Tag Archives: BEAD

Tariff Uncertainty

This is a blog about uncertainty because it’s hard to know what else to say about the impact of tariffs on the broadband industry – other than we know there will be an impact. Right now, the tariff situation is in utter turmoil. Every ISP I talked to about the issue had the same concerns. They are all hoping for certainty. They can deal with price increases, but they can’t deal with not knowing the situation for building a year from now.

ISPs generally plan a year ahead. The networks they are building now were planned in 2024, and many ISPs are paralyzed about what to plan for 2025. I’ve been through other periods of economic uncertainty during my career, and every time, the most common reaction to uncertainty from ISPs has been to take a pause until the uncertainty ended. If the tariff situation doesn’t soon become predictable, I would expect 2025 construction to slow significantly, particularly for smaller ISPs.

The first place I would normally go to get a feel about the impact of any big changes for the whole industry is to see what big ISPs have to say about it. The big ISPs have quarterly earnings calls, and Wall Street expects them to talk about expected changes in their company in the next quarter and next year. I listened to the recent earnings calls for Comcast, Charter, and T-Mobile, and the companies were all coy and noncommittal on the tariff topic.

Perhaps the easiest way to think about tariffs is by industry segment. I’ve been thinking about what will happen if tariffs settle in at something like the original announcement of 10% tariffs across the board.

Fiber ISPs would probably have the smallest impact of tariffs – but it’s not zero. Fiber is made domestically. Fiber electronics will be shielded from tariffs to some extent since the major electronics vendors established US manufacturing to prepare for BEAD grants. But those factories still rely on some imported components. Perhaps the biggest impact will come for non-grant construction since those ISPs have continued to buy cheaper imported electronics. It will be interesting to see if the new U.S. factories can supply everybody. I suspect they can’t. But even if they can, U.S. electronics are more expensive than the imported electronics before tariffs.

Cable companies are not going to be so lucky. Companies like CommScope and Vecima Networks that make cable electronics have already said they will have big hits from tariffs. We’ll have to see if this results in a slowdown of upgrades of cable networks to DOCSIS 4.0 or mid-splits. Day-to-day components like settop boxes are mostly manufactured overseas.

WISPs and cellular carriers are likely to see a hit from tariffs since most of their electronics are imported. There are American makers of towers and related equipment. Cellphone prices would increase from tariffs, but for now those tariffs have been reversed.

All ISPs are going to see a hit on WiFi gear, which is almost all imported.

ISPs and carriers buy a lot of vehicles, and it looks like the cost of new vehicles will be climbing.

The surprising increases are going to come on the little stuff like the small hardware needed for all kinds of network construction. The worry is not just that those prices might climb, but that there will be supply chain interruptions.

Any ISP that is building a network funded by grant dollars has to be worried since grants awarded in past years will not be increased, and the ISP will have to absorb the full impact of tariff increases. I have to wonder if this will put more pressure on defaults for RDOF and other previous grants if ISPs see grant projects becoming unviable. I won’t be shocked if some of the companies winning BEAD grants change their mind by the time they are asked to sign a grant contract later this year.

The bottom line is that uncertainty is not good for the industry, and I think the reactions we’ll be seeing from ISPs will be more a reaction to uncertainty than to cost increases.

Technology Equality

There was an article published last week by Dr. Christopher Ali in Tech Policy.Press that asks if we should be making widespread broadband grants to Starlink and other low-orbit satellite technologies. Dr. Ali is Professor of Telecommunications in the Bellisario College of Communications at Penn State.

I highly recommend reading his paper. I was particularly taken by his conclusion. He says, “There is an important difference between technological neutrality and technological equality. LEO and fiber are not equal, and any policy that treats them as such will widen the very divide we have spent decades trying to bridge.”

I have been making this same observation about almost every grant program in the last decade, but just not as eloquently as Ali. As Ali points out, his comments are not a criticism of Starlink. Like him, I’ve talked to dozens of rural folks who absolutely rave about Starlink. For rural households, finally getting access to working broadband twenty years after the rest of the country has been a revelation. They can finally work at home, join Teams calls, and take online classes – things that the vast majority of Americans take for granted. Starlink should absolutely be a part of BEAD to reach remote locations, but should it be deployed to other locations?

Ali’s real issue is with the folks who set grant rules. Consider BEAD. The rules were established in 2020, and grants were not expected then to be finally completed until the end of 2028. Consider how much broadband has changed in the country just between 2020 and 2025.

  • In 2020, Ookla said the median broadband speed in the country was 86 Mbps download and 12 Mbps upload. In March of this year, Ookla says that median broadband speeds in the country has increased to 287 Mbps download and 53 Mbps upload.
  • In the second quarter of 2020, OpenVault said the average U.S. household used 359 gigabytes per month of download data and 25 gigabytes of upload data. OpenVault says at the end of 2024 that consumption had grown to 652 gigabytes of download and 46 gigabytes of upload.

The policy folks who set the BEAD rules set the broadband target performance for BEAD just a hair above the national average broadband performance in 2020. We’re only half way to the completion of BEAD grant construction and the country has already more than doubled the 2020 national broadband speeds and consumption. It’s not a stretch to predict that by 2028 the average U.S. home will be consuming more than a terabyte of data each month.

If the authors of the BEAD grant rules had looked just a decade forward, they would have set the BEAD performance standard to something like 400/100 Mbps. It doesn’t seem like a big policy stretch to think that valuable grant money ought to build networks that match the average market performance when they are completed. As Ali mentions, the biggest issue with LEO satellites isn’t even speeds, but capacity. Will the LEO companies be able to provide broadband to the many millions of households who will have no other broadband options?

It’s obvious why the folks in Congress picked wimpy BEAD standards. They are politicians and were under tremendous pressure from ISPs to not be excluded from BEAD dollars – and even under more pressure to not declare cable company networks as underserved. I remember the furor from cable companies in 2020 that lobbied hard against the BEAD upload speed requirement of 20 Mbps. That was because, at that time, most of them had upload speeds closer to 10 Mbps. It’s amazing what only five years of market pressure has done, and cable companies are upgrading urban upload speeds to 100+ Mbps with quick mid-split upgrades and have plans to get to gigabit upload speeds with DOCSIS 4.0.

WISPs didn’t have the same market power as cable companies in 2020, but they fought hard to make sure that the requirement for BEAD didn’t climb above 100 Mbps. But after only five years, they got access to a lot of new spectrum and can buy gear that will deliver 500 Mbps or faster broadband.

As ALI points out, LEO technology barely meets the 2020 definition of broadband that was codified in BEAD, and it is not a forward-looking technology – it is not equal to fiber or even to fixed wireless. And yet, the NTIA is doing mental gymnastics using an argument about technology neutrality to give more money to satellite technology. Perhaps the critics of satellite technology will be proven wrong, and satellite providers will improve technology so that by 2028, they will be delivering forward-looking speeds and coverage. But if not, we’ll be making grant awards in 2025 to implement 2020 broadband.

An Industry on Hold

I keep seeing articles or podcasts every week speculating on what the new administration and Congress might change in the $42.5 billion BEAD grant program. This all seems like speculation to me since only a few people really know what might happen, and I don’t think they are talking. I don’t think any of the pundits know any more about what will happen to BEAD than what I included in a tongue-in-cheek blog last year that included a BEAD bingo card.

There is one thing that definitely has occurred. A large chunk of the industry that was expecting to participate in BEAD is largely on hold.

That obviously includes the many ISPs that have filed or plan to file BEAD applications. There is a huge amount of speculation that any significant changes to BEAD will mean repeating the BEAD application processes in the three states that have already announced awards and the twenty-plus with open BEAD grant windows.

While State Broadband Offices are marching forward with the BEAD process, they are all spending a lot of energy speculating on what they might have to rework – and worrying that they’ll not have enough money to do this all a second time.

The group feeling the most pain are the vendors expecting to sell to BEAD grant winners. This group already had a let-down when many of them guessed at the beginning of 2024 that there would be BEAD grants made last year. They now see the process entering April 2025 with no idea of when grants will be made and when ISPs might start ordering equipment. The one thing they are now seeing is that the money might be finally get released for a lot of states at the same time instead of BEAD awards dribbling out over a year.

Another group that is getting very concerned is elected officials in counties across the country. A lot of counties devoted significant resources participating in the BEAD process. Many states gave counties some power in choosing BEAD winners by giving a lot of grant points for local endorsement and local funding. A lot of counties have made broadband grants to ISPs that are contingent on them winning BEAD – and many of those grants are from ARPA funding that has a ticking time clock and expiration date. There are also a lot of rumors flying around that the federal government might claw back unspent APRA funds.

Everybody is on hold for the big decision of how much BEAD funding will go to satellite. Will it be 5%, 10%, 20%, 50%, or 80%? I’ve heard industry pundits making all of these guesses. That split is vitally important to both the ISPs and the vendors. The group most worried about this is local elected officials, who almost universally want fiber built in their counties.

The other big question that has everybody in knots is how much of the process can be changed by NTIA versus what needs to come from Congress. There is legislation still in the early stages in the House that addresses the issues, with other lawmakers drafting alternate ideas. While Congress could act quickly on this if they want to, they have a lot of other big issues on their plate right now.

Interestingly, the first Congressional bill on the issue is called the SPEED Act, but none of this is feeling very speedy. But who knows? Edicts could come down quickly and State Broadband Offices could issue grants quickly if there isn’t a lot of paperwork involved in reshuffling the rules. Meanwhile, my original BEAD bingo card is still intact.

Will Anybody Care About Broadband Maps?

We just spent a few years agonizing over the FCC broadband maps. The reasons we’ve cared is easy to understand. The FCC maps were first used to allocate BEAD funding to states. States that spent a lot of time to clean up the maps seem to have gotten a better share of the BEAD funding, while other states were badly shorted. The concept behind using the maps for this purpose made sense – but only if the maps were relatively accurate in different regions of the country.

The FCC maps became even more important as states conducted BEAD map challenges. These challenges were to define which specific homes get BEAD (and which ones don’t). In some states the map challenge has seen a lot of participation from ISPs and local communities, but in many states the process didn’t see a lot of vigorous challenges.

We’ll soon be at the end of the BEAD map challenges, and that makes me wonder if anybody will ever care about the FCC maps after this. The original purpose of the FCC maps was for the FCC to count homes with and without broadband. The maps have been terrible at this since they were first introduced for the simple reason that the FCC presumes that self-reported speeds from ISPs reflect the real-world speeds available to people. The FCC definition of broadband is currently 100/20 Mbps, and there are a lot of ISPs that miraculously claim that as the speed of their networks in the FCC maps.

It’s hard to think of any motivation for the FCC to make the maps better. The agency can accept the speeds reported by ISPs, and once BEAD grants are awarded and RDOF areas start being built, the FCC can claim with a fairly straight face that all of rural America has broadband. At that point, the FCC is likely going to declare job done. For the last decade, the FCC has issued annual broadband reports to Congress that have said that the state of broadband is good and is improving – all based upon maps that everybody knows grossly overstate both broadband speeds and coverage. I can’t see any future motivation for the FCC to highlight that there are still homes without good broadband.

This will be even easier if the FCC decides that Starlink and Kuiper are broadband. It won’t matter if the satellite companies have a limit on the number of customers they can serve – the FCC can decide to accept their speed claims at any given home.

The FCC has options if they are ever motivated to really measure broadband coverage. They could start by eliminating the ability of ISPs to claim marketing speeds instead of some approximation of actual speeds. The FCC could get serious about enforcing coverage claims of where an ISP can meet the 10-day installation rule. The FCC could compare Ookla or other speed tests against the speeds claimed by ISPs – and the FCC could challenge ISPs where claimed speeds are far higher than speed tests. I don’t see the FCC ever being willing to get that aggressive with ISPs – and this process would be extremely contentious.

I’m positive that when BEAD is over, the FCC and everybody else will lose interest in the broadband maps. I also believe that we’ll still have millions of rural homes without a good broadband option. I predict that states that still want to solve the remaining broadband gaps will revert to creating their own state maps like they did before BEAD. But for the most part, rural broadband will be claimed to be solved – until the day comes when the FCC is forced to increase the definition of broadband speed again – and then we’ll start all over.

Technology Neutral

The term technology neutral has been around for a number of years related to federal grants. The first program that included the term that I remember was RDOF, although it likely was used earlier. The term is used among the folks who create grant programs as a way to not dictate technology choices – any technology that can meet the requirements of a given grant program should be considered.

The term is taking on significant new meaning in the BEAD grant process. The BEAD legislation said that the BEAD program was supposed to be technology neutral. However, the NTIA adopted a principle that States should favor fiber whenever possible, while acknowledging that other technologies are going to be needed to reach everybody.

Interestingly, most States did not need to be prodded in the direction of fiber. State broadband programs that were in place before BEAD largely favored fiber, even though some funding was made to other technologies like fixed wireless. If you examine the grant awards made by States from the Capital Project Funds, the large majority of awards went to fiber.

It makes sense that States have favored fiber because that’s what they’ve heard from elected officials around their state. I’ve worked with dozens of counties in the last few years, and every one of them is hoping to get rural fiber. They have become convinced that this is the technology that will carry them for the next fifty years.

It’s not hard to understand the reasons for the preference for fiber. If we go back even a few years, preferring fiber was clearly the best goal for most counties. Fixed wireless technology has gotten magnitudes better in the last few years, but the radios that were available five years ago did not compare well to the capability of fiber. FWA cellular wireless is also new to the rural market and didn’t exist before a few years ago. Nobody took satellite broadband seriously a few years ago because almost every part of the country had long waiting lists for folks hoping to get satellite service.

It’s clear that the new head of the NTIA is going to eliminate the NTIA’s preference for fiber. The NTIA had already started down that road over the last half year in making it easier for States to make BEAD awards to alternate technologies.

The question that every State broadband office is getting tired of being asked is if they are still going to be allowed to make awards to build fiber, and if so, under what parameters. Will the NTIA dictate specific rules for choosing fiber or will it modify the guidelines on how to evaluate alternate technologies?

There will be a lot of pushback from States if they can’t build much fiber, because governors and state officials have been promising to build as much fiber as possible. A large number of counties have made local matching grants to ISPs that are proposing to build fiber.

To a large degree, any significant change that limit the amount of fiber that will be built by BEAD feels like a political decision more than a policy decision. That’s interesting because the biggest recurring theme I’ve witnessed in the push for better rural broadband is that it has been nonpartisan everywhere. I remember being at a County Board meeting five years ago when the Board members joked that it was a pleasure to finally be working on a topic where they all agreed.

Nobody knows how BEAD will change. There are parts of the program that every ISP would like to see changed. However, there are a lot of county and state officials hoping to see fiber being funded, as was done in the recently announced awards in Louisiana.

USTelecom’s 2025 Wish List

Jonathan Spalter, the President and CEO of USTelecom wrote an open letter to the White House and Congress with its wish list for government action in  2025. USTelecom is the trade association and lobbying arm representing the biggest telcos and cable companies. The most interesting thing about the list is that most smaller ISPs will agree with almost everything on it.

Champion Networks of the Future. This asks the federal government to make it easier to tear down copper telco networks. It’s an interesting request because, for the most part, the big telcos are already doing this. They are really asking the federal government to intercede in states that want to see customers provided with an alternative option for basic communications before they lose a copper telephone line.

Secure and Reform Universal Service. USTelecom recognizes that the existence of the Universal Service Fund is in jeopardy due to open court cases that could kill or maim it. This is a request for Congress to pass legislation that reinforces the mission of the USF and that also fixes the broken funding mechanism that gets funding today from telephone services.

Put the Pedal to the Metal on Broadband Deployment. This is support for moving quickly with BEAD grants while relaxing some of the BEAD rules such as requiring low rates. The big ISPs assume a lot of this funding will go to them. Some of the reforms that USTelecom wants can be done by NTIA, but others will need action by Congress.

Review All Legacy Regulations. USTelecom asks to eliminate outdated regulations and reporting, a reasonable request. Unfortunately, some of the silliest outdated requirements come from Congress and legislation is needed to kill some old requirements.

Break the Federal Permitting Log Jam. This has been on the list for twenty years. Getting permits on federal land can be nearly impossible. There has been announcements from the last several White Houses that supposedly addressed the issue but that haven’t resulted in any meaningful change.

Model Efficient, Effective Cybersecurity. This is the hardest wish to accomplish and undoubtedly comes from the recent Chinese hacking of our telecom networks. I have to wonder if this is too big of a challenge to fix with centralized government edicts – and if telcos really want the government telling them how to handle cybersecurity. But it definitely must be addressed.

What’s interesting is what is not on this list. There is no request to eliminate heavy FCC regulation, because the big telcos already know they now have a friendly FCC.

A BEAD Bingo Card

It seems like everybody I talk to has a different prediction on the forward trajectory of BEAD grant spending. The reality is that nobody has a handle on this yet since the people who will be making these decisions are not going to be in a position to do so until sometime next year.  While this doesn’t exactly make a bingo card, it’s a wild range of possibilities. I’m also curious to hear from readers if I’ve missed any likely possibilities.

Nothing Will Change. Louisiana has announced grant awards and a few more states are likely to do so soon. A lot of states will have open grant portals over the next two months. Since the grants are finally moving, BEAD will be allowed to play out.

NTIA Puts BEAD on Hold. A new NTIA leader puts everything on hold to give Congress time to consider changes.

BEAD Proceeds as Planned, but Implementation Made Easier. NTIA will let the current grant process move forward, but Congress / NTIA will kill a lot of the implementation provisions before it’s time to build the networks.

States that Haven’t Made Awards Will Be Pressured to Give More to Satellite. NTIA will let the grant process continue but will change the high-cost area rules to force more funding for satellite.

Even States That Made Awards Will Have to Revise for More Satellite. Every State, including those that already announced grants, will have to reshuffle to award high-cost locations for satellite.

Allocation Dollars by State Will Be Reshuffled. There has been a lot of grumbling that some states got too much money and others not nearly enough. Congress could grab all extra funding, known as non-deployment funds, and send it to the states that were shorted in the original allocation.

Non-Deployment Funds Will Be Clawed Back. All BEAD funds not specifically needed for BEAD infrastructure will be returned to Treasury.

BEAD is Repurposed for Satellite and Little Else. The size of BEAD funding is significantly reduced, and most of the smaller fund goes for satellite.

BEAD is Completely Killed. Congress declares that satellite broadband coverage is ubiquitous and the country no longer has a digital divide. They cancel BEAD completely. There are those who argue that the funding has already been irrevocably given to states, so this would result in a big state/federal fight over claw backs.

Future Digital Equity Grants Will Get Cancelled. NTIA will announce some digital equity grants before January 20, but other future State and federal grants will be canceled.

All Digital Equity Grants will Be Cancelled. All digital equity grants will be canceled. Some of this money has already been given to states, so another big fight.

My Predictions for 2025

Disruption of Federal Grants. It seems almost inevitable that Congress is going to pull back some or all future funding for the Digital Equity Grants that are part of the BEAD program. Some in Congress are already warning the NTIA not to award the current grants that are under review.

The BEAD grant program will change. Congress is likely to reverse some of the BEAD provisions that Senators have been complaining about, like the BEAD requirement that requires a low-rate option. However, BEAD is ultimately designed to be a state grant program, and a lot of States are going to fight hard against trying to direct funds away from fiber. With that said, it’s likely that a lot more BEAD funding will go to satellite than earlier estimates. I predict that the change of administration and a swap out of folks at NTIA is going to result in at least a six month delay in the grant process.

The FCC Will Stay the Course. The new FCC will not change the agency as much as you might expect from a change in administration. New Chairman Carr will act quickly to reverse the current FCC rulings on net neutrality and discrimination. But otherwise, there won’t be a lot of revisiting of other recent decisions. Assuming that Chairman Carr will tackle what he addressed in Project 2025, the FCC will spend a lot of energy trying to free up new 5G spectrum and investigating issues associated with Section 230 and content moderation.

Job Well Done? I predict at some point that the FCC and/or the NTIA will declare at some point this year that the rural broadband problem has largely been solved, relieving the federal government of any obligation to fund any more broadband infrastructure.

FWA Will have Another Strong Year. Some industry analysts have written off FWA cellular broadband as a temporary flash in the pan. I predict that T-Mobile, Verizon, and AT&T will continue to collectively add 900,000+ customers per quarter again this year. Any increased inflation in the economy will drive the FWA numbers even higher.

Universal Service Fund Will Change. I predict that the Supreme Court is going to rule that Congress erred when it gave the FCC the authority to operate the USF and to establish fees to fund it. That’s going to force Congress to scramble to revamp the popular program. Congress will be forced to fix the funding issues. I predict Congress will create a tax that will be charged against a larger base that includes large users of the Internet like Google, Microsoft, Meta, and others. All of the changes to USF will probably mean that the launch of the $9 billion 5G Fund for Rural America will be delayed or shelved for the year.

The Mad Scramble to Buy Fiber Businesses Will Continue. There is still a glut of investment capital looking for a place to land, and a lot of that money is going to be aimed at buying existing fiber-based ISPs.

RDOF Troubles. I don’t think we’re done with RDOF defaults. This might be further exacerbated by any movement by the administration to claw back RDOF funding that hasn’t resulted in infrastructure.

Cable Companies Will Tame Their Losses. While large cable companies will continue to collectively lose customers, the rate of losses will slow as the companies focus on holding their market share. The large cable companies collectively lost 265,000 customers in the third quarter of this year. However, Comcast and Charter both said they would have had small gains except for the one-time losses due to the end of ACP.

Return Abandoned Grant Funds to States

Every once in a while there is legislation proposal that strikes me as a common sense idea. One recent such piece of legislation is the Broadband Fairness Act proposed by Senator Josh Hawley (R-MO).

The Act is simple and would return any defaulted grant funds administered by a federal agency back to the State where the award was originally intended. For example, there were numerous defaults for RDOF as Starry and many other ISPs withdrew from the fund and the awards to LCD Broadband and Starlink were cancelled by the FCC.

Under this proposed law, those defaulted funds would have gone directly to the States where the grant or subsidy was originally supposed to go. The Act encourages the States to use the money directly for the areas that were affected by the default.

The mechanics of making this work could get complicated. Consider RDOF that is paid out over ten years. I suppose this law would mean the State would get the funding over the remaining pay-out schedule. That should be enough funding for a State to justify creating an immediate grant since it knows it will eventually be reimbursed (just like is done by an ISP).

This would also apply to the many other grant and subsidy programs like ReConnect, CPF, SLFRF, EA-CAM, NTIA grants, and CAF-II.

This law would also apply to BEAD. There is no doubt in my mind that there will be BEAD defaults. There will be ISPs that agree to take grants in areas that turn out to be a lot more expensive to build than they expected. With a grant program of this size, there likely will also be ISPs that get into financial straits in the next few years and find themselves unable to complete the grant construction.

The beauty of this idea is that the money would go back to states fairly quickly to be used for the original purpose. This idea is almost what I would call a reverse claw-back. States would claw back federal funds to use for broadband if the first federal grant award fails for any reason.

Without something like this mechanism, areas with defaults simply get no broadband. That’s a scary thought because after BEAD runs its course, there might not be any more federal broadband grants for a while. Areas where grants default will be left behind with no broadband solution. If there is a big RDOF default next year, the FCC is not going to act to fill the created broadband gap.

In some ways, this feels like a little bit of a dig against the federal agencies that award grants. The FCC certainly made a mess of RDOF when only $6 billion out of $9 won in the auction is still active, and there are rumors of more coming defaults. But sometimes defaults just happen. Nobody expected Charter to walk away from a few RDOF areas recently – but they made a business decision that they could not afford to fulfill those obligations. This Act is a way to get defaulted money back into action much faster than waiting for federal agencies to launch a replacement grant program. It’s hard to not like the simplicity of the idea.

Because of the way that Congress functions today, this likely would need bipartisan co-sponsors to get any traction. It’s an idea that politicians in states that are going to see a lot of federal grant funding might want to consider.

The Smallest BEAD Dilemma

One of the biggest challenges for BEAD grant is for State Broadband Offices to make sure that every unserved location gets covered by the grants. My understanding of the process is that NTIA will not approve the BEAD grants being made by a State until they can demonstrate that every unserved and underserved location will be covered by the grants.

I think that requirement will lead to what this blog calls the Smallest BEAD Dilemma. The problem States will encounter is finding solution for the many small pockets of unserved customers. The map below is a good representation of the issue. This is a map of the BEAD serving areas in a real county. I squared off the county to hide its identity. The blue areas are considered unserved for BEAD, the yellow areas are underserved, and the orange areas are served.

The first thing to notice  is that that there are small pockets of unserved and underserved customers throughout the county. Finding an ISP willing to build to construct to these many small areas is going to be a challenge for a Broadband Office.

An ISP seeking BEAD has a big dilemma. In practically every state, the number one criteria for awarding grant points is by having the lowest construction cost per passing. An ISP can achieve the lowest cost per passing by designing a coherent network that only goes to larger pockets of unserved customers. The cost per passing climbs dramatically if the ISP extends a network to reach scattered smaller pockets. To make matters even worse for an ISP, the BEAD grant rules frown on funding any middle-mile fiber that might be needed to reach the remote pockets.

The issue is even worse than is implied by this map due to the scale of the map. There are even tinier pockets of unserved customers in the middle of the orange areas on this map, buried inside the larger towns and County seats. Some of these smaller areas are the unlucky households that were bypassed somehow by cable companies. These are the folks you hear about who are told they can connect to the cable network for a $20,000 construction fee.

An ISP who wants to build BEAD in this county is going to be asked to reach and serve the many small pockets. We already know this is true in states where the Broadband Office is drawing the grant service areas to make sure that any big pockets of customers also includes nearby small pockets. These State Offices are trying to force ISPs to solve the small pocket problem while also judging ISPs on the cost per passing of their proposed network.

This dilemma doesn’t only apply to fiber ISPs. Wireless networks don’t reach everywhere because of dead spots created by hills and terrain. It’s likely that the heat map of the homes that can be reached by a tower will not pick up every unserved house in a series of BEAD grant areas. A wireless ISP will often have to build extra towers and backhaul to reach every home in the disjointed BEAD areas.

I predict that trying to force ISPs to serve tiny pockets of customers will be the stickiest negotiating point between ISPs and State Broadband Offices. ISPs are not going to be agree to spend a lot of extra money to reach remote customers. But Grant Offices have to insist on this since they are mandated by the NTIA to reach everybody before grant funding can flow.

I think most Grant Offices are going to run headlong into this problem when ISPs refuse to take on impossible service areas. I predict this issue will likely add many months to the grant award process – and in places where the BEAD areas are true Swiss cheese – much worse than my example map – Grant Offices might not find a solution. What will grant offices do when there are large geographic areas where no ISP is willing to serve? Even worse, what will they do when ISPs walk away from a BEAD negotiation when they are asked to do the impossible?

Policymakers and many Grant Offices seem to be under the impression that ISPs will jump through endless hoops to get ‘free’ government grant money. All the ISPs I know will not accept a grant award to serve an area that will ultimately lose money. I think awarding the grants is going to be a lot harder than anybody is anticipating.