Doug Dawson

I’ve heard rumors for years that the policymakers in DC never expected the Affordable Connectivity Program (ACP) to be permanent. The expectation of the original architects of the plan was that ISPs would bow to public pressure to fill the void when ACP ran dry. However, the giant ISPs are not likely to self-fund the discounts and smaller ISPs can’t afford to do so. I’ve seen some recent articles that argue that the Federal Communications Commission could employ the Universal Service Fund.

In a survey of 8,000 broadband customers nationwide, Parks Associates found that FWA cellular wireless customers feel better about the price they pay for broadband than subscribers of other technologies. The survey asked broadband customers to react to the following statement: “I receive Internet service at a fair cost / good price”. The response by technology was as follows:

When internet service providers are asked about the impediments they encounter for building new fiber networks, they almost always list pole issues at or near to the top of the list. Why are poles of such big concern? Building aerial fiber means putting the fiber on poles. Most poles are owned by electric utilities, although some belong to telephone companies or municipalities. Invariably, some poles have to be replaced in order to add a new fiber line. This mostly occurs when there is not enough space for the nationally required distance between wires.

Federal Communications Commission Chairwoman Jessica Rosenworcel announced plans to introduce a Notice of Proposed Rulemaking (NPRM) that would expand customer choice in apartments, condos, public housing, and other multi-tenant buildings. The NPRM would allow tenants to opt out of bulk billing arrangements where landlords build broadband or cable TV into the price of rent.

State Broadband Offices and the BEAD grant process have designed grant rules that put pressure on internet service providers to provide inexpensive rural broadband. But in doing so, I’m not sure that they understand the high prices that rural folks are paying for broadband today. In rural areas I've looked at, most households are paying over $100 a month for broadband. There are state BEAD rules that are trying to force rates down to rates between $50 and $75 per month for gigabit speeds. I find several faults with these rate-setting efforts:

I believe we can’t ignore the history of our industry if we want to avoid the worst of it from happening again. There are a variety of factors that led to the rural mess that created the need for BEAD and other broadband grant programs. I think the downward trajectory started with the divestiture of AT&T into AT&T as a long-distance company and large regional telephone companies. The newly-formed company lobbied hard to be able to make profits over and above the low, but steady profits that could be earned by a regulated utility.

There is a tendency to think of high-cost areas—places where it’s expensive to build fiber—as only being in remote places with tough terrain. We’re going to see a lot of other cases of high cost locations that I think are going to surprise State Broadband Grant offices. There are many reasons that drive up the cost of building a landline network. Some places are high-cost by definition. I know of a small town in Arizona that is fifty miles away from the nearest other people.

In a recent press release, John Deere announced an agreement with Starlink to provide broadband for smart farm equipment in areas where cellular coverage is not strong enough. Anybody familiar with rural America understands that there are gigantic holes in cellular coverage, so this arrangement puts Starlink in a strong position with farmers. The decision means that John Deer will include a Starlink receiver in smart farm equipment along with a 4G LTE receiver.

A large majority of internet service providers seeking BEAD grants will be financing matching funds using loans. Matching funds are the contributions expected from providers—a 75 percent grant means 25 percent in matching funds. Very few providers carry enough cash on hand to consider using equity to pay for broadband expansion. This contrasts significantly with large telephone and cable companies that will be pursuing BEAD grants, most of whom will finance grants using equity. When it comes to financing using equity vs using loans, equity is the clear winner for the provider.

Some State Broadband Offices are taking a stab at social engineering by trying to force BEAD grant winners to offer low broadband rates. I understand the sentiment behind this because everybody in the industry involved with digital equity issues hears stories about homes that can’t afford broadband even when it is available. I know this feels like a broadband office is doing something good, but there are a number of reasons why this is a terrible idea.