Tag Archives: BEAD

BEAD Cost Caps

Most States have now sent final BEAD proposals to NTIA with a list of the proposed ISPs to win BEAD funding for every eligible location. The next step is for NTIA to review grant applications, which is now underway. The agency has already been contacting States and establishing a cost cap for each State based on the CostQuest cost models.

Several States have reported that NTIA is instructing the State to outright reject any proposed award that is more than 85% of the cost cap. States are to ask any ISP with a proposed BEAD cost between 65% and 85% of the cost cap to lower the BEAD award to 65% or else default the grant. Any proposed BEAD award below 65% of the cost cap is apparently safe for now. This may not be the last step, and NTIA has set a deadline for itself for December 4 to review all grant awards.

The current process is clearly aimed at lowering the amount of funding awarded by BEAD. The Benefit of the Bargain round of BEAD grants has already drastically lowered the amount of BEAD grants. For the States that have reported to NTIA when I wrote this blog, States have awarded $16.1 billion for grants, and those same States are not spending $17.9 billion of unassigned funding. We have no way of knowing NTIA’s motivation – is this purely to save federal grant monies or to give more money to satellite.

I understand the desire to save federal grant money. However, Congress created the $42.5 billion BEAD program with rules intended to spend all of the funding, either for infrastructure grants or for broadband-related uses. With the current awards, almost 53% of the funding will go unspent, and that percentage will climb as States implement the cost thresholds.

There are several reasons why using CostQuest cost studies to establish the cost caps doesn’t make much sense. By definition, a huge percentage of BEAD locations are more costly to reach with a wired technology than the average cost to reach everywhere in a State. I would hope NTIA took that into consideration when setting the cost caps.

Statewide averages costs don’t make sense for states that have a wide range of topology and household density. I look at my own state of North Carolina, which goes from the ocean coast, through urban centers, into the Piedmont hills, and finally into Appalachia. I remember when Minnesota used average costs from the CostQuest models as a way to validate the magnitude of grant requests. The State calculated a different average cost for each County, which makes a lot more sense than applying a single cost cap for a whole state.

There is another issue that might be the most important reason why it makes no sense to look at CostQuest model numbers. In most places in the country, the BEAD location map is comprised of a mixture of BEAD-eligible locations and locations that either have good broadband or are supposed to get it. There are myriad examples where a BEAD eligible-location sits next door to one that is not eligible. In many cases, this hodgepodge represents an error in broadband mapping more than any reality in the real world – but that is a topic for another blog.

Picture having to build into a small rural neighborhood where only half of the homes are BEAD eligible. This results in a cost per passing that is likely almost double what it would be if every location were BEAD-eligible. This situation is found all over the BEAD map, everywhere I’ve looked. The folks who designed BEAD understood this because it was widely publicized how RDOF awards had carved up the broadband landscape into Swiss cheese rather than into contiguous grant areas.

All of these reasons mean that applying a single statewide cost cap to judge BEAD locations  is nothing more than an exercise to lower grant spending. I’m just speculating, but this seems to be a tool to get the broadband office to cancel grants rather than NTIA having to be the heavy. What’s clear is that the bottom-line result of applying a cost caps will mean a lot more locations awarded to satellite or other low-cost technologies.

BEAD Awards and Satellite

North Carolina, where I live, recently announced its preliminary awards for BEAD. The State has allocated $408.5 million for preliminary BEAD awards out of an allocation of BEAD money to the State of $1.5 billion. That leaves an astounding $1.1 billion on the table and likely unspent. There is some hope that the unspent money, referred to as non-deployment funds, will be at least partially available to the State for broadband-related activities. But that possibility seems to be dwindling every day.

The State had to cover 93,138 homes and 374 community anchor institutions with the BEAD funds. The State made awards to build fiber to 68% of the locations, to deploy cable or fixed wireless to 2% of locations, and to subsidize low-orbit satellite providers for the remaining 30% of locations.

Now that the awards have been announced, we can finally see the proposed BEAD areas by location and technology. I live in Western North Carolina, that was devastated a year ago by Hurricane Helene. There was a lot of hope in this part of the state that most of the awards would go to fiber. The State mostly did okay for Western North Carolina. Of the 29,400 BEAD-eligible locations in this part of the state, over 24,000 went to ISPs who promise to build fiber, leaving 5,300 locations that will get awards for low-orbit satellite. Most of the satellite funding in the State went to Kuiper, which got $15.9 million out of the $18.3 million awarded to satellite. People here are scratching their heads, wondering why a company with only a hundred satellites is being awarded grant funding.

But now that the funding for satellite has sunk in, I’m starting to see what this means for Western North Carolina. First, there are five counties where satellite was awarded to all of the eligible BEAD locations – Clay, Madison, Mitchell, Polk, and Yancey.

What do County officials in those counties tell people? NTIA is giving money mostly to Kuiper and some to Starlink to be able to offer them satellite broadband. All of the BEAD-eligible locations in these counties can already buy satellite broadband from Starlink. The only benefit of BEAD for these residents is that they will probably get a free receiver for enrolling as a BEAD customer. Any hope these counties had of filling in the map with fiber is now gone.

There may be future broadband grants. For example, USDA is planning a new round of ReConnect grants. But even if we assume that ReConnect can be used to cover areas served by satellite, ReConnect won’t make a big dent in areas given satellite from BEAD. So far, with 45 states reporting preliminary BEAD results, the two satellite companies have been awarded $707 million in BEAD. That’s a lot of locations nationwide, and the number is likely going to grow significantly before BEAD grants are final.

It was understood from the time that the BEAD rules were adopted by Congress that there would have to be some remote locations that can’t be reached with fiber. But nobody thought it would be nearly as many as we are seeing. The BEAD grants were originally going to award $45.5 billion in grants, but it now looks like the actual awards will be less than half of that amount.

In North Carolina, a lot of the 5,300 locations in Western North Carolina could have gotten fiber if the state had been able to use more of the $1.1 billion it will be returning to Treasury. I fully understand the desire to be cost-conscious with federal funding, but BEAD was intended by Congress to be a once-in-a-generation opportunity to build long-term broadband infrastructure for a lot of rural America. I always assumed that the BEAD emphasis on fiber first would have meant that States would be judged for the whole portfolio of grants being awarded, and wouldn’t shy from awarding BEAD for areas where construction costs are higher than average.

I have to mention that the proposed grant awards are far from final. I’ve heard from multiple States that NTIA is now asking them to either reduce the amount of funding for some grants or reassign the money to somebody else. That likely will mean even more locations will go to satellite by the time the dust settles and the BEAD grants are final.

The Accelerating Rate of Deregulation

We’re less than eight months into the new administration, and when considering that short amount of time, there has been an unprecedented amount of deregulation coming out of the federal government related to broadband and telecom issues. Regulatory changes aren’t just coming from the FCC, but also from the White House, NTIA, Congress, and other agencies like the FTC.

The trend to deregulate under a Republican administration is not a surprise. For example, we heard a lot of deregulation rhetoric when FCC Chairman Ajit Pai took over the FCC. His FCC tackled deregulation, but at a much slower pace than the current administration. Brendan Carr hit the ground running in this new administration when he was named as Chairman soon after the inauguration.

Following is a list I made of deregulatory changes I can recall that have happened this year, and I’m sure I’ve missed a few.

  • Chairman Carr came in with the intentions of killing Title II regulation of broadband and net neutrality, but was spared the effort when, in early January, the U.S Court of Appeals for the 6th Circuit struck down the regulations that had been adopted by the previous FCC.
  • The FCC’s signature deregulatory thrust has been labeled as Delete, Delete, Delete, which is a streamlined way to eliminate obsolete regulations. In practice, it appears that the FCC has decided to take shortcuts and has shortened the timeline or totally eliminated the ability for public comments before regulations are eliminated.
  • The FCC canceled rules that allowed the Universal Fund to pay for WiFi on school buses. The FCC is currently killing rules that would allow the USF to fund hotspots for lending in libraries.
  • The FCC made it easier for telcos to retire copper by putting a 2-year moratorium on public notices of upcoming copper retirements. The FCC is now working to make the temporary rules permanent.
  • In perhaps the biggest change, the White House ordered NTIA to cease the implementation of the $2.75 billion Digital Equity Act that was to be used for teaching people how to use computers, making sure every household had a computer or tablet, and promoting subscription to home broadband.
  • NTIA weakened the $42.5 billion BEAD grant program. The agency:
    • Watered down the assumed preference for fiber and tried to give more funding to alternative technologies like satellite.
    • Eliminated the mandate that anybody building a BEAD network had to have at least one broadband product that would be affordable for low-income households.
    • Weakened labor requirements and got rid of the preference for prevailing and union wages.
    • Perhaps the biggest long-term impact of the BEAD changes is that NTIA has seemingly defined satellite broadband as a legitimate broadband option for homes, meaning most homes can now be said to have a broadband option.
    • It looks like all of these changes might mean a $10-$20 billion reduction from the expected $42.5 billion program.
  • The FCC stopped the implementation of lower rates for telephone and video calls in jails and prisons.
  • The Federal Trade Commission halted the implementation of Click to Cancel, which would have mandated that any company that lets a customer subscribe online must make it just as easy to cancel service online.
  • While not specifically deregulation, the FCC has ignored its own timeline for kicking off the 5G for Rural America Fund, which is supposed to bring a lot more cell towers to rural America.
  • Courts continue to weaken the FCC’s authority. Several rulings in 2024 weakened the FCC. For example, Loper Bright Enterprises v. Raimondo overturned the Chevron Doctrine, which brings into question the ability of the FCC to enact laws that were not specifically mandated by Congress. This year, McLaughlin Chiropractic v. McKesson Corp gave District Courts more leeway to disagree with rulings made by federal agencies like the FCC.

To be fair, there are some new regulations to go along with the deregulation effort:

  • The FCC adopted some new regulations for poles related mostly to how pole owners must react to large orders for getting onto poles.
  • Congress reinstituted the spectrum auction for the FCC. However, that new law may reclaim some WiFi and CBRS spectrum for auction, which is key for rural and home broadband.
  • Tariffs on most imported goods have increased the cost of building broadband networks, particularly for electronics.
  • The FCC is suddenly opining on the content on network television and has threatened the broadcast licenses of the large broadcasters.

I couldn’t decide how to categorize the recent issue where the FCC said it was going to examine and try to kill any state regulation of AI. Should that be categorized as more deregulation, or an increase in federal regulation?

This is a huge number of changes for only an eight-month period, and I have to wonder how far the deregulation effort will go over the next few years.

Showdown at the BEAD Corral

The telecommunications industry has not had many instances when a momentous decision could drastically change the industry. The only big one I remember was when Judge Harold Greene issued the landmark ruling in 1982 that resulted in the divestiture of AT&T into multiple local Baby Bells and the remaining AT&T long-distance company. While a small number of insiders knew what was coming, the announcement of the divestiture rocked the industry and drastically changed it going forward.

Rural broadband is facing a similar dramatic moment when the NTIA decides what its going to do with the BEAD proposals that States have presented to it. State Broadband Offices (SBOs) have been submitting final BEAD plans that are still mostly fiber. This seems to fly in the face of NTIA, which changed the rules to give a lot of funding to alternative technologies, meaning satellite and fixed wireless.

A little history is needed to explain why I categorize this as a showdown. In the original NOFO for BEAD, the NTIA clearly stated that its preference was for as much of the BEAD money as possible to go to build fiber. The fiber preference came from wanting to use this once-in-a-generation grant to create long-term broadband networks in rural areas. Over time, the NTIA eased its stance a little and came out with rules to describe how satellite broadband can be used to serve remote locations. But the preference was still to use BEAD for fiber.

The new administration upended the BEAD program. In June, it issued new BEAD guidelines that made it much harder to award money for fiber. The NTIA rules essentially turned the BEAD review process into a one-round reverse auction and said that BEAD funding should go to the ISP that asks for the least amount of grant per location. The only caveat was that the NTIA could consider a second applicant that was within 15% of the cost of the lowest bidder. When the new rules were published, the industry collectively saw it as a fiber killer.

But the new rules had a small loophole. SBOs could designate some BEAD applications as ‘priority broadband projects’, as long as they met three criteria. A proposed technology had to meet the speed, latency, reliability, and consistency criteria established by the BEAD legislation. A proposed technology had to be able to scale over time to meet foreseeable future broadband demand. Finally, a proposed technology had to support the deployment of 5G and other successor technologies.

SBOs have seemingly aggressively used this loophole to disqualify alternative technologies and still award BEAD to fiber projects. It’s not hard to understand how they could do this. For example, there are many articles about how satellite doesn’t always meet the 100/20 Mbps test today, and it’s not hard to set a future speed threshold that satellite can’t guarantee. The third requirement of supporting 5G and future technology deployments can be interpreted to mean deploying fiber backbone networks in rural areas that can support future cell towers. It’s clear that satellite doesn’t meet this requirement, and a fixed access network that only uses microwave backhaul also fails to meet it.

West Virginia issued a Final BEAD Plan for public comment that awards 99% of the state’s BEAD money to fiber to reach 94% of the eligible passings. Virginia proposes to bring fiber to 81% of its eligible passings. Part of the BEAD review process for BEAD is to elicit public comments on the proposed use of the funding. Starlink filed comments in Virginia and Louisiana, aimed at the NTIA, that the States are not adhering to the revised NTIA guidelines that say that funding should go to the lowest bidder.

Even with States still proposing fiber, the new NTIA guidelines have had an impact. Louisiana had completed its BEAD process before the new guidelines. The State originally proposed to bring fiber to 95% of the locations in the state. The NTIA rules required Louisiana to restart the grant process, and in the revised process, the State lowered the allocation to BEAD to 80% of the locations. During the process, fiber ISPs sharpened their pencils and lowered the requested amount of funding.

NTIA now faces a big choice. SBOs (and actually the Governors they work for) have clearly said that they want BEAD money to build fiber. All three of these early states have Republican governors, and as I have always said, broadband is not a partisan issue at the state and local levels.

This is definitely a showdown moment. NTIA can concede to the requests from these States. In doing so, it will have a hard time not doing the same thing for other states, red or blue. Or the NTIA can play the bad cop and tell States to kill most of the proposed grants for fiber.  But perhaps whatever the NTIA decides isn’t the final word since the process now hangs under the threat of lawsuits – perhaps from Starlink, or perhaps from States who lose grant awards aimed at fiber.

A Peek at the New BEAD

The State of Tennessee released a side-by-side comparison of the new Benefit of the Bargain round of BEAD applications compared to its initial round of BEAD applications conducted before the revised BEAD rules.

The side-by-side comparison (file:///C:/A/Articles/Tennessee-BEAD-Comparison.pdf) is interesting and shows some big differences between the two grant rounds:

  • Tennessee received 541 applications in the new Benefit of the Bargain round compared to 298 applications in the original round of BEAD.
  • The low-orbit satellite companies Starlink and Kuiper bid throughout the state. Starlink didn’t submit any applications in the first round but bid almost everywhere in the new BEAD round. Kuiper bid for most of the state in both BEAD rounds. Satellite is clearly going to win a significant amount of grant funding since there were 68 of 173 serving areas that got proposals from one or both satellite providers and no other technology. The satellite companies surprisingly don’t seem to be fazed by bidding in Appalachia.
  • There were surprisingly few proposals for fixed wireless technology, with proposals only made in 12 of the 173 study areas included in the new round of BEAD. Part of the reason for this might be the mountainous and hilly nature of much of Tennessee, but there are plenty of areas in the central and western parts of the state where wireless will work well.
  • Comcast switched technology from the first to the second round. In the first round, the company proposed to build fiber, and in the new round it mostly changed to traditional hybrid fiber/coaxial networks – apparently to be able to bid at a lower cost. This makes me wonder if it’s really cheaper to build copper coaxial cables than fiber or if Comcast is just willing to take less funding.
  • There has always been a big question of whether big ISPs would show up for BEAD. There are three big companies in the new round of BEAD – AT&T, Comcast, and Windstream. The industry has always wondered if AT&T would join BEAD.
  • There are a number of smaller ISPs asking for funding to build fiber that includes cooperatives and municipalities.
  • There are four service areas that had no proposals. The state will have to talk an ISP into serving these areas before they can close out their BEAD grants.

It’s impossible to make any definitive cost comparisons between applicants because the new BEAD rules allow ISPs to request to serve areas smaller than the serving areas suggested by the state. There are also roughly 7,000 fewer passings on the newest BEAD map than were included in the initial BEAD grants. But in general, the comparison shows:

  • Most companies proposing to build fiber bid less the second time, but some of this could be due to fewer eligible passings and not just to a sharpening of the pencil.
  • Fiber ISPs across the country are wondering how much lower other technologies will bid in BEAD. There is only a single company asking to build wireless in the state, and their proposed grant awards are roughly one-third the cost of those asking for fiber in the same study areas. But without knowing more details, that ratio might not mean anything for other states.
  • However, satellite bids are incredibly low, most at 10% or less than proposals to build fiber. There is a map showing the eligible passings by study area, and I eyeball the satellite bids to be in the range of $400- $600 per passing. Kuiper is generally significantly lower than Starlink. These low bids are going to worry ISPs everywhere.

 

BEAD and Vendors

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

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

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

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

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

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

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

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

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

The New BEAD Map Challenge

Perhaps the most unusual element of the new BEAD guidelines is a requirement that BEAD not be used for ‘overbuilding’. The new rules allow an ISP using unlicensed spectrum to stake a claim for areas it already serves and remove those areas from the BEAD map.

Judging if a WISP is really offering service that is considered as served for BEAD is complicated and involves multiple factors. First is speed. There are WISPs that have invested in new radios and backhaul to be able to deliver 100/20 Mbps to everybody. But there are WISPs (and other ISPs) that have been playing a regulatory game by claiming broadband speeds of exactly 100/20 Mbps while delivering something slower.

Second is geographic coverage that identifies the homes a WISP reach from a given radio. A landline network can serve everybody it touches, but terrain can make it increasingly hard for a WISP to reach every home, particularly as the distance from a tower increases. It’s not easy for a WISP to guarantee who it can reach or not reach.

Finally is overall capacity – the ability to be able to serve everybody in a given area. Judging capacity involves a number of factors – the density of homes in the area around a tower, the physical limitation n the connections a radio can make, the brand and age of the radios being used, the amount of backhaul bandwidth, the frequencies being used, and the number of other WISPs in an area that are vying for the same channels of frequency.

Broadband offices have already wrestled with understanding these issues in the original BEAD map challenge that involved WISPs using licensed frequency. But the new map challenge is crazy because State Broadband Offices are going to have to make super-quick decisions. NTIA is giving WISPs only seven days to claim they offer service that should be considered as served under BEAD, and the process is already underway in most states. States are also facing an incredibly short overall time frame and are now supposed to make all grant awards by September 4. That leaves no time to investigate, deliberate, or possibly even fully understand mapping and speed claims made by WISPs.

Contrast this with the BEAD mapping challenges that dragged on for half a year in some States where local governments and ISPs disputed the speed claims in the FCC map. NTIA created a torturously complicated process for the original map challenge to force challengers to prove that locations should be removed or included in the BEAD map. But now, we’re going to have a whirlwind process for excluding possibly millions of locations from BEAD. WISPs won’t have to go through any of the many steps required by the original map challenge, such as getting customers to prove their claims using speed tests.

I’ll be curious to see how many WISPs make a map claim. Removing locations from the BEAD map is not necessarily a good strategy since keeping BEAD locations provides an opportunity for a WISP to pursue BEAD funding under the revised rules that favor fixed wireless and satellite technology.

This quick process is troubling for another reason. I foresee a WISP or other ISP suing a State for making a quick decision about the maps they don’t like. The entire BEAD process has been surprisingly free of lawsuits, but a lawsuit at this late stage would really gum up the works. One area that could lead to lawsuits is the short decision-making time frame that leave WISPs with no chance to appeal a State’s decision. The short process also means that local governments or other ISPs don’t get a chance to review or comment on a State’s decisions.

Whatever happens, it’s going to be chaos. ISPs that still want to participate in BEAD now need to wait until this new map challenge has been resolved to see what is left on the map for BEAD grants. ISPs have been deliberating about where they want to serve for years and could suddenly be facing a different map. NTIA seems to be assuming that ISPs will somehow quickly cope and pivot to a changed map – but that is often going to mean reworking engineering designs and business models in a hurry. There are a lot of ISPs thinking about dropping out of the BEAD process because of the last-minute rule changes.

There has been a lot of criticism of NTIA in the past for being too deliberate. But this new process goes to the other extreme, and introduces major changes in the BEAD map and grant award rules with practically no time for the industry to react or provide input to the States. It seems inevitable that States are going to take widely different approaches to the issue, which makes it even more of a crap shoot for ISPs interested in BEAD.

A Lesson Not Learned

Decades ago, I was lucky to have interviewed a number of rural people who told me what it was like when they finally got electricity. Almost every person I talked to mentioned how life-changing it was to brightly illuminate their homes with electric lightbulbs.

Other than that, everybody’s electricity story varied according to their economic circumstances and priorities. Wiring a home with electricity was a big expense for a lot of folks, and many got loans from their electric coop to help pay for wiring and appliances. Others introduced wiring gradually as their budget would allow. Farmers often lit their barns before their homes. The most valued and first appliances bought by many homes were washing machines and refrigerators.

People also told me about the frustration of waiting for decades to get electricity that was available in the county seat or other nearby towns. They said that most adult children left the farm, attracted by the lure and conveniences of electricity. They described how access to electricity clearly defined a world of haves and have-nots.

Rural electricity was largely funded by low-income loans to newly formed electric cooperatives. Electricity to the farm enabled the agricultural revolution that made the U.S. the breadbasket of the world. Rural electricity immediately raised the standard of living for rural residents and gave them the same opportunities as everybody else. I’m not sure how to do the math, but electrifying rural America was probably the best infrastructure investment that the U.S. Government ever made – rivaled perhaps only by the interstate highway system.

We took a different approach to stringing telephone copper in rural areas, with a mix of private and public investment. In 1900 there were over 3,000 telephone companies in the country – many of them in small towns and rural areas. Many of the rural networks were built and financed by farmers, but a huge amount of rural copper was also funded by government loans given to small telephone companies and newly formed rural telephone cooperatives.

Since it’s now clear that broadband is the newest utility that homes need to participate in today’s economy, the federal government naturally got involved in funding rural fiber networks. Some of this was funded with subsidized loans, but a lot more has been accomplished through federal grant programs like RDOF, ReConnect, and the Capital Projects Fund. The BEAD program was supposed to be the big grant program that filled in the final gaps in rural fiber – and many State Broadband Offices were well on the way to fulfilling that goal.

I’ve never understood why and how we lost the lessons we learned in the past. I am certain that a lot of rural America would already have fiber today if the federal government had offered 40- or 50-year loans at 1%. Electric and telephone cooperatives would have gladly taken that money to expand fiber networks across regions. Some of the big telcos would have taken the money. I am certain that new cooperatives would have been formed in areas where there were no logical recipients of the loans. Just like with electrification, the vast majority of these loans would be repaid, meaning there would be very little net cost to the government to fund rural fiber through loans.

Instead, the FCC chopped the rural landscape into Swiss cheese areas with the RDOF program, and other grant programs have tried to fit fiber projects around the messy jigsaw puzzle that was left over. I’m not sure that we could have designed a worse way to mess up the rural broadband landscape.

We’ve now suddenly decided that it’s too expensive to build rural fiber – even though we were near the finish line with BEAD. And to be fair to the critics of BEAD, it is expensive to give away billions in grants. But once we started down the grant pathway instead of the loan pathway, BEAD was the logical conclusion to the effort.

It’s sad we didn’t remember the lesson we learned from electrification. The best solution for stringing a wired network in rural areas is to loan the money to local companies who have a vested interest in making it work for the long haul.

States: Don’t Give up on MDUs

As States look ahead to how they’ll use BEAD funds beyond broadband infrastructure deployment, one key area of opportunity is emerging: supporting underserved multi-dwelling units (MDUs). The Infrastructure Investment and Jobs Act (IIJA) singles out a funding opportunity for MDUs where a “substantial share” of units lack adequate internet access or are in low-income communities.

While States have already received NTIA approval for how they plan to use non-deployment funds, there is a good chance that the upcoming revised Notice of Funding Opportunity (NOFO) might narrow States to only using funding for purposes specifically allowed in the Act. If that happens, States may be invited to revise their Initial or Final Proposals, giving them a valuable opportunity to rethink and refine their funding strategies.

This blog is a plea for States not to give up on the opportunity to use non-deployment funds to bring better wired-broadband to affordable housing MDUs. Landlords of affordable housing MDUs face a chicken-and-egg dilemma – many affordable housing MDUs don’t have good broadband because the tenants can’t afford to pay market rates for broadband.

The affordable rates needed for success will vary according to the incomes of tenants. In the MDUs that serve residents with the lowest incomes, prices will have to be in the range of $10 to $15 per month. There are affordable housing MDUs where incomes are higher, but generally still not high enough for tenants to afford normal market rates for broadband.

The MDU solution for States to consider is to wire MDUs with fiber or Category 6 cable to enable gigabit speeds within apartments. States should support wired solutions instead of funding  building-wide Wi-Fi, which will not meet the requirements of a served technology and is notoriously inconsistent (has anybody ever loved the Wi-Fi they get in a hotel?)

There are a number of reasons for States to consider this use of any remaining BEAD funding to wire affordable housing and other underserved MDUs.

It’s a lot more affordable to wire buildings than States probably assume. I’ve been doing research with the vendors and technologies used to wire MDUs. My analysis that the cost to retrofit a typical 72-unit MDU complex with Category 6 wire ranges from $300 to $630 per unit. Wiring with fiber costs a little more, and ranges from $450 to $800 per unit. It cost a lot more to wire buildings a decade ago, but modern wiring technologies and techniques have significantly reduced the cost.

It is also getting increasingly easier to find ISPs willing to work with landlords to bring affordable broadband when it’s needed. If the landlord takes on all of the rewiring and infrastructure costs inside an MDU, then ISPs need only bring a fiber connection to the MDU. The cost of a bulk-billed wholesale fiber connection can be made affordable when ISPs and landlords step outside of the industry norm. Most ISPs operate on rolling 3-year contracts for selling to businesses (ISPs view an MDU as a business customer). For example, ISPs and landlords both get a huge benefit by considering ten or even twenty-year contracts for a fiber connection – landlords get lower costs and ISPs eliminate churn.

Because of the affordable cost of rewiring buildings for high-speed broadband, States can do a whole lot of good for a relatively small investment. Even if States pay 100% of the cost to rewire MDUs (and there is no particular reason they should pay 100%), the cost per family to bring better broadband to MDUs is a tiny fraction of the cost to serve a rural family with any broadband solution. BEAD originally held out a hope that it could help to solve the MDU broadband gap, and with non-deployment funds, some of that promise can still be kept.

Administration Killing the Digital Equity Act

Last week, President Trump called for the end of the $2.75 billion in grants from the Digital Equity Act. The funding was approved as part of the Broadband Equity Access and Deployment (BEAD) program.

The purpose of the program was to help close the broadband adoption gap by helping people learn how to use computers and to navigate the Internet. The grants were to be distributed in two ways. The State Digital Equity Capacity Grant Program reserved $1.44 for States to distribute through grants. The NTIA was slow in getting this program running, and grants were supposed to be launched starting in 2022. The NTIA finally announced $840 million in funding for States in 2024. It doesn’t appear that very much of this funding has been turned into grant awards.

The second part of the program was for the Digital Equity Competitive Grant Program that is administered directly by NTIA. The budget for this grant program was $1.25 billion, with 5% reserved for Native Entities, and 1% set aside for territories. The program was supposed to award $250 million per year in grants from 2022 until 2026. The NTIA was also slow in launching this program, but finally announced $619 in awards in January of this year. It seems certain that those awards will never get inked. There has been money awarded to states, but it’s not clear how much of that might have actually flowed to states since this seems to be a reimbursement grant program.

It’s a shame that almost none of this money has already been used. If NTIA had met the Congressional time line and intentions, 60% of the grants would already have been awarded in 2022, 2023 and 2024. The NTIA has defended the slow speed of the BEAD grant program, but Congress clearly intended for this money to flow quickly. I’m sure we’ll hear about how hard it was to make this work, but I have to think States would have been able to give their portion of this away if they had been given the money years ago. I remember a lot of non-profits that were already making plans to ask for this grant funding in 2021.

It’s hard to deny that there is a computer literacy gap in the country. I can’t find a specific definition of computer literacy, and different sources estimate the number of adults who are not computer literate between 30 million and 50 million. This program was part of the BEAD process that wanted to make sure that rural folks who don’t know how to use computers can take advantage of the expansion of rural broadband that is supposed to be coming from BEAD. The industry is still waiting to find out the status of the $42.5 billion in broadband grants, and seeing this program and ReConnect grants killed in the same week isn’t give anybody a warm and fuzzy feeling.

The President’s announcement said this funding is illegal, which is an odd stance since this was approved by Congress, which seems to be the very definition of legal. This cancellation announcement was not unexpected due move to kill all federal programs and activities that are considered to be DEI. It’s not clear how this is a DEI program other than the name of the grant program contains the word equity.

There is a lot of controversy surrounding the White House’s ability to kill grant programs that were created by Congress, and there are already a slew of lawsuits concerning other federal grants that have been cancelled or put on hold. A quick web search shows lawsuits associated with cancelled grants for the National Endowment for the Humanities, USAID, NIH research grants,  Covid-19 public health grants, and others.

There is always the chance that Congress will insist that these grants proceed, but recent lack of Congressional action probably means there is little chance of that.