Tag Archives: non-deployment funds

NTIA’s BEAD Role

At the SCTE Tech Expo in Washington, DC, Arielle Roth, the newly seated head of NTIA, was quoted by several sources as saying, “Our role is to be good stewards of the money . . . We wouldn’t be doing our due diligence if we didn’t look under the hood and make sure that Americans aren’t on the hook for costs that would be unreasonable.”

By the looks of what NTIA has been doing, they seem to have taken cost-cutting as the primary goal of the BEAD program. First, they forced States to shave millions of locations from the BEAD-eligible list, and I believe we’re going to find out later that many millions of those locations should have gotten grants for better broadband. NTIA is now in the process of setting a cost cap for each state based on the CostQuest cost models and forcing ISPs to accept 65% or less of the state-specific cost cap.

I would agree that NTIA has a responsibility to make sure that money isn’t wasted, but that is not supposed to be its primary concern. Let me take you back to the beginning of BEAD to talk about how this was supposed to work.

Congress clearly intended for the full $45.5 billion allocated to BEAD to be spent. States were instructed to bring good broadband to every BEAD-eligible location, and the legislation included an emphasis on building fiber. Whatever wasn’t spent on infrastructure was to be used for non-deployment projects that were broadband-related. This could have encompassed a wide variety of different uses to be determined by each state. The legislation suggested uses for non-deployment funds for things like wiring urban MDUs for broadband and getting computers and other devices into the hands of those who need them. States have suggested a wide range of uses for non-deployment funds. For example, West Virginia wanted to use the funds to do a statewide pole inventory to make it easier to build fiber. South Carolina envisioned creating a statewide middle-mile network that made sure that ISPs in every rural county could buy backbone Internet for the same price as in the populous counties.

Unfortunately, NTIA got off to a bad start early when it realized how bad the FCC maps were. The whole BEAD process was delayed waiting for better maps. When they got slightly better maps, NTIA pulled the trigger and used those maps to allocate BEAD funds to states. Almost immediately, some states yelled that they didn’t get enough money, while other states realized they got more than they needed. There were policy discussions about shifting money between states after awards were made, but that never happened.

The States then went through a map challenge process. Unfortunately, the rules required by NTIA made it far easier to remove BEAD-eligible locations from the map than to add locations that should have been eligible. I know multiple counties that worked hard to show that some of the ISPs in their County were not delivering 100/20 Mbps. However, the process for proving that was nearly impossible to follow – it required convincing multiple customers of a given ISP to take speed tests multiple times per day over multiple days, and in a specific manner. The end result of the disastrous map challenge process was that millions of locations were removed from BEAD, with relatively few added.

More recently, NTIA acted to remove even more locations from BEAD. They correctly removed locations where some other grant was supposed to build better broadband. But they also made it easier for WISPs, using both licensed and unlicensed spectrum, to ask to remove locations from the BEAD map.

States were originally given a lot of latitude in how to use the funding allocated to them. But States were to act under the overarching intentions of the legislation that said they should consider fiber first. States understood that by funding relatively expensive fiber builds, they were reducing the funds that would be left for non-deployment. States had serious policy discussions of how to balance between building fiber and other needs.

But this latitude is exactly what Congress intended. They wanted BEAD to avoid the problems of RDOF, where the FCC called the shots and ended up awarding money to ISPs that should not have been funded. That draws attention to a second quote from Roth. She said that BEAD funding should go to “serious providers who are going to deliver on their promises and that we’re not going to see defaults.” I hate to be the bearer of bad news to NTIA, but by pressuring ISPs to take less grant funding to stay in BEAD, NTIA is greatly increasing the chance of future defaults. This is going to be a repeat of RDOF. ISPs will start building networks and will suffer inflation and supply chain issues, and some of them will decide that it’s better to pull the plug than to finish building a project they can’t afford, and that can’t make money. That’s the reason for the RDOF defaults in recent years – RDOF winners looked at the low amounts of award they accepted in the reverse auction and threw in the towel.

One thing is now clear with BEAD – NTIA now fully owns the program. States lost all of their latitude with BEAD, and the NTIA changed the rules after the BEAD process made it to the five-yard line. Whatever happens from here will be laid 100% at the doorstep of NTIA, and my prediction is that BEAD is not going to be talked about fondly in many parts of the country.

Going, Going, Gone?

We now know the next BEAD fight, and it might be the biggest fight yet. On September 5, NTIA issued a press release talking about the progress of the Benefit of the Bargain round for States to award BEAD funding. The press release announced that 36 of 56 States and Territories have made tentative BEAD awards and have submitted their final proposals to NTIA.

The header of the Press Release is that “Plans include broad range of technologies and save American taxpayers at least $13 billion”. The Press Release went on to say, “In the plans submitted today, states are already projecting savings of at least $13 billion for American taxpayers”.

The $13 million referenced by NTIA is the difference between the funding allocated to each state for BEAD and the amount being awarded to BEAD grants. According to the IIJA legislation that created BEAD, any funds not spent on infrastructure were to remain with the States to pursue other activities related to improving broadband. The legislation included some specific examples related to activities that promote the adoption and meaningful use of high-speed internet, including workforce development, digital literacy training, subsidies for internet-capable devices, telehealth initiatives, and the installation of Wi-Fi in multi-unit residential buildings. States were free to propose other ideas, and many have.

When NTIA issued the new rules for making BEAD grants in June, the agency said that funding for non-deployment funds was under review. It’s now pretty clear that NTIA plans not to expend the non-deployment funds and take credit for saving the expenditure for the U.S. Treasury.

The $13 billion number will grow. That amount comes from the States that have already submitted final plans. If the same ratio of non-deployment funds holds for the remaining states, then the amount of non-deployment will be around $25 billion. There are ten States where the non-deployment funds are more than $500 million, led by North Carolina at $1.1 billion and Georgia at $1 billion. The others include Arkansas, Kentucky, Louisiana, Mississippi, Ohio, Tennessee, Virginia, and West Virginia. Interestingly, the amount of non-deployment funding grew significntly when NTIS stressed making BEAD awards to satellite technology.

I describe this as a fight because States aren’t going to easily let this funding go. First, States have worked hard to reach consensus for specific plans for using the non-deployment funds. As an example, West Virginia plans to use non-deployment funds to create a database of utility poles in the state, to update security on the State’s own network, to award grants for expanding rural cell towers, and for training programs for technical jobs in the telecom sector. These are typical of the plans in other States and all work to further broadband deployment.

States are also unhappy about the NTIA statement because the funds were directed by Congress, and States believe they are entitled to the non-deployment funds. Louisiana Gov. Jeff Landry sent a letter to Commerce Secretary Howard Lutnick this week that emphasized that the non-deployment funds belong to the State. In Louisiana, the non-deployment funds are in the range of $850 million.

It’s not hard to imagine a coalition of State Attorneys General from red and blue states together suing NTIA to get the non-deployment funds. There are similar lawsuits underway for withheld funding for healthcare and education.

The bottom line is that a lawsuit might be inevitable. NTIA statements make it clear that it wants to claim the savings by keeping the non-deployment funds, and there are States that are likely not going to let the funds go without a fight. But maybe there is a compromise somewhere in the middle.

States: Don’t Give up on MDUs

As States look ahead to how they’ll use BEAD funds beyond broadband infrastructure deployment, one key area of opportunity is emerging: supporting underserved multi-dwelling units (MDUs). The Infrastructure Investment and Jobs Act (IIJA) singles out a funding opportunity for MDUs where a “substantial share” of units lack adequate internet access or are in low-income communities.

While States have already received NTIA approval for how they plan to use non-deployment funds, there is a good chance that the upcoming revised Notice of Funding Opportunity (NOFO) might narrow States to only using funding for purposes specifically allowed in the Act. If that happens, States may be invited to revise their Initial or Final Proposals, giving them a valuable opportunity to rethink and refine their funding strategies.

This blog is a plea for States not to give up on the opportunity to use non-deployment funds to bring better wired-broadband to affordable housing MDUs. Landlords of affordable housing MDUs face a chicken-and-egg dilemma – many affordable housing MDUs don’t have good broadband because the tenants can’t afford to pay market rates for broadband.

The affordable rates needed for success will vary according to the incomes of tenants. In the MDUs that serve residents with the lowest incomes, prices will have to be in the range of $10 to $15 per month. There are affordable housing MDUs where incomes are higher, but generally still not high enough for tenants to afford normal market rates for broadband.

The MDU solution for States to consider is to wire MDUs with fiber or Category 6 cable to enable gigabit speeds within apartments. States should support wired solutions instead of funding  building-wide Wi-Fi, which will not meet the requirements of a served technology and is notoriously inconsistent (has anybody ever loved the Wi-Fi they get in a hotel?)

There are a number of reasons for States to consider this use of any remaining BEAD funding to wire affordable housing and other underserved MDUs.

It’s a lot more affordable to wire buildings than States probably assume. I’ve been doing research with the vendors and technologies used to wire MDUs. My analysis that the cost to retrofit a typical 72-unit MDU complex with Category 6 wire ranges from $300 to $630 per unit. Wiring with fiber costs a little more, and ranges from $450 to $800 per unit. It cost a lot more to wire buildings a decade ago, but modern wiring technologies and techniques have significantly reduced the cost.

It is also getting increasingly easier to find ISPs willing to work with landlords to bring affordable broadband when it’s needed. If the landlord takes on all of the rewiring and infrastructure costs inside an MDU, then ISPs need only bring a fiber connection to the MDU. The cost of a bulk-billed wholesale fiber connection can be made affordable when ISPs and landlords step outside of the industry norm. Most ISPs operate on rolling 3-year contracts for selling to businesses (ISPs view an MDU as a business customer). For example, ISPs and landlords both get a huge benefit by considering ten or even twenty-year contracts for a fiber connection – landlords get lower costs and ISPs eliminate churn.

Because of the affordable cost of rewiring buildings for high-speed broadband, States can do a whole lot of good for a relatively small investment. Even if States pay 100% of the cost to rewire MDUs (and there is no particular reason they should pay 100%), the cost per family to bring better broadband to MDUs is a tiny fraction of the cost to serve a rural family with any broadband solution. BEAD originally held out a hope that it could help to solve the MDU broadband gap, and with non-deployment funds, some of that promise can still be kept.

Proposed BEAD Legislation

We got a peek at how the BEAD grants might be modified when Representative Richard Hudson of North Carolina introduced the Streamlining Program Efficiency and Expanding Deployment (SPEED) for BEAD Act. Note that these are just proposed changes to BEAD and other changes are not off the table. Many of these changes undo direct requirements from Congress in the original BEAD legislation.

A lot of the changes are largely cosmetic and what the regulatory world refers to as ‘packing peanuts’, meaning the changes make a policy statement but have almost no impact on making the BEAD grant awards. This includes:

  • Changes the acronym for BEAD from ‘Broadband Equity, Access, and Deployment” to ‘Broadband Expansion, Access, and Deployment’.
  • Eliminating topics from the grant application that most ISPs were giving lip service to anyway. ISPs may still care about these topics, but they would no longer be a requirement for States to consider when choosing grant winners. This Act would eliminate consideration for:
    • Diversity, inclusion, and equity
    • A long list of labor requirements including an emphasis on union wages, prevailing wages, workforce composition, and a labor peace agreement.
    • How a new network would address climate change.
    • Grant points for offering open access.
    • Regulation of network management practices, including data caps.

The proposed legislation has a few items of more significant impact that most ISPs will like:

  • Allows ISPs to remove high cost locations from BEAD proposals. Most states have drawn arbitrary required service areas, and this lets an ISP remove location that add too much cost. Presumably those locations would default to a satellite or some other technology.
  • While BEAD would maintain the requirement to offer at least one low-cost broadband plan, states would not be allowed to regulate or otherwise mandate or set such rates or require rates to be capped or frozen for future years.

There are a few major proposed changes:

  • Any unspent BEAD funds would be returned to Treasury. States will be pleased to see that the Act leaves Non-Deployment Funds alone – many feared those would be yanked. Originally, unused funds were to be redistributed to states that didn’t get enough funding. This is bad news for States that hoped to get more.
  • One of the biggest changes is that BEAD funding can’t be used to fund digital inclusion and adoption activities. Funds can still be used for telecom workforce development.

The biggest change is the one we’ve all been waiting for – there would no longer be any preference for fiber, and any broadband technology that meets the speed and latency requirements is eligible for BEAD funding. Of course, this doesn’t answer the big question of what that means. Might this mean that 10% or 20% of BEAD would go to satellite technology, or even most or all of it? As much as folks want an answer to this question, it’s likely to be a while until rules get that specific. That final direction is likely to come from the NTIA in the form of new instructions on how to choose grant winners.

While the proposed Act has the acronym SPEED, it seems inevitable that any changes by Congress or NTIA will require states that have already made BEAD awards, or the many that are currently scoring grants, to start the grant award process over. Some folks have speculated changes could delay BEAD for another year, but I expect many states will be able to make the pivot more quickly.

Commerce Secretary Howard Lutnick recently said he plans to make similar changes and probably others. I don’t understand enough about the new dynamics in DC to know if NTIA can make significant changes unilaterally or if they would want the cover provided by this legislation. The bill undoes provisions that Congress created in the original BEAD legislation, and it seems like Congress ought to be the ones to change them. But Commerce might feel they have the authority to make changes. I guess we’ll find out soon.