Tag Archives: BEAD

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.

Our Balkanized Broadband Leadership

Congress inserted an interesting requirement into the bill that reauthorizes the funding for the National Telecommunications and Information Administration (NTIA). Both the House and Senate added language that would require that a national broadband plan be created that would try to put the FCC, the NTIA, USDA, and other agencies on the same page. This legislation makes sense, because it’s clear that the three agencies do not coordinate in trying to solve broadband gaps – if anything they are competing and trying to one-up each other.

The House version of the new legislation was sponsored by Reps. Tim Walberg (R-MI.) and Annie Kuster (D-NH). The Senate version of the language was sponsored by Sens. Roger Wicker (R-Miss.), Ben Ray Luján (D-NM), John Thune (R-SD), and Peter Welch (D-VT.).

The genesis of the plan came from a GAO report from 2022 that said that there was a balkanized approach to federal funding programs aimed at solving the rural digital divide. That is putting it mildly. The three agencies seems to be stepping over each other trying to get headlines.

Just consider the last year. The NTIA has been working on getting the BEAD grant program going (at a pace that has been widely criticized as being far too slow and meticulous). Immediately after the NTIA announced the amount of BEAD funding that was to be allocated to each State, the FCC announced the new EA-CAM subsidy program for small telephone companies that covered many of the same locations that are eligible for BEAD. There is no conceivable excuse for the two agencies not to have coordinated this – and had the FCC announcement been considered, the BEAD funding would have been allocated differently to States.

The USDA also recently closed a new round of ReConnect grants on the eve of States getting ready to finally launch BEAD grants. This puts State Broadband Offices in a quandary with how to treat areas with a pending ReConnect grant – they won’t be able to make any grant awards for these area until Reconnect is resolved.

The GAO’s use of the word balkanized is now my favorite word for describing the federal broadband effort. The FCC’s RDOF program was a disaster from the beginning. A third of awarded RDOF subsidies ended up being canceled by the FCC or turned back in by ISPs. There are still ISPs defaulting on BEAD several years later, with recent announcements by Charter and Altice walking away from some RDOF areas. Even where RDOF was awarded, it butchered the rural landscape by creating a checkerboard (or Swiss cheese) in many counties of places covered and not covered by RDOF – making it incredibly hard to design a broadband solution for the remaining unserved pockets. The FCC also gave ISPs far too long to implement an RDOF solution – in some cases until 2028 – and a huge number of counties are still wondering today if the ISPs that won RDOF in their county will show up.

All of the grant and subsidy programs suffer by relying on faulty FCC broadband maps. I would rate the maps used to allocated RDOF as maybe a 2 out of 10. The FCC knew these maps were faulty but blazed ahead with a subsidy program that pretended the maps were perfect. It’s impossible in many cases to see any difference between areas included in RDOF and neighboring Census blocks.

The maps being used for BEAD have probably improved to a 5 out of 10. The biggest flaw in the BEAD maps is the inexplicable decision of the FCC to still allow ISPs to claim marketing speeds rather than something closer to actual speeds. There is a large number of rural ISPs that miraculously claim a speed of exactly 100/20 Mbps in the FCC maps, which blocks others from pursuing BEAD grants. The FCC thinks they have accounted for this problem by allowing for a map challenge process, without realizing that the counties that have the biggest broadband gaps are also the ones with barely any staff or budget – so the places that should have undertaken map challenges are doing nothing. The NTIA piled on top of the situation by creating a map challenge process for BEAD that is so technical and obscure that even well-funded counties can’t come close to putting up a decent challenge for places that everybody agrees don’t have good broadband.

Local governments are increasingly irate with all three agencies tackling broadband. The word balkanized doesn’t come close to describing the behavior of each agency that not only ignores what the other agencies are doing but seems hell-bent on sticking a thumb in each other’s eyes.

I have very little faith that the broadband coordination proposed by Congress will do the slightest bit of good. When President Biden came into office, he ordered the three agencies to coordinate efforts, which obviously fell on deaf ears. The only way to make the three agencies work together would be to put them under the same boss – and that’s not likely to happen.

I’ve predicted for quite some time that BEAD is going to miss millions of homes that should be classified as unserved and underserved. I have to think the federal agencies are already planning on how to blame each other when BEAD doesn’t work as promised.

Wireless to Fiber

There is an interesting discussion that has been percolating in the industry for many years. Many wireless ISPs have extolled the benefits of building wireless networks as the first step to eventually build fiber networks.

For over a decade, I’ve been a big proponent of this business plan and have worked with many rural ISPs who entered new rural markets with wireless with the hope of eventually building fiber in the same areas. The business plan makes a lot of sense – get paying customers and pocket revenues to eventually fund the upgrade. ISPs with this business plan typically have built as much fiber as they could up front, such as building fiber to each wireless tower to extend fiber deep into the network. Many of the ISPs that have adopted this business plan have already started making the transition to fiber. Many of them have taken advantage of state and federal grants to accelerate the process.

As soon as I heard about the BEAD grants, one of my first thoughts was that this two-step upgrade business plan idea is dead. We are at perhaps the only point in the history of the industry when there is enough money to go straight to fiber by taking advantage of grant funding. Grant funding can provide an ISP with the same kind of cash up-front that they might have accumulated after operating as a WISP in a market for a decade or more.

I sat in more than a dozen presentations in the last year where a WISP asked a County government for ARPA funding to build a wireless broadband network. One of the best selling points in these pitches was that WISPs will have the broadband up and running a lot sooner than a fiber overbuilder. But in every single presentation, the WISPs also that they want to build wireless today but would eventually migrate to fiber.

I didn’t go to the WISPA convention this year, but I talked to one of the vendors that attended and asked him for the main takeaway. He said that everywhere he went, he heard talk of building wireless networks today as the first step to eventually get fiber.

I don’t doubt that most WISPs that promote this two-step business plan are sincere. There are a lot of WISPs that have already built some fiber and understand the long-term durability and reliability of a fiber network. But I suspect that a few of the WISPs who are making this pitch are not sincere and are just telling local government officials what they want to hear.

The issue really gets muddied by the pending introduction of 6 GHz spectrum into wireless networks and the promise of much faster wireless broadband speeds. If WISPs can upgrade to deliver really fast broadband, is there any incentive to ever build fiber? Perhaps there will be no need to upgrade, and perhaps the wireless network is the right long-term solution.

I’m still on the side of building fiber if an ISP can find the funding – and I’m the first to admit that’s my own personal bias. Fiber networks are going to last a long time. Forget the talk that fiber is only good for 20 to 30 years. I think most folks who build fiber today believe it will easily last 60 to 70 years, and where they’ve placed conduit, future upgrades will be a lot less costly than building from scratch. Fiber electronics vendors have also gotten a lot smarter, and you can new generations of electronics over an existing network without a costly rip and replace. This contrasts with wireless technology, which is changing at such a rapid pace that periodic rip and replace upgrades are still the norm.

Local government officials tell me that their two biggest fears of getting a wireless solution are that the network won’t reach everybody and that the WISP won’t make the needed upgrades in the future. To be fair, many of these same local officials are also leery about seeing grant money go to giant ISPs to build fiber, with the fear that these big companies won’t maintain the network.

The bottom line for me is that I am leery about accepting a claim that somebody building a wireless network today is going to eventually upgrade to fiber. But maybe fiber isn’t needed with a high-quality WISP that spends the extra money to reach everybody and who will keep radios up to date in the future. The real concern for rural communities should be how to avoid getting a WISP or a fiber ISP that doesn’t maintain the network – and identifying them is a whole different challenge.

Reinventing ReConnect

Your guess is as good as mine about whether Congress will ever pass the draft annual Agriculture Reauthorization Bill as written. It’s my understanding that the legislation includes new money for the ReConnect grant program that is administered by the Rural Utility Service (RUS), which is part of the Department of Agriculture.

This has been a successful grant program, and I know of quite a few rural projects that have been funded through these grants. The ReConnect grants only fund areas that are remote and include a test that gives priorities to grant areas that are the farthest distance from towns and cities.

There have been changes in the broadband industry that have made it harder each year to define a ReConnect grant area. The RUS grant rules favor grant requests that cover large contiguous areas. You can cobble together grant service areas that include multiple different geographic pockets of homes and businesses, but this involves a lot more paperwork.

It’s getting quickly harder to find big contiguous unserved areas. This started with the CAF II reverse auction and really came to fruition with the Rural Digital Opportunity Fund (RDOF). That subsidy program awarded subsidies by Census blocks, often widely scattered across a county. When I saw the first RDOF map, I quickly started thinking of RDOF as the Swiss cheese program. RDOF often chops rural areas into small pieces and leaves behind scattered pockets of homes that are not easy to aggregate into a grant like ReConnect.

This chopping up of grant areas continued as States and counties have been awarding broadband grants, often for grant areas that cherry pick the densest pockets of homes. This not only breaks the remaining unserved areas into more Swiss cheese, but it also makes it harder to justify somebody asking for a grant to serve the areas that are left over.

It’s going to get hard to find grant areas after BEAD grants start being awarded. The BEAD grants are supposed to bring broadband to all unserved locations in each state and hopefully also to the underserved. But I think everybody who understands the industry knows this will not happen as planned. There are already states that are saying that BEAD funding won’t cover everybody. There will be ISPs that don’t build everything they promised. There will be ISPs using technologies that won’t reach everybody as promised. There will be ISPs that financially fail and don’t finish the grant projects. And this won’t just be for BEAD – there are going to be plenty of areas supposedly covered by RDOF that won’t get the broadband they have been promised.

The biggest pile of places that won’t get broadband from BEAD are the millions of places that are still incorrectly identified on the FCC maps as served but which aren’t. These places won’t start to become apparent until after the BEAD grants are awarded and mapped and people living in areas with no good broadband start to make noise.

It’s very unlikely that the locations that get missed by RDOF and BEAD will easily fit into the current ReConnect grant template. ReConnect might be the only major ongoing grant program, and if ReConnect is going to reach the places left over from other federal grants, the RUS is going to have to make some significant changes.

First, it has to become easier to ask for funding for small pockets of homes. The RUS has purposefully given out a small number of large grants in each grant cycle to reduce its burden of monitoring the grant construction. But there are even more significant changes needed. For example, the RUS requires a substantial pledge of other assets to get an RUS grant. Unless somebody is already an RUS borrower, they are not likely to accept draconian collateral pledges for small grants.

Currently, the ReConnect grant is totally reliant on the FCC maps, and that has to change as well – because many of the places that will be missed with broadband will be incorrectly labeled as served by the FCC. The ReConnect process is complicated, it’s a challenge to input grant requests that must tie to penny while doing so in financial formats that nobody outside of the RUS understands.

In a post-BEAD world, any future grants are going to have to be creative, nimble, and able to bring solutions to small grant areas without a huge amount of paperwork. Unless the RUS is willing or able to change how it awards grants, this could be a grant program with very few future takers – and that would be a shame.

If BEAD Isn’t Enough

There are several States already estimating that the BEAD grant funding is not going to be enough money to reach all of the unserved and underserved areas. California, New Mexico, and Minnesota have estimated that BEAD will fall short. By the time the dust settles there will likely be more states.

I’m not surprised by this. Just since the BEAD grant program was enacted by the Infrastructure Investment and Job Act in November 2021, there have been some significant cost increases for building broadband networks. Network design engineers are telling me that costs have gone up in most places by 20% to 25% over the last two years. Part of this comes from inflation, which has driven up the cost of materials and labor. But a lot of the increase comes from perceived labor shortages in the industry, which has prompted construction contractors to raise prices faster than inflation.

The BEAD grant process also adds significant costs in some markets. I’ve done the analysis in some states where having to pay prevailing wages will increase the cost of a network by 10% to 15%. BEAD has other requirements that add significant cost. For many smaller ISPs the cost of obtaining a letter of credit is going to be expensive. There are environmental studies required for grant projects that add costs.

The various cost increases mean that BEAD funding won’t cover nearly as many locations as might have been supposed by whoever determined that $42.5 billion was enough money. As unbelievable as it sounds, we might have needed a BEAD pool of $60 billion or more to provide the same coverage as $42.5 billion in 2021 construction costs.

I think the problem is a lot larger than folks suppose because all of these estimates begin with the assumption that the FCC broadband maps are accurate. I think grant offices are going to be jammed with grant applications where ISPs and communities demonstrate the maps are wrong and the supposed FCC coverage doesn’t exist. I’m also coming to realize that there are a lot more underserved places in urban areas than are shown on the FCC maps.

There are also going to be grant projects that fail. The NTIA rules have gone far overboard to try to prevent failure, but we only have to look at the two-year-old RDOF program to see ISPs saying they can’t afford to build the projects with the funding they received. Some BEAD projects are going to take four years to build, and that’s four years of inflation eating away at the value of the grant.

Where might the money come from to cover these shortages? There are several possibilities:

  • There might be other grant programs that can plug some of the holes. For example, the Agriculture bill pending in the House and Senate has more funding for the USDA ReConnect grants. Hopefully, the USDA will change the rules a bit because ReConnect grants are not currently friendly to grant areas consisting of disjointed pockets of serving areas. Unfortunately, in much of the country, that’s what the remaining unserved areas look like on a map – scattered unserved pockets between areas built with other grants.
  • It’s always possible for the FCC to have another round of RDOF. I have to wonder if it learned any lessons from the first round of RDOF? Is there any hope that the FCC would give money to states rather than hold another reverse auction? Also, RDOF and other federal programs are also going to struggle if they insist on only funding areas identified on the FCC maps rather than areas that really need broadband.
  • Congress could always step up – but that seems like a remote possibility in the current dysfunctional Congress. Hopefully, if Congress provides the funding, it will give the money to the States again.
  • State legislators could come up with the funding. However, the vast majority of State funding in the last few years came from CARES and ARPA funding. The level of state broadband funding before those programs was relatively small. I remember joking with folks in Minnesota that the State’s broadband grant program at $20 million per year was a hundred-year plan to bring broadband everywhere.

Another Red Flag – the BEAD Labor Requirements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lets Stop Talking About Technology Neutral

A few weeks ago, I wrote a blog about the misuse of the term overbuilding. Big ISPs use the term to give politicians a phrase to use to shield the big companies from competition. The argument is always phrased about how federal funds shouldn’t be used to overbuild where an ISP is already providing fast broadband. What the big ISPs really mean is that they don’t want to have competition anywhere, even where they still offer outdated technologies or where they have neglected networks.

Today I want to take on the phrase ‘technology neutral’. This phrase is being used to justify building technologies that are clearly not as good as fiber. The argument has been used a lot in recent years to say that grants should be technology neutral so as not to favor only fiber. The phrase was used a lot to justify allowing Starlink into the RDOF reverse auction. The phrase has been used a lot to justify allowing fixed wireless technology to win grants, and lately, it’s being used more specifically to allow fixed wireless using unlicensed spectrum into the BEAD grants.

The argument justifies allowing technologies like satellite or fixed wireless using unlicensed spectrum to get grants since the technologies are ‘good enough’ when compared to the requirement of grant rules.

I have two arguments to counter that justification. The only reason the technology neutral argument can be raised is that politicians set the speed requirements for grants at ridiculously low levels. Consider all of the current grants that set the speed requirement for technology at 100/20 Mbps. The 100 Mbps speed requirement is an example of what I’ve recently called underbuilding – it allows for building a technology that is already too slow today. At least 80% of folks in the country today can buy broadband from a cable company or fiber company. Almost all of the cable companies offer download speeds as fast as a gigabit. Even in older cable systems, the maximum speeds are faster than 100 Mbps. Setting a grant speed requirement of only 100 Mbps download is saying to rural folks that they don’t deserve broadband as good as what is available to the large majority of people in the country.

The upload speed requirement of 20 Mbps was a total political sellout. This was set to appease the cable companies, many which struggle to beat that speed. Interestingly, the big cable companies all recognize that their biggest market weakness is slow upload speeds, and most of them are working on plans to implement a mid-split upgrade or else some early version of DOCSIS 4.0 to significantly improve upload speed. Within just a few years, the 20 Mbps upload speed limit is going to feel like ancient history.

The BEAD requirement of only needing to provide 20 Mbps upload is ironic for two reasons. First, in cities, the cable companies will have much faster upload speeds implemented by the time that anybody builds a BEAD network. Second, the cable companies that are pursuing grants are almost universally using fiber to satisfy those grants. Cable companies are rarely building coaxial copper plant for new construction. This means the 20 Mbps speed was set to protect cable companies against overbuilding – not set as a technology neutral speed that is forward looking.

The second argument against the technology neutral argument is that some technologies are clearly not good enough to justify receiving grant dollars. Consider Starlink satellite broadband. It’s a godsend to folks who have no alternatives, and many people rave about how it has solved their broadband problems. But the overall speeds are far slower than what was promised before the technology was launched. I’ve seen a huge number of speed tests for Starlink that don’t come close to the 100/20 Mbps speed required by the BEAD grants.

The same can be said for FWA wireless using cellular spectrum. It’s pretty decent broadband for folks who live within a mile or two of a tower, and I’ve talked to customers who are seeing speeds significantly in excess of 100/20 Mbps. But customers just a mile further away from a tower tell a different story, where download speeds are far under 100 Mbps download. A technology that has such a small coverage area does not meet the technology neutral test unless a cellular company promises to pepper an area with new cell towers.

Finally, and a comment that always gets pushback from WISPs, is that fixed wireless technology using unlicensed spectrum has plainly not been adequate in most places. Interference from the many users of unlicensed spectrum means the broadband speeds vary depending on whatever is happening with the spectrum at a given moment. Interference on the technology also means higher latency and much higher packet losses than landline technologies.

I’ve argued until I am blue in the face that grant speed requirements should be set for the speeds we expect a decade from now and not for the bare minimum that makes sense today. It’s ludicrous to allow award grant funding to a technology that barely meets the 100/20 Mbps grant requirement when that network probably won’t be built until 2025. The real test for the right technology for grant funding is what the average urban customer will be able to buy in 2032. It’s hard to think that speed won’t be something like 2 Gbps/200 Mbps. If that’s what will be available to a large majority of households in a decade it ought to be the technology neutral definition of speed to qualify for grants.

No More Underbuilding

Jonathan Chambers wrote another great blog this past week on Conexon where he addresses the issue of federal grants having waste, fraud, and abuse – the reasons given for holding hearings in the House about the upcoming BEAD broadband grants. His blog goes on to say that the real waste, fraud, and abuse came in the past when the FCC awarded federal grants and subsidies to the large telcos to build networks that were obsolete by the time they were constructed. He uses the term underbuilding to describe funding networks that are not forward-looking. This is a phrase that has been around for many years. I remember hearing it years ago from Chris Mitchell, and sure enough, a Google search showed he had a podcast on this issue in 2015.

The term underbuilding is in direct contrast to the large cable and telephone companies that constantly use the term overbuilding to mean they don’t want any grant funding to be used to build any place where they have existing customers. The big ISPs have been pounding the FCC and politicians on the overbuilding issue for well over a decade, and it’s been quite successful for them. For example, the big telcos convinced the FCC to provide them with billions of dollars in the CAF II program to make minor tweaks to rural DSL to supposedly bring speeds up to 25/3 Mbps. I’ve written extensively on the failures of that program, where it looks like the telcos often took the money and made minimal or no upgrades.

As bad as that was – and that is the best example I know of waste, fraud, and abuse – the real issue with the CAF II subsidy is that it funded underbuilding. Rural DSL networks were already dying when CAF II was awarded, mostly due to total neglect by the same big telcos that got the CAF II funding. Those billions could have instead gone to build fiber networks, and a whole lot of rural America would have gotten state-of-the-art technology years ago instead of a tweak to DSL networks that barely crawling alone due to abuse.

The FCC has been guilty of funding underbuilding over and over again. The CAF II reverse auction gave money to Viasat, gave more money for upgrades to DSL, and funded building 25/3 Mbps fixed wireless networks. The classic example of underbuilding came with RDOF, where the areas that were just finishing the CAF II subsidy were immediately rolled into a new subsidy program to provide ten more years of subsidy. Many of the areas in RDOF are going to be upgraded to fiber, but a lot of the money will go into underperforming fixed wireless networks. And, until the FCC finally came to its senses, the RDOF was going to give a billion dollars to Starlink for satellite broadband.

The blame for funding underbuilding lies directly with the FCC and any other federal grant program that funded too-slow technologies. For example, when the CAF II funding was awarded to update rural DSL, areas served by cable companies were already delivering broadband speeds of at least 100 Mbps to 80% of the folks in the country. By the time RDOF was awarded, broadband capabilities in cities had been upgraded to gigabit. The policy clearly was that rural folks didn’t need the same quality of broadband that most of America already had.

But the blame doesn’t just lie with the FCC – it lies with all of the broadband advocates in the country. When the ISPs started to talk non-stop about not allowing overbuilding, we should have been lobbying pro-broadband politicians to say that the FCC should never fund underbuilding. We’ve collectively let the big ISPs frame the discussion in a way that gives politicians and regulators a convenient way to support the big ISPs. Both at the federal and state levels the broadband discussion has often devolved into talking about why overbuilding is bad – why the government shouldn’t give money to overbuild existing ISPs.

Not allowing overbuilding is a ludicrous argument if the national goal is to get good broadband to everybody. Every broadband network that is constructed is overbuilding somebody, except in those exceptionally rare cases where folks have zero broadband options. If we accept the argument that overbuilding is a bad policy, then it’s easy to justify giving the money to incumbents to do better – something that has failed over and over again.

It’s time that we call out the overbuilding argument for what it is – pure protectionism. This is monopolies flexing political power to keep the status quo, however poorly that is working. The big ISPs would gladly roll from one subsidy program to another forever without investing any of their own capital to upgrade rural networks.

Every time a regulator or politician says that we should not be using federal money to overbuild existing networks, we need to prod pro-broadband politicians to counter that argument by saying we should not be spending any more money on underbuilding. Broadband is infrastructure, just like roads and bridges, and we should be investing any grant money into the most forward-looking technology possible. If the national goal is to make sure that everybody has good broadband, then we should be ready to overbuild anywhere the incumbents have underperformed, be that in rural areas or inner cities. It’s time we shift the conversation away from protectionism to instead prioritizing bringing broadband that will still be good a decade or two after the grant award. Let’s not spend another penny of grant money on underbuilding networks by investing in slow technologies that are inadequate and obsolete even before they are completed.