We Need a Challenge Process for Broadband Maps

We all know that the broadband maps maintained by the FCC are terrible. Some of the inaccuracy is due to the fact that the data in the maps come from ISPs. For example, there are still obvious examples where carriers are reporting their marketing speeds rather than actual speeds, which they might not know. Some of the inaccuracy is due to the mapping rules, such as showing broadband by census block – when a few customers in a block have decent broadband it’s assumed that the whole census block has it. Some of the inaccuracy is due to the vagaries of technology – DSL can vary significantly from one house to the next due to the condition of local copper; wireless broadband can vary according to interference and impediments in the line-of-sight. The maps can be wrong due to bad behavior of an ISP who has a reason to either overstate or understate their actual speeds (I’ve seen both cases).

None of this would matter if the maps were just our best guess at seeing the state of broadband in the country. Unfortunately, the maps are used for real-life purposes. First, the maps are used at the FCC and state legislators to develop and support various policies related to broadband. It’s been my contention for a long time that the FCC has been hiding behind the bad maps because those maps grossly overstate the availability of rural broadband. The FCC has a good reason to do so because they are tasked by Congress to fix inadequate broadband.

Recently the maps have been used in a more concrete way and are used to define where grants can or cannot be awarded. Used in this manner the maps are being used to identify groups of homes that don’t already have adequate broadband. The maps were the basis of determining eligible areas for the CAF II reverse auction and now for the e-Connectivity grants.

This is where bad mapping really hurts. Every rural county in the country knows where broadband is terrible or non-existent. When I show the FCC maps to local politicians they are aghast at how inaccurate the maps are for their areas. The maps often show large swaths of phantom broadband that doesn’t exist. The maps will show towns that supposedly have universal 25/3 Mbps broadband or better when the real speeds in the town are 10 Mbps or less. The bad maps hurt every one of these places because if these maps were accurate these places would be eligible for grants to help fix the poor broadband. A lot of rural America is being royally screwed by the bad maps.

Of even more dismay, the maps seem to be getting worse instead of better. For example, in the CAF II program, the big telcos were supposed to bring broadband of at least 10/1 Mbps to huge swaths or rural America. A lot of the areas covered by the CAF II program are not going to see any improvement of broadband speeds. In some cases, the technology used, such as AT&T’s use of fixed cellular can’t deliver the desired speeds to customers who live too far from a tower. I also believe we’re going to find that in many cases the big carriers are electing to only upgrade the low-hanging fruit and are ignoring homes where the CAF upgrade costs too much. These carriers are likely to claim they’ve made the upgrades on the maps rather than admit to the FCC that they pocketed the subsidy money instead of spending it to improve broadband.

There have been a few suggested fixes for the problem. A few states have tried to tackle their own broadband maps that are more accurate, but they can’t get access to any better data from the ISPs. There are a few states now that are asking citizens to run speed tests to try to map the real broadband situation, but unless the speeds tests are run under specific and rigorous conditions they won’t, by themselves, serve as proof of poor broadband.

The easiest fix for the problem is staring us right in the face. Last year the FCC got a lot of complaints about the soon-to-be-awarded Mobility Fund Phase II grants. This money was to go to cellular carriers to bring cell coverage to areas that don’t have it. The FCC maps used for those efforts were even worse than the broadband maps and the biggest cellular companies were accused of fudging their coverage data to try to stop smaller rival cell providers from getting the federal money. The outcry was so loud that the FCC created a challenge process where state and local governments could challenge the cellular coverage maps. I know a lot of governments that took part in these challenges. The remapping isn’t yet complete, but it’s clear that local input improved the maps.

We need the same thing for the FCC broadband maps. There needs to be a permanent challenge process where a state or local government can challenge the maps and can supply what they believe to be a more accurate map of coverage. Once counties understand that they are getting bypassed for federal grant money due to crappy maps they will jump all over a challenge process. I know places that will go door-to-door if the effort can help bring funds to get better broadband.

Unfortunately, only the FCC can order a challenge process, and I don’t think they will even consider it unless they got the same kind of outcry that came with the Mobility II Funding. It’s sad to say, but the FCC has a vested interest in burying their head in the sand and pretending that rural broadband is okay – otherwise they have to try to fix it.

I think states ought to consider this. If a state undertakes a program to allow challenges to the map, then governors and federal legislators can use the evidence gathered to pressure the USDA to accept alternate maps for areas with poor broadband. These challenges have to come from the local level where people know the broadband story. This can’t come from a state broadband mapping process that starts with carrier data. If local people are allowed to challenge the maps then the maps will get better and will better define areas that deserve federal grants. I believe a lot of county governments and small towns would leap at the opportunity to tell their broadband story.

Gotchas in the e-Connectivity Grant Program

The high-level rules came out on Thursday for the USDA e-Connectivity grants being administered by the RUS. This is $560 million of grants and loans that were authorized by Congress last spring – this was first announced as a $600 million program and I’m not sure where the other $40 million went. I’m not going to list all of the rules of the grants – I’ve seen a dozen websites already that have summarized the key grant requirements. Instead I’m going to talk about a few requirements that I think will be show stoppers for many potential applicants.

RUS Loans are Still Draconian. Only 1/3 of the funding will be outright grants, with the other 2/3 being outright loans or 50/50 loans and grants. This means that most of funding can only go to those who are already RUS borrowers or who are willing and able to accept the draconian RUS loan provisions.

Anybody accepting an RUS loan must pledge 100% of their existing assets to the RUS and also give the RUS an exclusive first lien position on the company. What this means is that anybody that already has a loan elsewhere is not going to be able to take these loans. Existing lenders like CFC. CoBank, or any commercial bank will not accept a second loan position to these new awards. A huge number of telcos and electric cooperatives that borrow elsewhere won’t be able to accept RUS loans, eliminating them from consideration for anything but the 100% grant portion of the program.

These same loan restrictions also make it unlikely that any government entity can accept an award that includes am RUS loan. I’ve worked with nearly a dozen government entities that have pursued RUS loans and none of them have successfully been able to overcome the pledge and other lending hurdles.

The 10% Test. The program has a gotcha slipped in by Congress that no more than 10% of the locations covered by the program can already have existing broadband 10/1 Mbps or greater speeds. This is a giant change from past RUS award programs that allowed up to 85% to have 10/1 speeds. Applicants need to take this requirement seriously and I expect any applications that can’t the lack of existing broadband will be quickly tossed out of consideration. This is not a flexible rule and was inserted into the grant rules by big telco lobbyists who don’t want to see any competition.

This means that any parts of the country previously covered by any federal funding program that required 10/1 Mbps speeds will not be eligible – including past award areas that haven’t yet been upgraded, like the areas recently awarded under the CAF II reverse auction. Applicants are going to have to be extremely careful in defining study areas, almost on a home by home basis. I fully expect RUS to test the study areas hard and I’m positive that outside parties (like incumbent telcos) will be able to intervene if they think an applicant fails this test.

The worst part of this is that we know that the rural broadband maps suck and that there are many places that the FCC considers to have 10/1 broadband that doesn’t have it. Applicants will have a big uphill battle to get funding in these areas.

Requires Two Years of Sound Audits. Applicants need to produce two years of audited solid historical financial performance – meaning start-ups need not bother with the grants. The RUS hasn’t forgotten the big problems they had with start-up companies during the stimulus grant program.

Environmental Impacts. Applicants must analyze the environmental and national historic preservation impacts of a grant request. It’s possible to get out of this requirement if a state official will declare that these tests aren’t required for applicants from their state. Applicants are also going to need affidavits from a state official to describe state broadband grant programs and to describe any conflicts with a grant filing.

Record Keeping. In order to meet the 10% rule I expect study areas to be disjointed –pocket of homes here and there scattered over a larger area. Applicants will somehow have to track costs of construction in these small pockets and not mingle costs with other nearby areas that were not included in a grant supplication. It’s going to be hard to show an audit trail of invoices that are just for the study area.

Prevailing Wage. The announcement doesn’t mention prevailing wage, but I expect this to apply. In past RUS grants this requirement has been included in the detailed descriptions of the grant process that hasn’t yet been released. Prevailing wage means paying construction labor at rates determine by each state, and which in many states reflect the cost of building in the largest cities and not in the rural areas. Prevailing wages can sometimes be so much higher than actual construction company rates that the difference in the wages can wipe out most of the benefit if getting a 50% grant.

Matching Funds Spent First. The grants require that matching funds must be 100% spent before any RUS money. That means the funding sources that incur the highest interest rates must be spent first, adding to the cost of the project. The source of the matching funds needs to be identified by the time of the grant filings.

I’m positive that many will be excited about a new large broadband grant program, but the above grant requirements are going to scare off or disqualify many potential applicants. These hurdles are not by accident – the big telcos really don’t want anybody competing against them and have stacked the deck with the nuances of the rules.