As the National Telecommunications and Information Administration (NTIA) gears up to administer the $42.5 billion Broadband, Equity, Access and Deployment (BEAD) rural broadband infrastructure funding program, NTIA Administrator Alan Davidson gave an update at a Washington (DC) event on April 13. Among many broadband infrastructure funding topics discussed, Davidson seemed particularly upbeat about progress with the $1 billion Middle Mile Broadband Infrastructure Program, which is a component of the larger $65 billion Infrastructure Investment and Jobs Act. The $1 billion allocated in the IIJA for middle mile network deployments could be awarded in advance of the $42.5 billion for last-mile networks, Davidson noted. The reason is that unlike the BEAD rural broadband funding program, the middle mile program is not dependent on the completion of the FCC broadband mapping project. NTIA is also adopting a “customer service” mindset toward state broadband agencies that will be responsible for awarding funding to network operators in their states, said Davidson. Asked what states should do to prepare for the program and in a nod to infomercials and telethons, Davidson joked that “operators are standing by” to take calls from the states.

Casey Lide of Keller & Heckman recently wrote a blog post warning that federal grant funding might be considered taxable income by the IRS. This unexpected tax liability could severely curtail the impact of these programs in expanding affordable broadband connectivity and closing the digital divide. There are two potential ways of addressing this issue. First, the administration may be able to use existing executive authority to provide an exemption. The IRS has already clarified that emergency financial aid grants under the CARES Act are not treated as taxable income. However, other projects supported by federal recovery funds have been deemed taxable. The administration’s hands may be tied if they lack sufficient authority to thread this needle and extend protections to these broadband projects. Second, Congress could pass a technical fix to extend the exemption to broadband projects funded under the ARP and IIJA. This could possibly be attached to the supplemental COVID-19 relief package making its way through Congress or the bipartisan innovation package which is going to conference in the coming weeks. In many respects, this may be the preferred approach as it would provide the legal certainty and clarity needed to encourage participation in the programs. Regardless, there is a sense of urgency in having this clarification given that states are beginning to develop broadband plans for the BEAD program and providers are making strategic decisions with respect to their build-out plans funded by the federal programs.

[John Bailey is a nonresident senior fellow at the American Enterprise Institute.]

The Federal Communications Commission’s upcoming 2.5 GHz spectrum auction is generating some excitement among smaller rural US operators because of the FCC’s decision to offer flexible-use, county-based overlay licenses. The auction, which will start July 29, will be for licenses in the 2.5 GHz band where no one currently owns the spectrum. Top executives at several smaller operators have said that they were encouraged by the FCC’s format for Auction 108 because it will be amenable to rural operators. “We like this auction because it’s rural focused,” said Brighid Riordan, CEO of Cellcom, a Wisconsin-based operator. “When we look at auctions, and they’re for the large PEAs [partial economic areas], they tend to scoop in some areas that everybody wants,” she added. “That makes the prices go up.” For example, during the C-Band auction, the FCC issued PEA licenses, each covering fairly large areas and often including a larger market that was appealing to the big wireless operators. Appalachian Wireless CEO Allen Gillum agreed with Riordan, adding that during previous spectrum auctions, his company had to invest a lot of money to buy spectrum licenses that included areas outside its footprint. Gillum said that his company is planning to participate in the upcoming auction. “We will participate in it on a county-by-county basis.” T-Mobile's Steve Sharkey was very complimentary of the FCC’s auction rules established for the 2.5 GHz auction. The company is interested in Auction 108 because it already owns or leases much of the 2.5 GHz spectrum in the US and wants to fill in the gaps in its coverage.

A cyberattack targeting an underwater cable that could have shut down telephone services, financial transactions, internet and cable connectivity in Hawaii was foiled by federal agents with Homeland Security Investigations. The servers of a private Oahu company responsible for managing a trans-Pacific undersea cable that connects Hawaii and the Pacific region were targeted by an international hacking group, according to HSI, the investigative unit of the US Department of Homeland Security. Acting on a tip from out-of-state colleagues, federal agents identified the cyberattack and took measures to block access, according to HSI. A suspect was arrested in an “international location.” More than 95 percent of international data and voice transfers are routed through fiber-optic cables laid across the seafloor, according to the National Oceanic and Atmospheric Administration. What happens when an island loses complete connectivity became apparent in October 2019 when an islandwide outage of phone service, the 911 system and internet and cable TV service occurred on Kauai after a third-party carrier’s network fiber was damaged. “Hawaii is absolutely dependent on the trans-Pacific and undersea cables for our connectivity,” said Burt Lum, broadband strategy officer for the state Department of Business, Economic Development and Tourism. “If they did a massive cyberattack that potentially hit multiple trans-Pacific lines … and they were able to somehow sever redundant paths, you could put a lot of businesses out of commission as well as affect the ability for the Department of Defense to communicate from Hawaii.”