Program review: Where does BEAD stand three years in?

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Washington, DC (September 17, 2024) - On November 15, 2021, U.S. Congress passed the Infrastructure Investment and Jobs Act (IIJA), which created the Broadband Equity, Access, and Development (BEAD) program. BEAD’s $42.45 billion budget makes it the largest federal broadband deployment program to date.

The legislation established an ambitious goal of deploying universal access to broadband service at speeds (bandwidths) of at least 100 Mbps download, 20 Mbps upload (100/20), with less than 100 milliseconds of latency — or in catchphrase form, “internet for all.”

Almost three years later, while no broadband infrastructure has yet been built, much in terms of thoughtful planning has been accomplished. The deliberate rollout has been a function of:

a) the statutory mandate to execute the program through state broadband offices, but under the supervision of a federal agency, the National Telecommunications and Information Administration (NTIA), which necessitates a lot of coordination, and

b) the goal of internet for all, which requires plans for statewide coverage before the full BEAD budget can begin to be spent.

Planning for universal coverage takes time. In summer 2024, most states achieved the crucial landmark of getting their full state BEAD plans approved by the NTIA. Now, though, state broadband offices face the challenge of carrying out the first stage of their plans by competitively awarding BEAD funds to internet service providers (ISPs) for specific projects in a way that fills in the map to achieve the IIJA’s internet for all mandate.

The Final Proposals, in which states are required to submit lists of specific projects to the NTIA for approval and funding, are due 365 days after plan approval. For most states, that clock is now ticking.

For states to succeed, ISPs will need to rise to the BEAD challenge. ISPs must develop ambitious projects and prepare to apply to state broadband offices to get their projects funded when the application windows open in the next few months. Montana and Louisiana are already taking applications. 

IPV2 approvals

As of September 16, 2024, there were 43 NTIA-approved Initial Proposals, Volume II (IPV2), the part of each state’s BEAD plan describing how they’ll be allocating BEAD funds to ISPs. State IPV2s were due on December 27, 2023, although some were submitted earlier.

After submission, the NTIA provided iterative “curing” feedback to state broadband offices, and adjustments were made until the NTIA was satisfied that state plans were (a.) compliant both with the IIJA and with its own Notice of Funding Opportunity (NOFO) released on May 13, 2022, and (b.) well-thought-through and likely to succeed. The vast majority of IPV2 approvals to date occurred in summer 2024, with the biggest surge in late July and early August, as shown in Figure 1.

Not all approved IPV2s are posted publicly. The NTIA itself does not post them. Posted, approved IPV2s vary in their level of detail, and most leave some scope for ongoing state discretion.

Challenge processes

All states have long since received approval for their Initial Proposals, Volume I (IPV1), which focus on defining BEAD-eligible broadband serviceable locations (BSL) and challenge processes. The vast majority of states launched their challenge processes weeks or months ago.

The BEAD challenge process gave, or will give, ISPs, local governments, and nonprofits the opportunity to dispute the broadband coverage maps on which BEAD eligibility will be based, on a per-location basis. The only states that have not yet started their challenge processes are New Jersey, North Carolina, Oklahoma, and Texas.

Closely related to the challenge process is the deduplication process that removes from BEAD eligibility locations that are already covered by preexisting broadband deployment commitments from other federal programs, such as the FCC’s Rural Digital Opportunity Fund (RDOF).

At the time of writing, only Hawaii has an open challenge window. Many other states are in the rebuttal stage, when ISPs whose coverage claims are challenged have an opportunity to respond and supply evidence in support of their coverage claims, or the adjudication stage, where state broadband offices will compare challenge and rebuttal evidence and decide whether each challenge should be upheld or dismissed.

After the adjudication stage, states should submit their challenge process determinations to the NTIA, and many have done so. However, while the challenge and rebuttal phases are inherently public-facing, later stages such as adjudication, NTIA submission, and NTIA approval, can occur without being posted online, so their visibility is less consistent.

The NTIA’s State BEAD Challenge Tracker reports the open and close dates of all states’ challenge windows but does not report on later stages of the challenge process, such as rebuttal, adjudication, submission, and approval. 

West Virginia has publicly announced NTIA approval of its challenge process results, and its post-challenge locations are available for download. Maine and Montana, among others, have also posted challenge process results online. They do not explicitly indicate whether the results are NTIA-approved or not.

Nonetheless, they can serve as examples of how the challenge and deduplication processes can make the BEAD program’s task easier than might have been anticipated, based on the raw numbers of unserved and underserved locations in the FCC National Broadband Map.  

In Montana, the post-challenge list of BEAD-eligible BSLs almost cuts in half the number of unserved and underserved BSLs that the state needs to deploy to, relative to the most recent FCC National Broadband Map (see Mike Conlow’s analysis). Table 1 shows how the number of BEAD-eligible locations in Montana compared with the total number of unserved and underserved:

Much of the change occurs because BEAD doesn’t need to identify deployment solutions for places where other federal broadband programs, especially the FCC’s Rural Digital Opportunity Fund (RDOF) program, have already funded and scheduled deployments.

RDOF initially awarded funding for 45,984 Montana locations. With fewer eligible BSLs, BEAD funds for Montana look closer to being sufficient to delivering service to all remaining locations. With a BEAD allocation of $628,973,798.59, Montana would have just $5,066.57 per BSL if it had to seek broadband deployment solutions for all 124,142 BSLs reported as unserved or underserved in the latest FCC National Broadband Map. But using the post-challenge BSL list, the average amount per BSL rises to $9,485.78.

Similarly, in Maine, while there are 67,129 unserved or underserved BSLs in the most recent FCC National Broadband Map, the post-challenge BEAD-eligible list includes only 14,703 unserved and 14,082 underserved locations. This change raises Maine’s per-target-BSL BEAD allocation from $4,051.57 to $9,448.59.

While Maine and Montana identified fewer BEAD-eligible BSLs than the total unserved or underserved, the challenge process can work both ways. For example, while “planned service” challenges can reduce the number of BEAD-eligible BSLs by removing from the list locations where ISPs report that they are about to complete a deployment, “availability” challenges can establish the BEAD eligibility of BSLs that were initially classified as served, by showing that coverage has been overreported. 

Prequalification

State IPV2s show that many states will run a “prequalification,” sometimes called a “qualification” or “preapplication” phase, in which ISPs will indicate their intention to apply and provide general information about their company, including organization charts, financials, ownership structure, and/or technical experience, based on which the state broadband office can prequalify the ISP as an applicant. Later, qualified applicants can submit projects that they want funded.

In these states, getting BEAD funds requires participation in both rounds. First, the applicant ISP needs to get itself qualified, then specific projects need to win funding for specific areas as part of the statewide universal coverage solution.

Some states indicate in their IPV2s that prequalification is mandatory, and no applicant that fails to participate in the prequalification round can get funded. Others, such as Massachusetts, do not indicate that prequalification is mandatory, and pending further clarification appear to intend to accept main-round applications from ISPs not previously qualified.

In this case, participation in the prequalification round can still serve as an opportunity for curing, and local governments may be more willing to write letters of support (which give applicants rubric points in many states) for prequalified ISPs.

Also, some states’ IPV2s indicate an intention to use prequalification applications for geographic planning, and they may ask prequalification applicants to indicate their intended expansion territories, which will then be used as the basis for defining project areas that will later be opened for competitive grantmaking. For example, Missouri asked for “project area submissions” from ISPs earlier this year. In these states, ISPs that do not participate in the prequalification round can still participate, but they may not be allowed to apply for the area they really want.

Project area maps

Most states’ BEAD plans indicate that there will be predefined project areas for which aspiring BEAD subgrantees will have to apply. That is, any BEAD applicant that proposes to serve any eligible BSL in each predefined project area will need to plan to serve every eligible BSL in the project area.

As an astute November 2023 New York Law School analysis, entitled “Navigating the BEAD Weeds – Project Areas,” observed, states’ decisions on what project areas to allow have exhibited great variation. Six states — Iowa, Minnesota, Missouri, North Dakota, South Dakota, and Texas — initially submitted IPV2s in which BEAD applicants could define their own project areas.

Of those six, three — Iowa, Minnesota, and Texas — have not yet had their IPV2s approved. Missouri’s IPV2 was approved on August 2, 2024, allowing applicants to submit project areas at the prequalification stage. On August 29, 2024, South Dakota became the first state with an approved IPV2 that simply allowed ISPs to submit whatever project areas they want at the BSL level of granularity.

But predefined project areas prevail. They sometimes consist of preexisting geographies, e.g., counties in Hawaii, municipalities in Massachusetts and New Hampshire, school districts in Kansas and Oregon, utility districts in Vermont, census block groups (CBGs) in Kentucky and Montana, census blocks in Indiana and Colorado, and ZIP codes in Virginia.

Other states’ IPV2s indicate that custom project areas will be defined by algorithmic or manual means, which are sometimes described in detail — Washington's IPV2 is particularly explicit — and sometimes left unclear. These custom project areas have many different names, including “Project Area Units” (Illinois), “Project Service Areas” (Maine), “Sub-Project Areas” (Louisiana), “Regional Project Areas” (Nevada), “Target Regions” and “Target Areas” (West Virginia), “Project Funding Areas” (Utah), and “Network Expansion Territories” (Oklahoma).

In the case of custom project areas, an early step in state BEAD implementation must be the design and release of a project area map. This has been done in states like Nevada, Tennessee, Washington, and New Mexico.

BEAD applicants should bear in mind that even where the defined project areas include served BSLs, projects will need to be designed to focus on the BEAD-eligible unserved and underserved BSLs within the project areas rather than using BEAD funds to overbuild served areas. 

ISPs seeking to develop coherent and viable BEAD applications in a state using predefined project areas should consider: a.) whether the state allows multi-area projects, and b.) how the state will deconflict overlapping project areas.

For example, consider three Regional Project Areas in Nevada, as shown in Figure 2: 

Table 2 provides more information about these project areas:

*CAI = community anchor institution

Nevada’s IPV2 doesn’t allow multi-area projects or include any plans for deconfliction. So, although these areas are adjacent and likely to be served by the same backhaul, middle-mile, and/or tower infrastructure, they can’t be applied for together.

Despite its remoteness, WHI-0835-1 has a good critical mass of customers and a large “reference price” and expected grant size, and it seems likely to be attractive to BEAD applicants. The challenge for potential applicants to WHI-0222-1, and especially WHI-0209-1, is that they can’t know who will win WHI-0835-1 or make their bids for WHI-0222-1 and WHI-0209-1 conditional on winning WHI-0835-1. 

A congressional hearing on BEAD

On Tuesday, September 10, 2024, the Communications and Technology Subcommittee of the U.S. House of Representatives Energy and Commerce Committee conducted a hearing on the BEAD program, which featured a rich discussion by legislators and panelists — at times both favorable to and critical of — the NTIA’s administration of the program.

The panelists were: Misty Ann Giles, Montana’s broadband director; Basil Alwan, CEO of Tarana Wireless; Shirley Bloomfield, CEO of NTCA — The Rural Broadband Association; and Blair Levin, a federal telecom agency veteran who currently works as a policy analyst at New Street Research and a nonresident fellow at the Brookings Institution’s Metropolitan Policy Project. 

Five criticisms of the BEAD program and the NTIA arose during the hearing. 

First, several House members criticized what they perceived to be de facto “rate regulation” by the NTIA, in the form of a low-cost service option that states define, with NTIA approval, and that BEAD subgrantee ISPs will be required to offer for 10 years after BEAD-funded networks are built.

While the IIJA states, “nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service,” it also mandates the low-cost service option.

This tension within the IIJA statute has caused ongoing controversy. The NTIA argues that requiring ISPs to offer a low-cost option as a grant condition is not rate regulation. Director Giles from Montana described how her office got NTIA approval for a $70/month rate for the low-cost service option.

Second, the NTIA has long been criticized for explicitly prioritizing end-to-end fiber, as against the alleged “technology neutrality” of the IIJA itself. However, the IIJA tasks the NTIA with defining a “priority broadband project” based on “criteria as the [NTIA] shall determine” that can “easily scale” to “meet the evolving connectivity needs of households and businesses.”

By defining a priority broadband project as end-to-end fiber, the NTIA provided helpful clarity. At the hearing, Tarana Wireless CEO Alwan argued that improvements in next generation fixed wireless access technology would make fiber prioritization unsuitable if the IIJA were passed today, while suggesting that fiber prioritization was a reasonable choice at the time. NTCA CEO Bloomfield argued that fiber prioritization is still appropriate.

Some committee members and panelists praised the NTIA’s  recently released pre-decisional guidance on BEAD handling of alternative technologies, which should facilitate BEAD funding for LEO satellite and unlicensed fixed wireless options. These technologies will likely need to be part of the solution for the most remote locations classified as “extremely high cost.” However, the late appearance of the guidance, at a time when some BEAD application windows are open, is arguably problematic.

Third, there was discussion of BEAD project areas, with NTCA strongly advocating small project areas and arguing that large project areas will inhibit small local ISPs from participating. Director Giles from Montana explained why her state found census block groups (CBGs) to be the most suitable project area unit for their state.

Fourth, some panelists and committee members explored how the BEAD program’s prospects for success are threatened by developments in federal programs that provide ongoing support for rural broadband networks.

The expiration of the Affordable Connectivity Program (ACP) in June 2024 will deprive aspiring BEAD subgrantees of an important source of expected revenue to cover operating expenses. This will make some areas uneconomic for BEAD deployment that might have been viable.

The recent Fifth Circuit Court of Appeals decision in Consumers Research vs. FCC, issued on July 24, 2024, which found the FCC’s Universal Service Fund unconstitutional, jeopardizes the commercial sustainability of many rural broadband networks, including those that could be built with BEAD program funds.

NTCA CEO Bloomfield reported that most of her organization’s members will stop rural broadband expansion if the Fifth Circuit’s determination of the unconstitutionality of the USF is confirmed by the U.S. Supreme Court.

Fifth, there was substantial criticism of the labor provisions of the BEAD Notice of Funding Opportunity (NOFO), which encourage directly employed workforces, unionization, and Davis-Bacon prevailing wage rates as unrealistic in light of the prevailing practice of deploying rural broadband networks by means of contractors. However, Montana, whose IPV2 has been approved by the NTIA, reported that it made Davis-Bacon prevailing wages optional.  

Conclusion

Almost three years after BEAD was created in statute, it’s true that the program hasn’t yet connected anyone to broadband.

However, through the diligent efforts of countless people across federal, state, and local governments and the private sector, the program appears to have built the capacity and developed the plans necessary to deploy new broadband infrastructure in an unprecedentedly universal and deliberate way, thus supporting the widespread notion that broadband has become “a necessity, not a luxury.”

The next year will be particularly exciting as we see the fruits of all this labor begin to tangibly deliver on the goal of achieving “internet for all.”