Kampis: BEAD distribution should concern taxpayers

States will begin to receive the $42.5 billion in taxpayer dollars allocated to high-speed internet expansion through the Broadband Equity, Access and Deployment (BEAD) program, but many have expressed concerns that improvements are needed if the funding will be adequate at closing what remains of the digital divide.

Congress created BEAD through the Infrastructure Investment and Jobs Act (IIJA) and specifically listed ways states could help remove barriers to deployment, including promoting the use of existing infrastructure, streamlining permitting, adopting dig-once policies and promoting utility pole access.

Doug Dawson, president of broadband adviser CGC Consulting, wrote recently that he’s “seen very little evidence that most states have taken any action, and for the most part, states seem to have ignored the IIJA directive.”

He noted that the language in IIJA is mainly directed at state broadband offices. But changes to a state’s policies would require legislative action or decision-making at state bureaucracies such as highway departments, “two things that are far outside the reach and power of a state broadband office.”

Easing regulations for providers is essential because BEAD grants have strict deadlines that include financial penalties. Claude Aiken, the chief strategy officer for NextLink Internet (which primarily services the Midwest), told Broadband Technology Report that lining up all the pieces will be a challenge.

“For BEAD, all your stakeholders must be aligned,” he said. “Permitting is a key piece of that because if you can’t get a permit, you can’t deploy.”

Ariane Schaffer, public policy and government affairs manager for Google Fiber, said coordination within local governments would be vital to expediting the construction of the BEAD project.

“You have lots of different parts of a community that have to weigh in on the permits,” she said. “When there can be a single point of contact in a community to pass along the information and ensure a provider is getting through the process, that is helpful.”

Rate regulation ranks high among concerns with BEAD funding. During a September House Energy and Commerce Committee hearing, US Telecom CEO Jonathan Spalter said rate regulation would “deter broadband provider participation and risk the sustainability of BEAD-funded networks.”

In 2023, the Taxpayers Protection Alliance filed comments on BEAD plans in 27 states and the District of Columbia, finding that some states had developed overly prescriptive pricing concepts.

The National Telecommunications and Information Administration (NTIA), which is administering BEAD, tasked states with developing plans for middle-class affordability. It did not require low-cost plans, likely because most providers with such plans are usually subsidized through various federal taxpayer-funded programs.

For example, Montana suggested requiring providers receiving BEAD grants to offer symmetrical 1-gigabit service for $70, well above NTIA requirements of 100 Mbps service and a price not aligned with current broadband market rates.

TPA noted that “such policies are tantamount to rate regulation for broadband services, and forcing providers to commit to such arbitrary pricing and speed thresholds to improve their standing in grant applications will ensure that fewer providers attempt to obtain these grants.”

Fewer providers applying for grants means less competition and likely worse consumer service.

There have been concerns about the letter of credit requirement for BEAD. This policy instructed providers to offer a letter from a bank as evidence they had available at least 25 percent of the grant amount in a bank account they could set aside for the duration of the project. Industry leaders said this requirement was too strenuous and could discourage smaller providers from participating.

NTIA created a waiver in November allowing the letter to come from a credit union, which usually offers lower interest rates, and for the applicant to offer up a performance band equal to 100 percent of the sub-award amount. This guarantees the contractor fulfills their obligations without requiring 25 percent of the project in the bank.

It is good to see NTIA take that step. For the sake of taxpayers and consumers, governments from the federal to the local level need to scrutinize their practices and processes more to ensure that projects flow smoothly once BEAD funds begin to be distributed.

Johnny Kampis is the director of telecom policy for the Taxpayers Protection Alliance.