Doug Dawson

Where are cellular carriers finding the millions of customers they are adding to fixed-wireless access (FWA) cellular broadband? In urban areas, the customers would have to be coming from cable companies, telephone company DSL, or fiber. In rural areas, customers would be coming from DSL, satellite, or cellular hot spots. I’ve been doing some digging, but my research is far from scientific.

In October 2023, Governor Gavin Newsom (D-CA) signed the Digital Equity Bill of Rights. This is an interesting law that guarantees that Californians have the right to, among other things:

One of the most interesting rules in the BEAD Program is that broadband needs to be offered to every unserved location in the country—not 98 percent, not 99 percent, but all of them. This sounds like a terrific policy goal, but as I’ve been thinking about it, the goal is going to be incredibly hard to meet in many places. There are homes throughout the West that are far away from everybody else and will be extremely expensive to reach. There might be even more such homes in Alaska.

The White House Office of Information and Regulatory Affairs recently released new rules that will be used to quantify and evaluate proposed new regulations. Many economists have been arguing for this change for a decade and believe that the new formulas are more accurate. There are several important changes to the new scoring methodology, notably that the new formulas give more value to future impacts of regulation. Critics of the new formulas argue that the new regulations are a way to impose high regulatory costs today that are justified by some theoretical future benefit.

Many internet service providers (ISPs) who operate mature fiber networks have been recently approached to sell their businesses to buyers who want to roll up and amass multiple fiber networks into a larger business. I know fiber network owners who are being offered prices for their business that they never expected. I’ve heard of offers at a multiple in the range of twenty times adjusted earnings. High multiples are a sure sign of plans for rolling up many ISPs into a larger business.

For well over a decade, it was fairly easy to understand the trajectory of the broadband industry. But the industry is now in total turmoil. Within a short time, cable companies have stopped growing. Currently, all of the industry growth among big internet service providers (ISPs) is coming from cellular fixed wireless access (FWA). Last-mile fiber networks are being built across the country. Wireless internet service providers (WISPs) finally have the radios and enough spectrum to be serious competitors. When I talk about trajectory, I’m not talking about predicting 2024.

There are a lot of fiber networks owned by government entities. I find it perplexing that a lot of these networks are used only for government purposes and nothing else. In some cases, commercial use of the networks is prohibited by the original source of funding that paid for the network. However, a lot of these government-owned networks could be used for commercial purposes. There are some governments that have decided to share the excess capacity. Some networks were built in collaboration with a commercial partner that uses part of the network.

When I first read the Infrastructure Investment and Jobs Act legislation that created the Broadband Equity, Access, and Deployment (BEAD) grants, I thought it was going to be a grant program that a whole lot of my clients would choose to ignore. The requirements in the legislation seemed overwhelming. But over the last year, my opinion mellowed because I assumed that State Broadband Offices (SBOs) would soften some of the rough edges of the federal rules.

Arizona and Missouri are going to use a cost model as part of their Broadband Equity, Access, and Deployment (BEAD) Program grant review process. Consultants have built complex models that are supposed to predict the cost of building broadband anywhere in the country. The models have to be loaded with specific inputs for any given location, and the models are then supposed to calculate what it will cost to build a broadband network. These two states are using the cost models in the worst possible way because they are using the costs suggested by the cost models to help pick grant winners.

One of the provisions of the Infrastructure Investment and Jobs Act is a directive that states should take steps to reduce costs and barriers to fiber deployment.