Broadband for Low-Income Housing

In April of this year, Kathryn de Wit of the Pew Charitable Trusts released what I consider to be the definitive article defining the broadband gap in low-income housing. I’ve discussed her paper before, but as we finally approach the start of the BEAD grant process, I wanted to highlight the findings from her report. While BEAD grant funding is supposed to be available to bring broadband to unserved and underserved homes everywhere, I have to wonder how much funding will be provided in most states to tackle this issue – which is mostly found in cities.

I think its universally understood that homes need broadband to take part in modern life. Just in my own life, it seems that month after month and year after year, that more of the functions I do now involve broadband. Just one example, I recently had some doctor visits, and a lot of the process is now online to register prior to the visit and to get my results from lab tests. This was not part of the process for my doctor just a year ago – but seemingly everything we do is migrating online.

Pew interviews with low-income households showed that some of the most important benefits of broadband for low-income homes include reduced isolation and increased social connection, support for aging in place, access to education, health care and wellness, job training, financial services, and the opportunity to apply for and find jobs. Several major studies have documented the positive impact for students who have broadband and computers in the home.

The Pew paper describes the lack of broadband for low-income housing as being the result of several issues. First is that ISPs, in many cases, are not building fiber or other modern infrastructure to subsidized housing. When an ISP builds fiber near a low-income apartment building, it often bypass the building and don’t offer fiber. While ISPs won’t publicly say it, this is due to an expectation of low returns on the investment of building a fiber drop, wiring the units, and providing the electronics.

Another issue is a shift away from community technology centers – places where WiFi broadband and computers are made available to the public. This is a movement that was already underway before the pandemic and which became the norm during COVID shutdowns. This means there must be a bigger emphasis on getting broadband and computers into living units.

But the biggest issue continues to be affordability. Pew research from 2021 showed that 43% of households with incomes under $30,000 did not have a broadband connection – which compares to 8% for homes with incomes over $75,000 per year. 45% of people without home broadband said they can’t afford a monthly broadband subscription, and 37% said they can’t afford a computer. The household income issue is even more acute in public housing, where the average household income in a 2016 study was just over $14,000 per household.

A large survey conducted by the NTIA of homes without broadband showed that the average amount that those living in subsidized households said they could afford was just $10 per month, although over half of homes said they couldn’t afford any amount. A 2021 survey by Everyone On shows that 40% of households with incomes of $50,000 said they can’t afford broadband, while 22% said they could afford to pay as much as $25 per month.

As you might imagine, there are a lot of challenges in getting better broadband to public housing:

  • Broadband subscriptions are not included in the HUD utility allowance. This is a funding mechanism that covers electricity, gas, and water fees in public housing. It’s time to recognize that a broadband subscription is a household need and not a luxury.
  • While BEAD grants theoretically cover bringing broadband to apartment buildings that need it, it’s a challenge to prove the areas are underserved since urban maps often claim ubiquitous broadband coverage from cable companies. The BEAD process is also incredibly unfriendly for filing grants for small areas like a single building due to the complexity of the requirements.
  • ACP funding has allowed many low-income households to get broadband. But unless Congress acts soon, that fund will run dry by next spring. The ACP rules also require individuals to apply for the subsidy. In a low-income housing building, everybody qualifies for ACP by definition, yet there is no mechanism for enrolling a building in ACP. Most other benefits for low-income housing are funded by the building instead of by individual tenants.

I’ve predicted for the last several years that the next big push for broadband connectivity will be in cities. As states start allocating rural grants for BEAD, it will likely become obvious that little has been done to help most cities. I think this is going to be a harder issue to solve than the rural broadband gaps because the big cable companies are going to fight anybody that tries to bring broadband into what they consider as their turf – even where they aren’t serving. But if the goal is to get everybody onto broadband, this is an issue we need to tackle and solve.

Revisiting the BEAD Letter of Credit

I recently agreed to sign a letter to the NTIA that asks the agency to eliminate the BEAD requirement that grant recipients must have an irrevocable standby letter of credit (LOC) to apply for a BEAD grant. This letter was signed by over 300 folks in the industry including ISPs, local government, policy experts, and industry associations. I sign very few documents like this, but the letter of credit requirement is a terrible policy – and is a big concern to many of my clients.

To explain an irrevocable letter of credit in plain English, anybody winning a BEAD grant must set aside almost the same amount of cash as the amount of grant matching from the day that the grant is awarded through the completion of the grant construction process.

A letter of credit to satisfy the NTIA must come from an FDIC bank with Weiss rating of B- or better for 25% of the award amount. A letter of credit is a specific kind of negotiable instrument where a bank guarantees that the bank will fund any shortfalls if a grant fails in its financial obligation. If a grant applicant fails to complete the construction of the grant, the money in the LOC would likely be claimed by NTIA or the state grant office (still unclear on the details).

Banks will not issue a letter of credit without having liquid assets or collateral equal to the amount of the LOC. That means a grant applicant must not only have enough cash or borrowing for its grant matching fund commitment, but the applicant must also set aside a large amount of hard cash as a guarantee for the LOC. The letter to the NTIA uses an example of an ISP that want to fund a $10 million project using a 75% BEAD grant. In this example, the ISP would get $7.5 million from the grant. It would need to have $2.5 million available for the matching fund. It would need to set lock up another $2.1 million for the letter of credit. That makes it incredibly expensive for an ISP to seek a BEAD grant. And FYI, this example is too conservative – grant recipients also must finance the operating costs of launching a grant project since those expenses are not covered by grants.

To make matters even worse, banks charge interest on a letter of credit because the bank must set aside a corresponding portion of its own equity to support the letter of credit. The cashed tied up by a bank for an LOC can’t be used to make other loans – so the bank must charge interest.

This is a huge problem for many reasons. Anybody but the largest ISPs will have a hard or impossible time getting a letter of credit. Most ISPs don’t accumulate cash because the best use of cash for most ISPs is to continue to build more infrastructure. A large percentage of ISPs will not have the cash available up front to support the letter of credit. Many cities and municipalities are legally barred from buying a letter of credit.

There is some question if the banking industry as a whole is willing to float over $10 billion in letters of credit for BEAD grants. The banking industry is under a huge amount of stress due to high interest rates. Banks are far less interested in making any kind of infrastructure loans today when interest rates are high – because the bank’s risk is much higher than normal. I know ISPs that have been told by their current bank that they are not interested in issuing a letter of credit – and the chance of getting a LOC from a bank that doesn’t know an ISP is slim.

There is no reason for this requirement – or at least no reason for it to be so draconian. The NTIA is insisting on a letter of credit because it doesn’t want to be embarrassed by projects that don’t get completed. This requirement is a massive advantage for large ISPs over smaller ones, but even large ISPs hate this requirement. There are many successful broadband grant programs that don’t require a draconian letter of credit. There are other ways to provide assurance to a state grant office, like performance bonds or issuing grant funds in tranches as milestones are met.

Hopefully, the press from this letter will get the NTIA to reconsider its position. The requirement for the extreme version of a letter of credit is overkill. The letter of credit is going to stop a lot of ISPs from being able to ask for BEAD funds – the local ISPs that customers prefer. Maybe most germane is that requiring a letter of credit might actually drive more projects to fail as ISPs struggle to support the interest payments on an LOC.

One More Mapping Challenge

There is still one more upcoming map challenge to try to fix errors in broadband maps for purposes of the upcoming BEAD grants.

The NTIA is requiring state broadband offices to have one more mapping challenge at the state level before the state can issue broadband grants. The NTIA issued a sample template for a state challenge process, but each state is allowed to develop its own challenge process. States are not required to wait for an update in the FCC mapping system before using any updated information when awarding grants.

The NTIA suggests that challenges can be made by ISPs who are considering asking for a BEAD grant. NTIA also suggests that states accept challenges from the public, and I assume that includes challenges from cities and counties as well.

This is the challenge that a lot of folks have been waiting for because there are still a lot of inaccuracies in the FCC maps. While some states did a vigorous review of the FCC maps and asked for map updates – many states did not. Some counties also put an effort into correcting the FCC maps – but many did not. This is the final chance to get locations declared as eligible for BEAD grants. I assume that States will not accept locations for BEAD grants that are not in the corrected maps.

This challenge is also the one that folks have been waiting for since the NTIA suggests that there can be a challenge against the claimed broadband speeds. A lot of the early map challenges had to do with getting the mapping fabric right – which is the database that is used to define the location of the homes and businesses in the country.

My consulting firm has been working with communities, and we are still seeing a lot of inaccurate information. In every county we have examined, we find ISPs claiming speeds of 100/20 Mbps or faster that are not supported by Ookla speed tests. We’re also finding coverage errors in the maps where ISPs are reporting homes as covered that are not. A lot of the earlier challenges fixed coverage problems that were grossly incorrect, but it takes a lot more effort to find smaller pockets of ten or twenty homes that can’t buy good broadband but for which some ISP claims coverage.

Many of the problems in the FCC maps are directly due to the FCC rules for ISPs to report broadband for the maps. ISPs are allowed to claim marketing speeds for broadband instead of the actual speed delivered. There are far too many cases where the advertised marketing speed is much faster than what is being delivered. ISPs can also claim areas as covered by broadband where the ISP can supposedly provide broadband in ten working days. Finally, we often find ISPs claiming broadband coverage where an engineering field review doesn’t find any of the claimed technology.

The mapping is only an issue for BEAD because the IIJA legislation that created the BEAD grants insisted that FCC mapping must be used to allocate grants. I’m sure that language was inserted into the legislation at the insistence of the big ISP lobbyists to make sure that grant funds were not used to ‘overbuild’ existing broadband. At the time the IIJA legislation was passed, the FCC maps were atrocious. They have now been improved to the point where I would say they are now merely dreadful – but nobody believes the FCC maps are accurate. Most people only have to look around their immediate neighborhood on the FCC maps to find a few overstatements of coverage. My team has looked in great detail at perhaps a dozen counties and found a lot of mapping errors. I can’t even begin to think what that means on a national scale.

Unfortunately, most people in the country have no idea how this complicated BEAD process works. After the grants have been awarded, I expect we’ll start to hear from unserved homes that are not going to be covered by a BEAD grant. I believe this is going to be a lot more homes than anybody at the NTIA, the FCC, or state broadband offices wants to acknowledge.

Hopefully, the ISPs who want to file BEAD grants will take a shot at cleaning up the map errors now. That’s the only way to get grant funding for locations that are underserved but which don’t show that on the FCC maps. Everybody interested in doing this needs to pay attention to the state broadband office. States will first issue a plan to the FCC describing the way it will conduct the mapping challenge. These plans will likely have a 30-day opportunity for public comments. If you don’t like the map challenge rules, holler! Sometime later, states will hold the mapping challenge, and most will likely have a narrow time window to file challenges.

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.

Who’s In Charge of Broadband?

On July 24, the FCC authorized a new subsidy program, Enhanced A-CAM (Alternate Connect America Cost Model). This program will extend subsidies to small, regulated telephone companies at a cost of about $1.27 billion per year for ten years. The subsidy will be paid from the FCC’s Universal Service Fund.

The funding requires recipients to deploy voice plus broadband with speeds of at least 100/20 Mbps to 100% of the areas covered by the subsidy within four years. The order is technology neutral, so telcos could elect to meet this requirement with fiber or with licensed fixed wireless technology.

According to Mike Conlow, this order will bring broadband to almost 583,000 unserved or underserved locations that are already covered by the NTIA’s BEAD grant footprint. Today’s blog talks about the absurdity of the FCC making this announcement only weeks after the NTIA announced the distribution of the $42.5 billion in BEAD funds to states. This means that two U.S. agencies both announced funding to cover the identical half-million locations within a month of each other.

Think about what this means. A state that has some of these A-CAM locations was allocated BEAD grant money to bring broadband to these areas. The FCC order is then directly funding to build broadband to the same passings. This means that a state that has a lot of unserved and underserved A-CAM passings is getting a funding windfall. Conlow estimated that this double funding is bringing a funding windfall of $180 million to Nebraska – the state with the most unserved and underserved A-CAM locations. The downside of this is that if Nebraska and other states are getting a windfall from the FCC decision, then other states are receiving less BEAD funding than they would have if these locations had been excluded from BEAD before the NTIA allocated the $42.5 billion.

The FCC’s A-CAM order was released only three weeks after the NTIA announced the BEAD allocations to states. There is no way that the FCC didn’t do this deliberately. The FCC could have asked the NTIA to take these locations out of the BEAD process so that the $42.5 billion would have been allocated fairly.

Two years ago, the Biden administration directed the FCC, the NTIA, and the USDA to coordinate everything associated with federal funding for broadband. The FCC’s actions with this decision are the exact opposite of coordination.

I speculate that the FCC did this to reclaim relevance in the discussion of who is helping America solve the rural broadband gap. The FCC has taken a lot of criticism in recent years for botching the RDOF funding process and handing out wasted billions to the big telcos in the CAF II subsidies. The FCC was also largely cut out of the biggest effort ever with BEAD grants to solve the rural broadband gap, and that had to sting. The FCC can now say to the folks living in the A-CAM areas that it provided the funding to bring better broadband instead of the NTIA. I’m picturing FCC ribbon cuttings for projects that launch fiber in these areas. I can’t think of any other reason that this order would have been released so soon after the NTIA announcements of BEAD funding for each state.

The NTIA should react to this announcement by reallocating the BEAD funding to states because for every state that got a windfall like Nebraska from the FCC’s A-CAM order, other states received less BEAD funding. Unfortunately, reopening the allocation process could open a can of worms, so that likely won’t happen.

In my mind, the FCC has become a loose cannon due to its control of the Universal Service Fund. The USF for all practical purposes is a big slush fund that gives the FCC the ability to tackle anything it wants, outside of any control by Congress or the White House. After this announcement, it wouldn’t shock me to see the FCC announce another round of RDOF funding in the middle of the BEAD grant process next year.

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.

FWA Mapping and BEAD Grants

There is one mapping issue that unfortunately messed up the NTIA’s count of eligible passings for BEAD, grants and that is going to be a real concern for folks who file BEAD grants. Over the last year, both T-Mobile and Verizon have activated rural cell sites that can deliver home broadband using licensed cellular spectrum that can be 100/20 Mbps or a little faster. According to the way that the NTIA and the BEAD grants determine grant eligibility, these locations are considered as served.

There are several reasons why this is going to be a practical problem in the BEAD grant process. First, the claimed areas claimed by the cellular carriers on the FCC maps are not accurate. Cellular broadband signal strength decreases with the distance between the cell tower and a customer. The easiest way to explain that is with an example. I talked to a farmer in Illinois who has the T-Mobile FWA broadband and is thrilled with it. The T-Mobile tower is on his farm and he’s getting over 200 Mbps download speed. He bragged about the technology to his neighboring farmers. One of his neighbors over a mile away is getting download speeds over 100 Mbps. But another neighbor over two miles away is getting speeds closer to 50 Mbps and doesn’t like the product.

At some future point, the FCC is supposed to require heat maps around each cell site to more accurately show the actual speeds that can be delivered, But for now, T-Mobile and Verizon are typically claiming speeds of 100/20 Mbps or faster for a sizable area around each cell site. This speed is true for the folks close to the tower, but at the outer fringe of each claimed circle are customers who are not able to receive 100/20 Mbps broadband. Those areas should be eligible for BEAD grant funding. I have no idea how State Broadband offices are going to deal with this. Any Grant office that decides to stick with the FCC maps will be condemning small pockets of folks to have worse broadband than everybody around them.

This is also another problem to deal with for an ISP seeking BEAD grants. I’ve described in the past how RDOF carved up the unserved and underserved areas in many counties into a jumbled mess, and FWA cellular coverage makes it that much harder to put together a BEAD serving area that makes both engineering and financial sense.

There is a more subtle issue that is even more troubling. The cellular carriers have no intention of serving everybody within the range of a cell site. There are constraints on the number of people they are willing to serve. This is similar to the constraints that Starlink has with serving too many people in a given small geographic area. This makes it hard to understand why NTIA rushed to define this technology as qualifying as served broadband. The willingness and ability to serve everybody ought to be one of the most prominent factors when declaring a technology to be creating served areas.

Even worse, T-Mobile says in the terms of service that it reserves the right to throttle usage on the FWA service. The bread and butter product for cellular companies is people with cell phones, and they are giving those customers priority access to the bandwidth at each tower. Any time cellular traffic demand gets too high, the usage to FWA customers will be restricted. That may not be a problem for low-population cell towers – but customers at any tower that has this restriction are going to be unhappy if broadband slows to a crawl in the evening.

My final issue with FWA cellular technology is that is expanding rapidly. Soon, it won’t just be Verizon and T-Mobile deploying the technology. UScellular, DISH, and AT&T are likely to start popping up in rural areas. I’ve been scratching my head wondering how State Grant offices and ISPs are going to deal with the technology if it’s activated during the grant review process. Cellular companies have every motivation in the world to intervene in grant applications and declare that areas are served and ineligible for grants. If the FWA carriers are allowed to make this claim for new cell sites, I can foresee numerous ISPs walking away from BEAD applications if the serving areas get carved up too badly.

This is a new technology, and, in my opinion, the NTIA rushed to accept these areas as served. The technology is so new that there was almost nobody served with cellular FWA back when the IIJA legislation enabled the BEAD grants. For the reasons I’ve discussed, it makes no sense to give cellular companies little broadband monopolies around their cell sites.

Another Twist in The BEAD Grant Process?

Word has been circulating that the NTIA recently informed State Broadband Offices that they must submit a final BEAD plan to the NTIA one year after receiving approval of the Initial Proposal of grant rules. That’s not a surprise since this language is straight out of the legislation, and the NOFO for BEAD – An Eligible Entity may initiate its competitive subgrantee selection process upon approval of its Initial Proposal and will have up to one year to conduct additional local coordination, complete the selection process, and submit a Final Proposal to NTIA.

The ugly twist is that the NTIA is expecting the Final Proposal to include a final list of all BEAD grant winners. Everybody has always assumed that the Final Proposal would be just that – a proposal that describes and fine-tunes the rules being used to award grants. Most State Grant Offices have assumed that they would have multiple years to pick BEAD grant winners.

Consider what has to happen once a state gets approval of its Initial Proposal:

  • A State Broadband Office must finalize the rules for awarding grants through attorneys and state leadership. Some states are going to be required to get the Legislature involved to approve grant rules. This will likely take 3-4 months for most states, but a few will take much longer.
  • The Grant Office would then be ready to announce the date for the first round of grant applications. They would typically give applicants 60-90 days to submit grant applications.
  • A Grant Office will need at least 30 days for the initial review of applications and to provide time to ask for clarifications from applicants.
  • Next, the detailed grant scoring must be done. The BEAD grants are complex, and it’s hard to see a state scoring and ranking grant applications in less than 60 days. There is a lot of complicated due diligence needed by grant offices that are often manned by first-time grant reviewers.
  • The State is then going to have to allow 15-30 days to post the grant applications and allow for protests and challenges. There would be another 30-60 days to resolve protests.
  • Finally, grant awards are announced, and it can easily take three months to negotiate contracts with grant winners. Inevitably, some winners will back out during this process.

The timeline above totals 16 months – and that’s if everything goes smoothly. The BEAD grants are complex, and reviewing and resolving grants that ask to serve overlapping areas is going to add a lot of complication to the process. To put this timeline into perspective, my state of North Carolina is 18 months into the $350 million ARPA grant process and still has not finished identifying all of the grant winners. And that’s with a capable and experienced Grant Office – some states are new to the grant process. The BEAD grants are for more dollars, are more complicated, and will take more time to review than ARPA grants.

The above timeline doesn’t reflect the added rules that are specific to BEAD. State Broadband offices have a mandate to bring broadband to every unserved location. They also must contend with special handling of high-cost areas. Both of these processes will require a lot more time than listed above for Broadband Offices to reach out to and negotiate with ISPs. States that are lucky enough to fund all unserved and underserved areas will need more time to figure out what comes next.

I’m fairly certain that any pressure to speed up the grant time frame comes from the recent White House emphasis on getting infrastructure money out the door quickly. I think everybody in the industry thinks that the BEAD grant process should have gone faster. But the BEAD process has been glacially slow and it’s been 19 months since the IIJA legislation was signed. It’s absurd that we are just now announcing the amount of money that states will get.

But we can’t make up for the glacial process of launching the BEAD grants by rushing at the end so that the money is shoved out the door without taking time to make sure that each State is getting the best long-term solution. States have been having a lot of internal debates about the technologies and types of ISPs they hope will win funding – any deliberation and chance of directing the funds responsibly will be cut short if the process is hurried. One of the most important parts of any grant process is to give worthy applicants a chance to refine and amend a grant request in a subsequent round. The BEAD grants are the first grants in my memory where the States had to reach out to stakeholders to get public feedback. If we rush, all that was learned in that process will be tossed aside.

If the NTIA really insists on a speedy timeline, it will be creating an RDOF-type disaster. The only way to get this process done in a year (or even 18 months) would be through a single round of grants – done hastily. With a tight time frame, the grants won’t be reviewed closely and grants that include errors will be pushed through. ISPs that aren’t really qualified will sneak through.

Having only one round of grants will feel a lot like the RDOF reverse auction. A giant pile of grants will be shoved into the funnel, and it’s likely that the grants will go to ISPs that ask for the lowest percentage of grant funding. A friend of mine has jokingly been saying that 95% of BEAD money will go to the large incumbent providers, and if there is a single-round grant process, he might not be far from the truth.

I’m hoping that this is just a trial balloon being circulated by the NTIA to get feedback, and if so, every State Broadband Office needs to push back hard. If the grants are going to be hurried, we’re going to end up with yet another disastrous federal grant program. I was hopeful that BEAD would avoid the mistakes of the past since the money was given to the States. But if the NTIA forces State Broadband Offices to rush the grant process, we’ll be watching a slow-motion train wreck over the next year.

The Latest FCC Maps

As promised, the FCC released a new set of maps on May 30. These are supposed to be the maps that will be used to allocate the $42.5 billion in BEAD grant funding to states. Broadband analyst Mike Conlow quickly published a blog on Substack about the new mapping data that includes a summary of the new map in easy-to-understand tables. Mike’s summary shows that there are more than 114.5 million broadband passings in the country – locations that could be broadband subscribers). That’s an increase of over 1 million locations since the last version of the FCC maps.

More importantly, the new maps can be used to count the number of households that can buy broadband at various speeds. The $42.5 billion in BEAD grant funding will be allocated to states according to the number of unserved locations – places that can’t buy broadband at a speed of at least 25/3 Mbps. Locations are underserved if there is an ISP that offers broadband between 25/3 Mbps and 100/20 Mbps. According to Mike’s quick math, there are 8.67 million unserved locations and 3.55 million underserved locations. Mike subsequently corrected the number of unserved locations to 8.3 million.

Anybody who is intimately familiar with the FCC maps knows that there is a lot of fiction buried in the reporting. There is one huge flaw in the FCC mapping system that has carried over from the previous FCC mapping regime – ISPs self-report the speeds they can deliver. Per the FCC mapping rules, ISPs can claim broadband marketing speeds rather than some approximation of actual speeds. In every county where I’ve delved deep into the local situation, I’ve found multiple ISPs that are overclaiming broadband speeds.

ISPs vary widely in how they report broadband speeds to the FCC. I see some ISPs who meticulously categorize customers into a dozen or more speed tiers. It’s fairly obvious that these ISPs are trying to accurately show the speeds that are available. But there are also ISPs that claim the same speed over a large geographic area. In today’s world, I’m always instantly suspicious of any ISP that claims exactly 100/20 Mbps broadband since that conveniently classifies those locations as served. An ISP making that claim is telling the FCC that everybody in their service footprint already has adequate broadband and that there is no need to give grant money to anybody to compete with them.

But such a claim is ludicrous if the ISP is deploying a technology like DSL, cellular wireless, or fixed wireless where it is impossible that every customer over a wide geographic area to get the ISP’s top claimed speed. Such claims are easy to debunk when you look closely. For example, customers only a few miles from a DSLAM or a tower can’t get the fastest speeds. There are multiple reasons why a given customer’s speed might be slower. Such claims are even more quickly debunked when looking at detailed Ookla speed tests.

A second flaw in the FCC maps is the coverage areas claimed by ISPs. The FCC is counting on public broadband challenges or challenges by State Broadband Offices to somehow fix this problem – but that’s an unrealistic hope. Most people don’t know about the FCC maps and the challenge process – and even people who know about it are not motivated to file a challenge about an ISP that claims service at their home that’s not really available. This issue can apply to any technology, but it’s particularly a problem for WISPs and cellular broadband. It’s not easy for a knowledgeable engineer to accurately judge the coverage area of a wireless network from a given tower – I have to think it’s beyond the capability of the folks at a State Broadband Office to understand it enough to challenge coverage. But it doesn’t take any expertise to know that a WISP or a cellular company claiming ubiquitous 100/20 Mbps coverage across large areas is exaggerating both speed and coverage capabilities.

It’s going to be interesting to see how States react to these final counts. There have been rumors about states ready to sue the FCC and the NTIA if they feel these maps will cheat them out of funding. There has been legislation introduced in the Senate that would force the NTIA to wait longer for better maps before allocating most of the funding. It’s going to be surprising if nobody pops up to challenge the allocation of the $42.5 million dollars. A challenge could pluge the BEAD grants into huge uncertainty.

An even bigger issue is if the FCC maps will be used to determine the locations that are grant eligible – because that would be a travesty. That would mean that every ISP that claims a bogus 100/20 Mbps broadband coverage will be rewarded by keeping out competition from grant funding. Regardless of how the funding is allocated to States, Broadband Offices need to be the ones to determine which locations in their State don’t have good broadband.

Buy America and BEAD

In the State of the Union speech earlier this year, President Biden made it clear that he wants to see the monies spent on infrastructure projects follow the Buy America rules. The Buy America rules were enacted in 1933. The Act says that purchasing funded by the U.S. government should have a preference for using American-made products. The rules allow for waivers from this provision, but the presumption is that without a waiver that American goods must be used.

The NTIA reacted to the president’s speech by writing a blog talking about the use of the Buy America rules in the upcoming $42.5 billion BEAD grants. The blog states, “The president made clear that while Buy America has been the law of the land since 1933, too many administrations have found ways to skirt its requirements. We will not.”

The NTIA requested waivers from Buy America rules when administering past grant programs, including the recent $1 billion middle-mile grants. The USDA sought a 6-month waiver of these rules that applied to some earlier rounds of the ReConnect grants. But the NTIA has made it clear that it doesn’t see any need for a waiver to buy American fiber optic glass or cable. The NTIA says there should be sufficient time for manufacturers to re-shore or expand U.S. manufacturing to meet the demands from the BEAD grants.

In the requested waiver for the Middle Mile Grant Program, the NTIA identified components of a fiber network that are sourced almost exclusively in Asia. This includes electronics like broadband switching equipment, broadband routing equipment, dense wave division multiplexing transport equipment, and broadband access equipment. It doesn’t seem likely that U.S. vendors are going to step up to create an American source for these components in time to meet the needs of the BEAD grants. And while the BEAD grants are substantial, they are not alone enough inducement to manufacture these goods in this country.

The market reality is that most of the costs of any broadband grant project will be spent on American inputs. The cost of labor is usually the largest component of network costs, and the grants require this work be done by American firms. As the NTIA points out, there are plenty of sources for American fiber and conduit. There are American sources of cabinets, huts, and enclosures. There are American vendors making handholes and pedestals.

But the sticky item is going to be electronics. If the NTIA plays hardball on fiber electronics, it will be nearly impossible that any ISP can fulfill the Buy American provision. I’m not as familiar with where wireless electronics are manufactured, but I assume that WISPs have a lot of the same concerns. Electronics are a relatively tiny slice of the total cost of a fiber network but a larger percentage for a new wireless network. .

The arbiter of the Buy American rules is the U.S. Office of Management and Budget (OMB), which recently solicited nationwide comments about how firmly the Buy American rules should be enforced for projects that will be funded by the Infrastructure Investment and Jobs Act. There is a possibility that the OMB will be stingy with waivers even if the NTIA asks for them, but that’s a bridge that can’t be crossed until it happens.

What’s most disturbing is that this joins a list of other issues that create a lot of uncertainty for ISPs considering the BEAD grants. If we don’t start clearing up the uncertainties, states might find that the ISPs they are hoping will request grants will sit out the BEAD grants. ISPs are naturally attracted to grants, but not if the hurdles are too hard to overcome.