Tag Archives: Capital Projects Fund

Where Were the ISPs?

I’ve been doing a lot of thinking about how the BEAD grant program got off track. Even before the current giant swing in rules by NTIA, the program had a lot of problems. One of my observations about the BEAD grant program is that ISPs were not an integral part of developing the grant rules. ISPs were largely ignored from the start and were only brought into the BEAD process after the rules were largely set in concrete.

This is actually not that unusual in the world of grants, but BEAD was supposed to be different. The BEAD legislation required State Broadband Offices to reach out to stakeholders in “every corner of a state” to solicit feedback on what should be accomplished with the BEAD program.

The BEAD process wasn’t just about infrastructure and also included funding that might be used for distributing computers and devices and training people how to use them. It made sense for Broadband Offices to reach out to listen, particularly since many States had newly created Broadband Offices that had recently been created to handle the grants funded by the Capital Project Funds.

I sat through the outreach process in a number of States, and was disappointed when, in many States, there was no listening involved, just Broadband Offices talking about the BEAD timeline. But the real flaw of the outreach program to me was that ISPs were not considered as major stakeholders in this process. For the infrastructure portion of BEAD, ISPs are the only stakeholders that really matter, because they are the ones who will raise the needed matching funds, build, and operate the grant-funded networks.

A lot of the problems encountered in the BEAD process could have been avoided if NTIA and States had asked ISPs upfront what it would take for BEAD to be attractive to them. The first time I read through the legislation, I identified a number of requirements that ISPs were going to hate. In practice, many of the BEAD processes turned out to be even worse than I had feared. For example, the map challenge process, as devised by NTIA, was a total nightmare that had no chance of functioning as intended. States could have done a much better job, and many States already had created their own broadband maps of the areas that needed better broadband. Those efforts were ignored.

I had naively hoped that since BEAD was the first grant program to require public feedback, States would end up loosening the worst of the rules to make the program work. To me, the ideal grant program allows a Broadband Office to waive requirements that are a problem for specific ISPs. The State broadband grants in many states were flexible to make them work.

Unfortunately, any hope that BEAD could work well died when it became clear that States were not going to be given much latitude. From the outset, it quickly became clear that NTIA was not going to be an advisor to State broadband programs. Instead, NTIA dictated practically every aspect of the BEAD rules and process. NTIA left very little to State discretion.

When it’s over, I think the NTIA decision to take full charge of BEAD will ultimately prove to be the fatal flaw of the program. It didn’t have to happen this way. It was clear in the legislation that Congress intended States to develop unique plans for BEAD that worked for each of them. We know what a grant program looks like the federal governments hands over the reins to States. The Capital Projects Fund gave over $9 billion to States to award broadband infrastructure grants. Treasury created some basic rules but largely let States decide how to implement and operate the grant programs. States took a wide variety of approaches to choosing ISPs for the funding. In the end, CPF was a State-directed grant program with only light oversight provided by the federal government. If NTIA had adopted the same philosophy with BEAD, construction would have started for grant-funded projects a few years ago.

Any infrastructure grant program can only be successful if ISPs are willing to participate. State Broadband Offices understand this and were adept at making State grant programs work.

BEAD became so out of kilter that many States ended up with a large number of locations where no ISPs other than Satellite providers made bids. If States had run these programs from the start, they would have found a way to bring local ISPs into the mix. They would have been able to fund a lot of fiber, but would not have hesitated to fund other technologies when that made sense. And they would have accomplished all of the steps required by the legislation in a lot less than four years.

BEAD and State Broadband Offices

I’ve been saying for the last few years that the hardest job in the industry has been the folks who head State Broadband Offices. These folks took these positions because they knew they could do a lot of public good by tackling the rural broadband gap and the overall digital divide. A lot of the hard work these folks did over the last three years was erased when NTIA first eliminated the Digital Equity grants and then recently eviscerated the BEAD grants.

SBOs were handed a giant mess with the BEAD grants. I’ve always said the biggest problem with BEAD was the Congressional staffers or ISP lobbyists who wrote the BEAD legislation. They made the process cumbersome and ridiculously complicated. In my opinion, NTIA made it even worse by being overly cautious from day one. It was clear that the agency did not want to be blamed for repeating the FCC’s disasters in the RDOF and CAF II subsidy programs.

SBOs knew the BEAD grant process didn’t have to be so complicated because they have processed and awarded almost $10 billion dollars of broadband grants from the Capital Projects Fund. Those grants came with some common sense rules, but they mostly trusted the States to be good shepherds of the funding. States did an overall great job. It’s not talked about enough, but this is easily the most successful broadband grant program we’ve ever had.

But SBOs accepted the BEAD complications and slogged through the many required steps of the BEAD process. While doing this, SBOs were widely blamed for being slow and not deploying needed broadband – and most of the delays were not their fault.

Some of the steps were so ridiculous that it would be comical if so much money wasn’t riding on the grant process. For example, the NTIA guidelines for the map challenge were overly complicated and largely impossible to comply with.

This last month has been massively disappointing for SBOs. The industry has talked about solving the digital divide for at least twenty years, and SBOs finally had a chance to do something about it. The Digital Equity grants would not solely solve the digital divide, but SBOs were working to create sustainable programs that would outlive the influx of initial funding. This all went for naught when the grant program was completely killed. There are a few states where the legislature contributed some funding for digital equity, but for the most part, this effort is dead.

Now, SBOs have seen all their hard work on BEAD upended completely. States were given a fair amount of latitude to design state-specific rules for awarding BEAD grants, and it’s fair to say that every state came up with its own solution. SBOs listened to state politicians, ISPs, and the public and did their best to create a grant program that fit the specific circumstances in their state

What is probably the most disturbing about the sudden change in the rules is that BEAD was finally working. A large majority of states have started the broadband award process and have been reviewing grant applications. States like Louisiana and Nevada made it through the award process and were ready to award a lot of money to build a lot of fiber while staying within the budget that BEAD gave them. Many states that are partway through the process report that they are getting grant requests to build fiber coming in lower than their expectations.

The revised BEAD grants are nothing more than a one-round RDOF auction by State, where the ISP that asks for the least amount of funding wins. There is a slight amount of wiggle in that a grant request that is less than 15% greater than the lowest bid can be considered. But BEAD is largely now low bid takes all. The one improvement over RDOF is that ISPs must meet financial, technical, and managerial criteria before participating. But even RDOF had an important fiber preference.

I’ve read a few opinions from folks who still think that a lot of the BEAD money can now go to fiber, and I hope they are right. But I remember the shenanigans played during the RDOF auction when ISPs were vying for $9 billion in funding. What are we going to see with a much larger pile of money at stake? What’s to stop a satellite company or large WISP from bidding $2,000 or less per passing to win a whole state?

One thing is for sure. It’s a lot less enjoyable to be a State Broadband Director now, because the NTIA took away one big set of funding and took all the decision making out of the BEAD grant funding. All of the work to create unique State solutions went completely out the door.

Related Blogs:

Updating my BEAD Bingo Card

County Governments and BEAD

A Tale of Two Grant Programs

Pretty much everybody in the industry agrees that the BEAD grant process has taken too long. The IIJA legislation that authorized BEAD was signed into law in November 2021. A few states are now opening a grant portal to accept BEAD grant applications – nearly three years after the legislation was passed.

Not all grant programs have taken this long. An interesting contrast to BEAD is another huge-dollar federal grant program, the Capital Project Fund (CPF). That was a $10 billion broadband grant program that was part of legislation for the American Rescue Plan that was enacted in March 2021. The two grant programs have a few things in common. Both are to build broadband infrastructure in unserved and underserved areas. Both grant programs give federal money to States to choose grant winners. But there is a stark difference in the way the two programs have been operated.

Capital Project Fund Grants. Following are a few key steps in this grant program.

  • This was funded by the American Rescue Plan Act on March 11, 2021.
  • The funding ranged from $106 million for D.C. to $540 million for California.
  • The program was administered by the U.S. Department of Treasury.
  • States had until September 2022 to file a grant plan for using the funds. For states that didn’t have a state broadband office, this meant scrambling to decide who was going to administer and operate the grant program.
  • Some states moved quickly, and on June 7, 2022, Louisiana, New Hampshire, Virginia, and West Virginia were approved to receive funding. The rest of the states were approved throughout the year.
  • States were free to start the grant process as soon as they were awarded the funding.

That’s 15 months from the legislation to the first states being able to launch a grant program. States didn’t need any further approval from Treasury to give funds to grant winners, so there were broadband grants awarded in 2022. States differed in the speed of awarding grants, but the money got in their hands relatively easily with limited strings attached.

BEAD Grants. Following are some of the important steps in the BEAD timeline:

  • Funded by the Infrastructure, Investment and Jobs Act in November 2021.
  • The program is administered by the NTIA.
  • BEAD NOFO (basic rules) issued in May 2022.
  • BEAD planning grants were awarded to each participating state to help cover the cost of launching BEAD.
  • States had to create a five-year broadband action plan. Not to belittle that process, but I imagine very few of those plans will ever again see the light of day.
  • A significant delay came when the NTIA had to bless the FCC broadband map. The early FCC maps clearly had problems, and this added at least six months to the timeline.
  • States had to create a Volume 1 report that defined areas with existing broadband funding and that identified unserved and underserved locations. When NTIA approves the plan, states could start the BEAD map challenge.
  • States had to file a Volume 2 manual that discussed a specific proposal for operating the grant process. Approval of Volume 2 starts a 365-day shot clock, and a state is supposed to choose grant winners within that time.

That means almost three years after the legislation before the first state started to solicit grant applications. But that’s not the end of the process.

  • NTIA recently suggested new rules for states that want to consider using alternate technologies. That’s going to add steps and time to the grant process.
  • States can’t award BEAD grants when they choose grant winners. The state must first find an ISP to serve every eligible location.
  • A State must then write a report to the NTIA about its plans to award grants. States are only free to start awarding grants after this final NTIA approval.

In addition to taking longer, BEAD is far more complicated. The NTIA went so far as to hire employees to act as liaisons to the states to navigate the paperwork process.

I was hopeful when I first read the IIJA legislation and saw that the money would go to states. By that time, it was already clear that the CPF funding process was moving well. However, it quickly became apparent that NTIA was going to implement BEAD one deliberate step at a time. Some of the BEAD timeline delays can be directly attributed to Congress, which legislated that the grant program must use the newly minted FCC broadband maps – but even without that delay, BEAD has been far more ponderous and agonizingly slow compared to CPF.

The biggest difference between the two grant programs is that Treasury fully trusted States to make grant awards within some rule boundaries, while NTIA micromanaged the process from beginning to end.