Analysis

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.

In the absence of the Affordable Connectivity Program, the National Digital Inclusion Alliance (NDIA) encourages ISPs to offer a low-cost plan and/or a discount to qualifying households. NDIA is creating a good-better-best rating system to evaluate the affordability and quality of low-cost internet plans. The rating system will be featured on the Free & Low-Cost Internet Plans webpage to help consumers understand their low-cost options.

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.

The Biden Administration has launched a new effort to lower costs and promote competition for US consumers. The Strike Force on Unfair and Illegal Pricing––co-chaired by the Department of Justice (DOJ) and the Federal Trade Commission (FTC)––aims to strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on consumers through anti-competitive, unfair, deceptive, or fraudulent business practices.

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.

I recently checked on the status of Dish, which is trying to become the fourth major cellular company in the country. Dish entered the cellular business in 2020 as a consequence of the merger of Sprint and T-Mobile. Dish was already under pressure at the time from the FCC to use its spectrum portfolio, and the FCC gave Dish until June 2023 to cover 70% of the U.S. population with cellular facilities.

With the Affordable Connectivity Program (ACP) on the brink of exhausting its funding and congressional action to secure its future still uncertain, it’s time we have the hard conversation about sunk costs. For ACP, that includes:

From all over the country, I’m hearing stories about internet service providers who are gaming the Federal Communications Commission (FCC) broadband maps in order to block areas from being eligible for the BEAD grants. It’s relatively easy for a provider to do this. All that’s needed is to declare the capability to deliver a speed of 100/20 Mbps in the FCC maps. Providers can largely do this with impunity. The archaic FCC rules allow providers to claim ‘up-to’ marketing speeds in the maps.

From an internet service provider perspective, the BEAD grant program has progressed at a glacial scale. The BEAD grants were signed into law on November 15, 2021, as part of the Infrastructure Investment and Jobs Act. Folks in the industry assumed that BEAD would follow a timeline similar to the earlier grants that were awarded using federal CARES and ARPA funding, and vendors certainly thought that grant awards would start in 2023 with construction underway by 2024. And then nothing happened. The BEAD process got bogged down in paperwork and bureaucracy.