Tag Archives: BEAD non-deployment funds

BEAD Non-deployment Complications

The NTIA should be getting close to approving all of the state BEAD initial grant proposals. Once that has been done, one of the last big steps will be for NTIA to announce how States can receive and use the BEAD non-deployment funds. When NTIA initiated the Benefit of the Bargain rules, the amounts of BEAD allocated to infrastructure plummeted, and the non-deployment funds mushroomed to over $20 billion, almost half of the original $42.45 billion BEAD funding.

NTIA will hold a listening session soon to hear ideas from State Broadband Office on how they would like to use the funding. Most States had specific proposals for using the funds, but States may not have specific plans for the increased amounts of non-deployment created by the Benefit of the Bargain changes.

The nondeployment process got complicated when the White House issued an executive order that said that NTIA “must provide that States with onerous AI laws … are ineligible for non-deployment funds, to the maximum extent allowed by Federal law.”

A number of State Attorneys General have expressed a willingness to sue NTIA should they be denied non-deployment in general, but also specifically if they are denied because they have state AI regulations. There is a great article, written by Lawfare, on the legal issues involved if this issue is taken to court. The article concludes that States have a great argument to question if NTIA or an executive order can overcome the intent of Congress when it passed the original BEAD rules.

One interesting observation in that article is that the White House is relying on a claim that State AI regulations may harm the development and deployment of AI. The argument is that AI applications drive demand for the Internet, so any State regulations that threaten the use of AI also threaten the value of BEAD-funded infrastructure. If that line of reasoning is deemed to be valid, it would imply that NTIA could withhold funding related to any other web applications that uses a lot of broadband.

The AI issue got more interesting when 22 states and the District of Columbia filed comments with the FCC in December that ask that the agency to not preempt any State AI regulations. While many of the States in the filing are blue, the filing included Arizona, Tennessee, and Utah.

The final interesting aspect of the issue is legislation introduced by two republican Senators, Roger Wicker (R-MS) and Shelley Moore Capito (R-WV), titled the SUCCESS for BEAD Act. The legislation is viewed as a way to negate the Executive Order and would require States to receive full funding and to distribute non-deployment funds through a competitive subgrant process. This would require grantees to provide a 25% match. The non-deployment funds could be used for six purposes: infrastructure improvement in rural areas, the enhancement of public safety and/or national security, network resiliency and cybersecurity protections, federal or military facilities, improving network latency, and the advancement of AI and related technologies.

Meanwhile, NTIA is still referring to non-deployment funds as savings, although there has been an acknowledgement that some of the funds should be distributed to States. I suspect that if NTIA does anything less than full distribution of all of the funds, we’ll see some combination of legislation and lawsuits to gain access to the funds.

Some Hope for Non-deployment Funds?

There is still some glimmer of hope that states will see some of the BEAD non-deployment funds. I call it a glimmer of hope because the issue is far from settled.

In a December 21 online post, Commerce Secretary Howard Lutnick was still taking credit for having saved taxpayers about $21 billion through changes in the BEAD rules. He was responding to a Wall Street Journal editorial (Trump Unbreaks the Internet), that had praised NTIA Administrator Arielle Roth for the change in direction of the BEAD program. Secretary Lutnick said the Administration is fixing the broadband mess left behind by the Biden Administration and that Commerce has stopped funding broadband builds he characterized as “rip-off projects run by powerful lobbyists who are very good at getting grants and very bad at delivering results”.

In December, there was some movement by Congress to require NTIA to release the BEAD nondeployment funds. Senators Roger Wicker (R-MS) and Shelley Moore Capito (R-WV) introduced the Supporting U.S. Critical Connectivity and Economic Strategy and Security (SUCCESS) for BEAD Act that would require NTIA to disburse funds not used for infrastructure to the States. On December 23, Representatives Andy Barr and Hal Rogers, Republicans from Kentucky, introduced a matching bill in the House. These two laws just reinforce the rules in the original IIJA legislation that said that any of the $42.45 BEAD grants not used for infrastructure would still go to the States.

In early November, Arielle Roth characterized the nondeployment funds as savings in a speech made to the Hudson Institute, which signaled that NTIA didn’t want to send the money to States. However, in a forum at the Free State Foundation on December 2, Roth said she was “operating under the assumption that the states will get to use their BEAD savings. But again, nothing has been finalized.” She also said in that forum that  “any spending must produce real, measurable value, not duplicate investment the private sector is already making.”

Obviously, none of this makes NTIA’s intention clear for non-deployment funds. The issue is further complicated by an Executive Order from the White House that said that non-deployment funds can’t be flowed to States that adopt “onerous” restrictions on artificial intelligence.

NTIA has said that it will make a decision about non-deployment funds after it finalizes all of the BEAD infrastructure grants. As I write this blog, the BEAD plans of 39 states and territories have been accepted by NTIA, and the agency said it hopes to finalize the remaining plans in January.

It’s clear that earlier in the year, Secretary Lutnick intended to cut BEAD grants to claim savings on government spending. He said so many times, and is still referring to the non-deployment funds as savings.

I assume there has been a lot of lobbying on the topic from those in Congress and Governors. The House and Senate bills that require releasing the funds have been proposed by Republicans. Perhaps the pressure the lobbying for the funds is being effective since most of the large dollar amounts of nondeployment funds are in red States, including Texas ($2.04 B), North Carolina ($1.12 B), Georgia ($1.00 B), Missouri ($946 M), Alabama ($869 M), Florida ($869 M), Louisiana ($856 M), Arkansas ($692 M), Kentucky ($623 M), Tennessee ($609 M), Ohio ($517 N), and South Carolina ($510 M).

There is no way to know what the restriction on non-deployment due to AI will mean. A sizable majority of states either have already passed AI regulations or are considering them. Florida Governor Ron DeSantis reacted to the Executive Order by saying that Florida absolutely reserves the right to regulate AI, and I suspect a lot of state legislatures feel that way. I guess it will boil down to how NTIA interprets the term “onerous” regulation in the Executive Order.

The bottom line of all of this is that it’s clear as mud about whether States will see non-deployment funds, but the issue is not dead. We’ll probably know more by the end of the first quarter.

Congress Active with Broadband Bills

We’re near the end of the year, and Congress is recessed until the new year. That hasn’t stopped Congress from introducing interesting new bills related to broadband. Any bill introduced in the first year of Congress is not automatically carried over to the second year session, but I assume these new bills are meant for deliberation in 2026.

Support for Non-Deployment Funds. Senators Roger Wicker (R-MS) and Shelley Moore Capito (R-WV) introduced the Supporting U.S. Critical Connectivity and Economic Strategy and Security for BEAD Act. This legislation would authorize States to use any remaining BEAD non-deployment funds that were not used to build infrastructure. The bill directs NTIA to give these funds to States to support functions like enhancing public safety, improving network resiliency, strengthening national security, and developing a qualified workforce for emerging technologies. This is a major issue since non-deployment has grown to over 21 billion, which is half of the $42.5 billion BEAD funding.

To some degree, this law feels redundant because it reiterates the same use of non-deployment funds that was directed in the original IIJA legislation that created BEAD. The need for this bill is only an issue because NTIA has been referring to the monies not used for broadband deployment as ‘savings’, which they want to return to the U.S. Treasury. If enacted, this would be Congress’s way of emphasizing that it meant what was written in the original law. If enacted, it also means that a lot more of the BEAD funding could have been used to build fiber and other long-term technologies instead of going to satellite broadband.

Expand Mental Telehealth. Representatives Andrea Salinas (D-OR) and Diana Harshbarger (R-TN) reintroduced the bipartisan Home-Based Telemental Health Care Act. If enacted, the legislation would expand access to telehealth services, including mental health and substance use care. The legislation is aimed at rural Americans who have barriers to in-person care, especially for individuals working in the farming, fishing, and forestry industries.

The legislation would create a new grant program that would provide funding for mental health and substance use care for people living in designated Health Professional Shortage Areas. The grants would be managed by the Department of Health and Human Services in consultation with the U.S. Department of Agriculture. Funding could be used to expand telemental health services, including providing broadband access and devices to use telehealth technology. The grants would also explore the feasibility of expanding the program to in-person services. The bill authorizes $10 million in grants for fiscal years 2025 through 2029.

Sunset Section 230 Immunity. Senators Lindsey Graham (R-SC), Dick Durbin (D-IL), Chuck Grassley (R-IA), Sheldon Whitehouse (D-RI), Josh Hawley (R-MO), Amy Klobuchar (D-MN), Marsha Blackburn (R-TN), Richard Blumenthal (D-CT), Ashley Moody (R-FL), and Peter Welch (D-VT) introduced the Sunset Section 230 Act. The legislation would repeal Section 230 of the FCC rules two years after the date of enactment. Section 230 was created in 1996, as a part of the Communications Decency Act. The purpose of Section 230 is to grant limited immunity to online platforms for user-generated content. Section 230 also shields online platforms from any damages from good-faith efforts to moderate or block objectionable content.

The stated purpose of the new legislation is to allow the public to hold platforms accountable for allowing illegal content, child exploitation, and misinformation, based on the underlying premise that the big web platforms currently have near-immunity for damages that arise from their “profits over people” operating model. This is going to be a controversial law, and opponents of the legislation argue that the law will stifle free speech, force platforms to over-censor to avoid massive lawsuits, harm small online platforms, and fail to address underlying issues of harmful content amplification by big tech.

 

AI and BEAD Non-Deployment

Yesterday, President Trump signed an Executive Order that gives the federal government the sole authority to regulate AI. The EO provides three justifications for asserting federal authority.

United States AI companies must be free to innovate without cumbersome regulation.  But excessive State regulation thwarts this imperative.  First, State-by-State regulation by definition creates a patchwork of 50 different regulatory regimes that makes compliance more challenging, particularly for start-ups.  Second, State laws are increasingly responsible for requiring entities to embed ideological bias within models.  For example, a new Colorado law banning “algorithmic discrimination” may even force AI models to produce false results in order to avoid a “differential treatment or impact” on protected groups.  Third, State laws sometimes impermissibly regulate beyond State borders, impinging on interstate commerce.

Within 30 days, the U.S. Attorney General is required to establish an AI Litigation Task Force with the sole responsibility to challenge State AI Laws. It seems likely this will result in a series of federal lawsuits trying to preempt any State AI regulations.

Of concern to the broadband world is that the EO includes specific language that singles out BEAD grant funding. The EO says:

Within 90 days of the date of this order, the Secretary of Commerce, through the Assistant Secretary of Commerce for Communications and Information, shall issue a Policy Notice specifying the conditions under which States may be eligible for remaining funding under the Broadband Equity Access and Deployment (BEAD) Program that was saved through my Administration’s “Benefit of the Bargain” reforms, consistent with 47 U.S.C. 1702(e)-(f).  That Policy Notice must provide that States with onerous AI laws identified pursuant to section 4 of this order are ineligible for non-deployment funds, to the maximum extent allowed by Federal law.  The Policy Notice must also describe how a fragmented State regulatory landscape for AI threatens to undermine BEAD-funded deployments, the growth of AI applications reliant on high-speed networks, and BEAD’s mission of delivering universal, high-speed connectivity.

In case you are wondering the extent of State AI regulations, the following map comes from BCLP, which is accompanied by a description of existing and pending AI regulations, by State. As this map shows, over half of the States already have some form of AI regulation, and only three states don’t have existing or pending AI regulations.

It’s been clear that NTIA has been seeking a mechanism for denying non-deployment funds, which are the portion of the $42.5 billion in BEAD that is not being spent on infrastructure. Current estimates are that non-deployment funds will be more than $21 billion. These funds are supposed to be distributed to States under the IIJA legislation. This EO gives NTIA the grounds for denying non-deployment funds for a lot of States.

If you read through the existing AI regulations, most are of two types. Many States have enacted legislation that makes it illegal to use AI to defraud people, adding AI to laws that already forbid using emails, telephone calls, and other forms of communication. There are also States that have legislation that tries to protect citizens privacy. There are a few States with other restrictions.

State Broadband Offices in States that have AI regulations do not have the power to overturn AI regulations, and State legislatures must act if they want to cancel AI regulations to preserve non-deployment funds. That may be a futile effort, because my best guess is that we haven’t seen the end of attempts to deny non-deployment funds and that this is only the first volley. For what it’s worth, there is opposition to overturning State regulation of AI in Congress, but it would be extraordinary for this Congress to override an Executive Order with legislation.

Status of BEAD Non-Deployment Funds

While States are scurrying to award BEAD infrastructure funds before September 4, the other portion of BEAD – non-deployment funds – is in limbo. One paragraph of NTIA’s BEAD Restructuring Policy Notice put non-deployment funding on hold:

Funding for allowable non-deployment purposes is under review and NTIA will issue updated guidance in the future. As of the date of this Policy Notice, NTIA rescinds approval of all non-deployment activities approved in Initial Proposals. NTIA will not reimburse Eligible Entities for any new costs associated with previously approved non-deployment activities incurred after the date of this Policy Notice. An Eligible Entity should consult with the NIST Grants Office and NTIA if the Eligible Entity believes that it is entitled to reimbursement for non-deployment activities or costs that were incurred prior to the publication of this Policy Notice. Final Proposals will only require detail on the use of BEAD funds for deployment projects.

For those who haven’t been following BEAD closely, non-deployment funds are any remaining money after a State has made awards to bring broadband to every BEAD unserved and underserved location. Because of the uneven nature of allocating BEAD funding to States, some States didn’t expect to have any non-deployment funding, while others expected significant non-deployment funds.

NTIA’s original guidance from several years ago suggested that non-deployment funds could be used for projects related to broadband adoption, providing broadband devices to the public, digital skills training, and other activities to complement BEAD’s universal connectivity goals. States had already published creative plans for using the non-deployment funds. For example, West Virginia planned to use $30 million to create a database of utility poles in the state, $4 million to update security on the State’s own network, $90 million to award grants for expanding rural cell towers, and $30 million for training programs for technical jobs in the telecom sector.

The new rules from NTIA in the Notice clearly expect States to reduce the money spent on broadband infrastructure since the new BEAD grant rules give top priority to ISPs that request the lowest amount of money to achieve the desired BEAD goal of 100/20 Mbps. We won’t really know what this means until the States announce the final BEAD grant winners – but the consensus is that it will mean significantly less BEAD funding for fiber and more for satellite and fixed wireless broadband.

If NTIA sticks to the rules determined by the BEAD legislation, then any reduction in spending on infrastructure would mean increased funding for non-deployment purposes. Congress intended that the full $42.5 billion of BEAD funding be spent on broadband infrastructure or related non-deployment activities. Governors and elected officials from red and blue states have been urging NTIA to use the funds as intended by Congress.

I conducted an informal poll on the question to policy folks around the industry. Some expect that NTIA will kill all non-deployment funds as a way to take credit for ‘returning’ money to Treasury. Others are hopeful that NTIA will allow at least some non-deployment activities. Optimistic folks point to the fact that NTIA left the door open and didn’t kill the funding when they issued the Notice of the new rules. That same notice officially killed funding for digital equity grants, and it would have been an easy way to end non-deployment funds.

As mentioned in the quotation above from the Notice, the September 4 filing from each state for BEAD grants no longer requires a revised request for non-deployment funds. I expect that most States will still include their wish-list for the use of non-deployment funds. It seems like that will put NTIA into the position of accepting or rejecting specific non-deployment projects.  That could mean a lot of bad press, state by state if NTIA rejects ideas like the West Virginia plan to spend $90 million on new rural cell towers – a long-term infrastructure project that would benefit a lot of people in the state for decades.

An even bigger question is how an agency like NTIA could decide to not spend non-deployment funds that were specifically directed by Congress. It’s one thing for the White House to issue executive orders that countermand Congressional spending, and courts will be busy for a long time figuring out the extent that is allowable. It’s a whole lot fuzzier if an agency like NTIA can directly ignore Congress. For all of us who thought we knew how the federal government works, this is uncharted territory.