BEAD Rate Regulation
Jade Piros de Carvalho
Vice President of Broadband Advocacy and Partnerships | MPA - Public Policy
Lots of drama over BEAD low-cost plans. Let’s dig in!
What is the BEAD low-cost requirement?
The Infrastructure Investment and Jobs Act that authorized #BEAD outlines a mandate to help income-constrained households access a broadband subscription on BEAD-funded networks, declaring that, “An entity that receives a subgrant…for the deployment of a broadband network…shall offer not less than 1 low-cost broadband service option
States and territories were expected to consult with prospective subgrantees and the Assistant Secretary to arrive at a definition that meets the needs of their state. NTIA further outlines considerations for the low-cost plan in the BEAD Notice of Funding Opportunity (NOFO) section IV.C.2.c.i o. They followed up with additional FAQ guidance to states on the low-cost broadband service option.
States were required to define their low-cost option in requirement 16 (Sec. 2.12) of their Initial Proposals.?
Phew! That background was really boring. Read on!
How was this requirement received?
Most major broadband associations have railed against the provision. Grumblings about the low-cost requirement surfaced early on. They gained speed last October when Senator Thune asked Commerce Secretary Raimondo during a hearing on the CHIPS act if NTIA planned to require states to include specific price points in their BEAD plans. Raimondo confirmed the agency had no intention to rate regulate or price set.??
Unconvinced, Asst. Sec. Davidson was grilled at a House Energy & Commerce Committee oversight hearing a few months later about the same issue. Davidson insisted that, "We are not setting a price at NTIA…we're giving states flexibility to set the low-cost option
Davidson makes a very fair point. We are far past an understanding of the #digitaldivide as solely an infrastructure issue. Research from nonprofit EducationSuperHighway shows that the affordability divide accounts for nearly ? of households that are left offline. We cannot fully leverage this historic public investment if we do nothing to address the ability of low-income households to use BEAD-funded networks.
Where do states currently stand on low-cost plans?
Despite the repeated assertions that states can define their own low-cost plans, a nationwide review of price points for the requirement shows marked similarities, suggesting a pressure to choose a certain price. Jake Varn of the The Pew Charitable Trusts Broadband Access Initiative writes in a compilation of draft plans that most states chose a $30 per month rate.
Furthermore, Virginia’s conflict with NTIA over the low-cost option has been well documented in the media, and has held up approval of the state’s Initial Proposal. The appearance is that states refusing to set a certain rate will not receive approval of their plans.?
What has been simmering for a year came to an ugly head last week when the House Energy and Commerce Committee issued a letter to the NTIA demanding to see all communications that pertain to BEAD Initial Proposals between the agency and state broadband offices. The requirement to set “an exact price of formula” for the low-cost plan in order to receive approval was specifically called out in the request.
I’ll save you the suspense of what Congress will unearth. Below is a typical response to states that don’t set a specific low-cost price.
Before you clutch your pearls at the evidence of rate regulation, let’s consider the position NTIA is in. While Congress is pointing their finger at the agency, they’d do well to notice the three fingers pointing back at them for this mess. They have assigned NTIA all the responsibility to deliver on the affordability mandate, but little of the authority to make it successful, and little guidance on how to do it to their liking.
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Congress threw every requirement but the kitchen sink into BEAD and told NTIA to figure it out. Then they said, “No, no. Not like that.” It’s an impossible position. If they want a particular formula for the low-cost provision, they need to make it clearer. Indeed, with the Chevron deference overruling, Congress better get used to issuing greater clarity.?
While Congress is beating up NTIA, state broadband offices (everyone’s favorite punching bag) are getting hit by both NTIA and providers. All the states want to do is use BEAD to get people connected. They can’t begin that process until their plans are approved.?
Is the drama warranted??
Despite all the hand wringing over the low-cost requirement, many providers already offer a 100mb plan for $30 per month or less. The Biden administration kicked off an effort in May 2022 to get providers on board with a low-cost plan (shout out to Lisa Hone for her championing of this!) and announced just last month that most of those providers are still willing to continue with a $30 per month offering.?
Rural providers will be quick to point out that many on that list are urban ISPs. Offering a low price point is easier in areas with dense subscriber bases. NTCA recently suggested? consideration of the FCC’s methodology for calculating a low-cost option that caps rural rates at “two standard deviations” above urban rates.?
This is also a fair point. Half of KS’ counties have less than 6 BSLs per square mile, and a quarter of the counties have less than 3 BSLs. The OpEx concerns about maintaining a network so remote (2-hour truck rolls, for example) are valid in some cases. Depending on how states define their BEAD project areas, revenue of only $30 per month for each BSL might make it impossible to pencil out a business case. But recent research shows that rural consumers pay significantly more for #broadband due in large part to the competition gap, and they are looking to BEAD to help fix that disparity.
Two things can be true at once: to fully realize our country’s goal of #internetforall, we must make concerted efforts to bring down the cost
That being said, leaders in rural broadband in Kansas like Twin Valley, Ideatek and others offer high-speed service across their entire rural footprint for $30, and
Nex-Tech
offers low-income households a $30 ACP replacement subsidy called IDP. These are just a few creative and community-focused solutions
The matter of whether it’s possible or not for providers to make a business case work with the low-cost option is moot. They don’t want to be forced to do it. And the IIJA explicitly prohibits regulation of rates for broadband service, as the Energy and Commerce Committee has pointed out more than once.?
Where does that leave us??
States are moving forward with their BEAD subgrant processes, and this issue could be one more barrier that holds up progress toward getting homes connected. About ? of state Initial Proposals have already received approval with a rate set for their low-cost option.?
The low-cost plan is currently being treated as a gating criterion for BEAD applicants, while middle-class affordability plans (Requirement 20, sec. 2.13) are treated as scoring criteria. This means that applicants are required to offer the low-cost option but are simply scored on middle-class affordability based on their distance from a target price per month. Applicants that offer lower price points score more highly.
If the low-cost plan weathers this storm and survives, states will need to address high-cost project areas that receive no bids due (in part) to the low-cost requirement. Treating the low-cost plan as a scoring (vs. gating) target in later bid rounds is one way to address this. A waiver from the Assistant Secretary is another.
The BEAD train is moving full steam ahead this summer. Whatever action Congress takes needs to happen soon or they risk slowing down progress in getting Americans connected.
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Tribal Outreach & Workforce Programs Specialist
7 个月Wonderful write-up, Jade Piros de Carvalho! Thank you for your work!
Associate Manager, Broadband Access Initiative at The Pew Charitable Trusts
7 个月Great write up Jade! The only pedantic thought I'd offer on that analysis of the original draft plans I put out last year is that I'm not sure if ~half of states setting their LCSOs at $30 is as much evidence of "pressure" as it was a response to NTIA releasing their model example for states to copy and paste from. I suppose the motivation to adopt the pre-approved model language as a path of least resistance could be thought of as a form of pressure but since NTIA approved Lousiana's first (and they weren't strictly a $30-model state), it seems less about the exact price itself than the process/justification of what the state proposed? (I also have to add the annoying asterisk that that analysis was based on the public comment drafts and its unclear how many states changed those definitions before submitting or have changed them during the curing process - I'm anxiously awaiting full 56 state/territory approval so I can recreate that map!)
BRIDGING THE DIGITAL DIVIDE THROUGH INCLUSION & EMERGING TECHNOLOGIES
7 个月For over 50 years, Americans have been sold a false bill of goods by politicians and lobbying groups that government REGULATION is evil. Many if not most of the economic and social inequities that exist, were caused by UNFETTERED, unchecked so called "free" markets whereby the sole concern of those who extol its virtues, is to seek PROFIT no matter the cost to those who can least afford those costs. SELF SERVING guidelines tends to both narrow the vision as well as the playing field when only the interests of BUSINESS are considered. When the NEEDS of the many are superseded by the GREED of the few, situations such as the DIGITAL DIVIDE, are the end result. Any chain is only as strong as its weakest link and until those with the POWER and INFLUENCE become willing to address this fact and SPEND the capital to forge a stronger chain, expect the chain to continue to break under the weight of GREAT unmet EXPECTATIONS.
Sales Director for Atlantic Vision
7 个月Between that and the protectionist racket that denied NTIAs request to allow lower cost options for drops and terminals, it's almost like the program is set up to not be as successful as it should be.
Broadband Network Analyst at Okanogan County PUD
7 个月Definitely dealing with the low BSL density, but the other factor is how are open access, wholesale networks supposed to meet this criteria when they are not the ones selling to the end consumer?