Tag Archives: high-cost areas

BEAD Grants – File Early or Wait?

Several states have already announced that there will be multiple rounds of BEAD grant applications. This makes a lot of sense for states that will be receiving a significant amount of BEAD funding. It’s a daunting prospect to try to meet all of the goals established by the NTIA in a single round of grants. Perhaps the biggest challenge will be making sure that as many unserved and underserved homes find a broadband solution.

One issue of concern for State Broadband Offices has to be what they should do if nobody asks for grant funding from some parts of a state. This is not hard for me to envision. I’ve been working with a lot of parts of the country where a 75% grant might not be sufficient – particularly when considering the extra costs that BEAD adds to building a broadband solution. For example, I’ve looked at a few mountainous and remote communities where the grants will need to be nearly 100% to get an ISP to want to bring a fiber network – and these are communities that don’t look to be reasonably served by a wireless solution. I think ISPs and State Broadband Offices will eventually need to negotiate to bring broadband to the highest cost places.

There are also a lot of small pockets of homes everywhere that do not neatly fit into any grant application. One of the reasons for many of these pockets was the FCC’s RDOF subsidies that created service areas often described as swiss cheese. But there are also small pockets of customers everywhere for more natural reasons, such as being located in an isolated place not close to other customers. I believe States are going to have to get very creative if they really want to get all of these tiny pockets served because ISPs are not likely to go through the complicated BEAD grant process to serve tiny, isolated areas.

This is further complicated by the legislative and NTIA rules that say that States must bring broadband to unserved locations before funding other places. Nobody yet understands what that will look like in practice, but States seem to have a mandate to make sure they find a solution for the most challenging locations before spending all of the BEAD grant funding elsewhere. That alone sounds like a good reason to expect multiple rounds of grants.

Communities have a different issue to consider. Many communities have a strong preference for the ISP(s) they want to serve them. Some favor local ISPs they’ve known and trusted for many years. Others are excited to see electric coops considering becoming the broadband provider. Some communities have a strong preference for fiber. Some local governments communities have already heard from residents that they do not want the incumbent telco that neglected them for decades to get more funding – they want somebody different.

It’s my opinion that communities with a strong preference for specific ISPs need to work with their chosen ISPs to be part of the first round of BEAD grant filings. Otherwise, they take a big chance that somebody they don’t want will file early and win the first round of BEAD grant filings. I’ve always thought it is likely that State Grant Offices will give extra consideration to ISPs that have the strong support of local officials. Many jurisdictions are making small local grants to demonstrate their support for a specific set of ISPs. But having a strong preference for an ISP partner won’t mean much if some other ISP beats files grants first.

There is a lot of speculation about the degree to which the big telcos and firms that are backed by venture capital money will be chasing the $42.5 billion in grants. It’s probably fair to assume these big companies will file every grant they are interested in during the first grant window of opportunity.

This means that it’s already time to talk to ISPs. I’m working with a number of counties that are already reaching out to local ISPs to understand their intentions. County governments have a strong desire to know that somebody plans to serve every unserved and underserved location in the county. Their biggest fear is that the big grants will come and go, and some of their folks still get no broadband solution.

ISPs that really want to serve specific areas need to be ready by the first round of grant filings – and communities should be pushing them to do so. It’s likely that the earliest rounds of state grants will be oversubscribed and many grants will not be made until later rounds – but if somebody beats an ISP to an area you want to serve, the opportunity might be gone.

Serving the Most Remote Locations

There is one interesting aspect of the BEAD grant rules that I’ve never written about. There is a provision in the BEAD rules that say that if no ISP seeks funding in an unserved or underserved area, a State broadband office may engage with ISPs to find somebody willing to serve such areas.

In order to make this work, States are allowed to offer additional inducements, such as providing additional state matching funds for the grant areas. State broadband offices would also be able to provide some kind of extra scoring points during the grant processes to make such grants eligible – with all of this being done with total transparency.

A State is first required to put out a general request for ISPs to serve such areas, a step that I assume would mean issuing an RFP. If that effort fails, the State can reach out and negotiate with specific ISPs to serve the unclaimed areas.

This option is driven by the overall goal of the BEAD grants to bring broadband to everybody who is unserved or underserved. This requirement will only kick in for states that have leftover money after trying to satisfy BEAD grant applications.

It’s an interesting process, but one that I think will be needed for various reasons. First, the RDOF subsidies created what the industry is calling swiss cheese or checkerboard coverage areas, which created little pockets that are geographically separated from other likely grant areas. The FCC RDOF maps really made a mess of the rural areas of many counties, where it will be a challenge to find a solution for every one of these pockets.

There also might be parts of counties that are particularly high cost that ISPs might not pursue. The BEAD grants can award up to 75% of the cost of a grant area, but there are many rural places where 75% grant funding is not enough. My back-of-the-envelope math says that areas with costs higher than $10,000 per passing might need more than a 75% grant – and there are a lot of rural areas with costs higher than that. I think the NTIA and State broadband offices will be shocked to find out how many grant applications fit into the high-cost category.

The BEAD rules allow States to make exceptions for grant applications for high-cost areas that need more than 75% grant funding. But the rules are not ISP-friendly and allow a State broadband office to seek alternate proposals or to allow other technologies for such areas – such as fixed wireless using unlicensed spectrum or satellite broadband. It’s not hard to imagine ISPs deciding to pass on a BEAD application for grants greater than 75% if a State broadband office can ignore such grants because of the high cost.

These rules add one more layer of complexity to an already complex grant program. This adds to the calculus an ISP must do in order to decide if it wants to seek a BEAD grant in high-cost areas. Does an ISP put in for a grant request of greater than 75% with a chance that the State will instead seek a lower cost solution? Or should an ISP wait until the State broadband office is soliciting ISPs to serve the high-cost areas? I guess it will all boil down to the philosophy of each State broadband office – and they are not likely to say ahead of time how they feel about high-cost areas.

I get a little more upset every time I write about the BEAD rules. Many states have already held state broadband grant programs of the size of the money they’ll get from BEAD, and those grants have probably a tenth of the rules of the BEAD grants. These grants were processed quickly, and projects tend to start construction the year after the grant award. I have to imagine that State broadband offices are intimidated by the BEAD rules – it puts them on the spot to do everything perfectly and meet all of the NTIA rules – and that’s probably not possible.