of Funding Opportunity (NOFO) for the $42.2 billion BEAD grants establishes new rules for the grants that might have a wider implication for broadband elsewhere. One of the most interesting aspects of the NOFO was the definition of a new term – Reliable Broadband Service.

The NOFO defines Reliable Broadband Service to means a broadband service that is shown to be providing broadband in the FCC maps using (i) fiber-optic technology; (ii) Cable Modem/ Hybrid fiber-coaxial technology; (iii) digital subscriber line (DSL) technology; or (iv) terrestrial fixed wireless technology utilizing entirely licensed spectrum or using a hybrid of licensed and unlicensed spectrum.

The key purpose of this new term is to define the technologies that can’t be overbuilt if the speeds on those technologies meet the BEAD speed requirements. For example, BEAD grants can’t be used to overbuild a cable network that has speeds today faster than 100/20 Mbps. However, there are some tiny rural cable systems that have speeds slower and that – and BEAD could be used to overbuild them.

The more interesting aspect of this definition is that the BEAD grants can be used to overbuild any other technology such as satellite broadband or fixed wireless networks using unlicensed spectrum. It doesn’t matter what the speeds are for these networks since NTIA has declared these technologies to be unreliable.

While this was expected and could be imputed from the Congressional enabling language, this is a clear blow to existing WISPs that are delivering decent speeds in rural places. The vast majority of WISPS use unlicensed spectrum – and I believe that this language also covers the use of CBRS spectrum – it’s lightly licensed but is not exclusive for a given ISP.

It’s also hard with this definition to think that anybody using satellite or unlicensed spectrum for fixed wireless will be eligible for BEAD grants, since those technologies have been declared by the NTIA as being unreliable. I don’t think it matters what speed these technologies can deliver – the NTIA has labeled them as unreliable.

This definition puts a label on those technologies that I’ve never seen used, but which is descriptive. Fixed wireless coverage varies in practice due to factors like temperature, humidity, and precipitation. The biggest issue with unlicensed spectrum is the possibility of debilitating interference. Not every home can see satellites due to terrain or tree cover, and satellite technology cannot guarantee serving everybody in a grant footprint – a key requirement in the NOFO for any grant winner. Earlier federal grants allowed for technologies that would reach most, but not all households – but the BEAD grants insist on total coverage.

Another part of the reasoning for the NTIA in coming up with this definition is probably the useful life of satellite and fixed wireless technology. It sounds pretty certain that low-orbit satellites will fall out of the sky after 5 – 7 years and will have to be replaced. The whole industry understands current fixed wireless technology to have a shelf life of around seven years. It’s easy to define these technologies as unreliable since there is no guarantee that a grant awardee will replace the technologies when needed.

This also raises an interesting question for elsewhere in the industry. Starting last year, the major broadband agencies in the federal government have been required to regularly communicate and coordinate. I have to wonder if this new definition might be the death knell for some of the big open RDOF awards that use satellite and fixed wireless technologies. If the FCC agrees that those technologies can’t serve everybody in an award area, then this new definition gives the FCC an easy way to cancel those awards.

This doesn’t mean that WISPs or satellite providers won’t still be in the market or even that they might not fare well – they are free to compete. But this new definition means that these technologies can be overbuilt with fiber or other technologies that satisfy the NOFO. And it seems likely that this means that satellite companies and WISPs using unlicensed spectrum are not going to be able to get BEAD grants.

Like every requirement in the NOFO, these rules will have to be interpreted by the fifty states. I think this particular language is fairly clear, but it will be interesting to see how states interpret this and the many other new rules and definitions created by the NOFO.

 

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