States are in the driver's seat as the BEAD program finally gains momentum

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Washington, D.C. (November 14, 2024) - The largest-ever federal broadband expansion program — Broadband Equity, Access and Development or BEAD — was passed in November 2021 but is only now really starting to hit its stride.

No one has been connected to broadband by BEAD, nor have any BEAD funds been awarded to any internet service provider (ISP) for expansion purposes. But they will come soon. State broadband offices are now in the driver’s seat, and some of them are moving forward strongly, executing the plans they announced in their Initial Proposals, receiving and evaluating and accepting and negotiating about applied projects, and blazing a trail for others to follow.

BEAD’s federalist design has made the BEAD program difficult and slow in some ways, but it allows states to experiment and emulate each other. States’ approaches differ substantially in some respects, and ISPs with expansion plans across multiple states will need not only to fill out different forms, but often to adopt different strategies in each state. But states can look to one another for lessons in how to make the subgrantee selection process industry friendly.

Application windows are open today in Kansas, Wyoming, and many other states. Expect most other states to reach the application intake stage in the next few months. State-by-state BEAD allocations per broadband serviceable location (BSL) differ substantially, and some states are expecting to face funding shortfalls while others will have BEAD funds to spare for non-deployment uses. But for all its quirks, the BEAD program is on track to change the country’s broadband coverage landscape and go a long way toward closing the Digital Divide.

BEAD’s federalist design gives states a chance to experiment and learn from each other

When U.S. Congress created BEAD as a cornerstone of the Infrastructure Investment and Jobs Act (IIJA) in November 2021, it gave the program a federalist design. States will pick the winners and hand out the money.

That federalism stands in contrast with past programs like the Connect America Fund (CAF) and the Rural Digital Opportunity Fund (RDOF), which were run through an expert federal agency, the Federal Communications Commission (FCC). A lot of U.S. Department of Agriculture (USDA) programs also allocated money for broadband projects with little or no state and local input. In general, prior to 2020, most states’ roles in rural broadband deployment were slight, although some pioneers, such as Iowa and Minnesota, were already active. Some states stood up their own broadband offices, but money was short.

Things changed with the 2020 CARES Act, when the federal government handed tens of billions to states for unspecified “coronavirus relief,” which turned out to include broadband. This precedent for federally funded, state-administered broadband grants soon got scaled rapidly, first in the Capital Projects Fund (CPF) in the American Rescue Plan Act (ARPA) of January 2021, which included $10 billion explicitly for state-funded broadband projects, and then in the $42.45 billion BEAD program.

Relative to the CPF, the BEAD program has more federal oversight. The IIJA included a fairly prescriptive template for how state BEAD programs should work, and tasked the National Telecommunications and Information Administration (NTIA) with developing general rules consistent with the law, and then overseeing states’ implementations of BEAD. That meant BEAD required two major planning stages: first, planning by the NTIA itself, and then planning by the state broadband offices within that framework. The NTIA and state broadband offices also had to come to agreement.

BEAD was built on the new promise of “Internet for All”. The goal of universal broadband coverage reflects a growing recognition that under modern technological conditions, internet access needs to be treated as a basic necessity. That promise remains unfulfilled today. It may remain unfulfilled even when BEAD has run its course, but a serious effort to fulfill it takes a lot of planning.

The BEAD rollout has been a bit slower in practice than anticipated at every stage, but in general, the inherent difficulty of joint federal-state planning for universal coverage is why, three years after the IIJA passed, BEAD hasn’t connected anyone to broadband yet. There was simply a lot of planning to do.

In some ways, the slow BEAD rollout facilitated coordination among different federal programs. In 2021, there was already a glut of federal funding flowing into rural broadband. RDOF was underway, and CPF was launching. But now, CPF will be near to sunsetting, and the RDOF buildouts should be well on the way to completion, by the time BEAD funds start to flow.

Meanwhile, the great merit of federalism, as has long been recognized, is that states can serve as “laboratories of democracy.” States can — and do — try out different laws, principles, policies, and practices, and then watch and learn from each other’s achievements, and also from their mistakes.

While some state broadband offices have more capacity than others, none of them can match the capabilities of the FCC. But universal broadband coverage is such a tough nut to crack that even the FCC, with all its brilliant people, has struggled to make good use of public funds to advance broadband coverage, as the mixed record of RDOF shows. State broadband offices have the key advantage that there are 50 of them (56 including the territories), so they can try a lot of different things, fail fast and small, see what works, and emulate success.

This blog post series seeks to help by highlighting state successes for others to emulate. Some states seem to be bottlenecked or inactive and not yet on track to make BEAD succeed. But some are doing great work. We’re here to showcase that, and to help other states recognize their successes and replicate them.

Application windows

First of all, kudos to states that have gotten as far as accepting BEAD applications. It’s harder than it sounds. Before opening application windows, states need to think through everything that they’ll need to know from applicants about: a.) their organizations, and b.) their projects. They need to formulate questions, develop templates, and set deadlines. They need to have teams of grant reviewers in place to read and evaluate the applications as they come in.

With that in mind, congratulations to Arkansas, Michigan, Connecticut, North Carolina, Virginia, and Montana for accepting, at the time of this writing, prequalification (organization) applications, and to Missouri, Kansas, Wyoming, and Montana for being open to main-round project applications. New Mexico’s prequalification round just closed, while Mississippi’s letter of intent (similar to prequalification) window will open on November 18, and a guide is posted. While Oregon is not yet accepting prequalification applications, it has posted the needed forms so ISPs can work on their applications in advance. And Georgia has posted its application questions for the countywide applications that it hopes to receive, although it hasn’t opened an intake window yet.

Among BEAD application windows, there is an important distinction between application rounds for organizations, variously called “pre-qualification,” “pre-application” and “letter of intent,” and a round that evaluates projects, sometimes called a “main” round or a “scoring” round (since the BEAD scoring rubric will be applied to projects). The relationship between organizations and projects is one to many: one organization may submit many projects. Some states don’t have prequalification rounds. BEAD success requires that both the organization and the project pass muster.

ISPs interested in pursuing BEAD funds should be aware of some upcoming deadlines:

• On November 30, Virginia will close its window for prequalification applications.
• On December 5, Wyoming’s BEAD application window will close.
• Also on December 5, Kansas’s BEAD application window will close.
• On January 31, Missouri will stop accepting Round 1 project applications. 

Some states are further along and have already opened and closed application windows. In Louisiana and Delaware, application intake is in the rearview mirror. Tennessee, Kentucky, Massachusetts, and New York will be open for project applications, but the chance to get prequalified seems to have passed. That said, many state broadband office websites have outdated language, and when deadlines are posted, they sometimes slip. So, for ISPs coming late to the BEAD opportunity, it’s probably worth asking. Some states may circle back to private industry for more projects later, in their quest to achieve universal coverage.

Look to the leading states

A lot of impressive work has been done by some of the leading states in the national BEAD implementation effort. Lagging states can look to these leaders as examples to consider following, and work products to emulate or copy. And ISPs in less active states may look to the frontrunners to help anticipate what their own state broadband offices may release as they move the process forward. In particular, states can look to:

• Louisiana’s soon-to-be-released Final Proposal.
• BEAD application materials from Georgia, Kansas, Montana, and several other states.
• Project area maps from many states.
• CBG reference prices from Arkansas.

Louisiana’s upcoming Final Proposal. First, Louisiana, which has long been the BEAD program frontrunner, will release its Final Proposal soon. Louisiana achieved Initial Proposal approval months earlier than other states and must therefore submit its Final Proposal earlier as well, with a deadline of December 15, 2024. Louisiana has posted lists of “preliminarily selected” sub-project areas (SPAs) and — far fewer — “direct negotiation” SPAs that still need solutions, it appears to be close to the goal.

Application materials. Second, many examples of application materials for the prequalification and project rounds are now available. Georgia (link downloads a PDF) being a notable recent example. Georgia’s application questionnaire is quite thorough, including certifications and financials, a project business plan with detailed assumptions and demonstrations of sustainability, a detailed staffing plan to demonstrate the qualifications of responsible personnel, detailed budgets with supporting documentation, technical details like fiber miles and backhaul, “a complete picture of the community to be served,” and in general, extensive narrative about the project. Kansas’s application requires somewhat less narrative but still includes detailed sustainability planning, which will be critical for providers in these rural, low-density areas.   

Custom project areas. Third, since many states embraced some form of customized project area predefinition as part of their subgrantee selection process, the preliminary or final project area maps from states including Washington, Missouri, Colorado, New Mexico, Arizona, Nevada, Kansas (downloads KMZ file), New York, Wisconsin, and Tennessee represent important milestones in BEAD implementation.

Project areas are the aspects of the BEAD program that vary most from state to state. For example, among posted project area maps, Washington has 236 project areas, with 1,000 BSLs per project area give or take 50%, while Colorado’s project areas, based on census blocks with some tweaking, average just 34 BSLs, though the average is driven by many very small BSLs, and most of Colorado’s BEAD-eligible  BSLs are in project areas of 250 or more.

Missouri’s project area map is a particularly interesting case because it was developed solely on the basis of provider input. This resulted in an unusually large distribution of project area sizes, from just over 10 to just under 7,000. States that aren’t using project areas, or that are using preexisting geographies such as census block groups, don’t need to post project area maps.

Fourth, since many states are planning to define some form of reference price per area to inform project scoring, Arkansas provides a relevant case study. Arkansas has almost 30,000 BEAD-eligible unserved BSLs and almost 56,000 BEAD-eligible underserved BSLs, distributed among 1,522 census block groups (CBGs), which serve as Arkansas’s project areas.

With a BEAD allocation of $1.024 billion, it has almost $12,000 per BEAD-eligible BSL. Per location (CAI or BSL) reference prices vary widely among Arkansas’s CBGs, from over $100,000 in handful of places to under $2,000 in areas where Arkansas anticipates the lowest deployment costs. Combined, the reference prices add up to $538 million, so Arkansas has substantial budgetary room to go above them as needed. Applicants’ rubric scores for Minimal BEAD Program Outlay will be scaled proportionally to the reference price.  

Many other states appear bottlenecked, and in many cases, it already seems clear that the 365-day deadline to deliver a compliant Final Proposal cannot be met. A common reason for delay appears to be that some state broadband offices are focusing on the challenge process and not trying to begin subgrantee selection process while the challenge process is underway. While that sequencing is understandable given the short time available, states would be wiser to run the early stages of the subgrantee selection process while the challenge process is still underway.

The early signs are good for industry participation in BEAD

There has long been concern that BEAD’s somewhat cumbersome processes would deter industry from participating. States like Louisiana, Arkansas, and Wisconsin had posted lists of prequalification round participants — interestingly, about 35 in each state at the time of writing — but will applicants submit projects on a scale approaching what BEAD success requires?

We’re now seeing the first public-facing evidence of the scale of industry’s BEAD participation, and it looks robust. Louisiana’s initial release of “preliminarily selected” BSLs suggests that ISPs there came through with a lot of projects. The Louisiana broadband office’s posted lists include 127,829 BSLs in preliminarily selected SPAs and 12,007 BSLs in not-yet-selected SPAs targeted for direct negotiations. We don’t know which companies are on track to win, how much money they’ll get, or what technologies they’ll use, but it looks like Louisiana got enough BEAD participation to close the vast majority of the state’s coverage gap.

Colorado also recently closed an application window, and it shared information with applicants about participation so far. Thirty applicants in Colorado submitted 185 proposals to bring high-speed internet to more than 111,000 homes, schools, businesses, and community anchors across the state. Requests totaled more than $1.78 billion in BEAD funding, plus hundreds of millions of dollars offered as match. They touched every Colorado county.

While this participation rate looks impressive, it appears that the collective reach of the BEAD applications in Colorado so far falls well short of the more than 160,000 unserved and underserved locations that the Colorado Broadband Office has identified as BEAD eligible. And, since the price tag is more than twice as much as Colorado’s available BEAD funds, Colorado will have to decline a lot of projects, probably reducing the program’s reach somewhat in the process.

Robust participation in Colorado and Louisiana is promising for, but other states shouldn’t take it for granted. And Colorado’s experience is a reminder that BEAD will probably face substantial funding shortfalls in some states.

Big, surprising differences in BEAD funding per BSL are opening up among states

Colorado’s apparent funding shortfall reflects an odd feature of BEAD, namely, that while BEAD funding was designed to be roughly proportional to the size of broadband coverage gaps in each state, BEAD funding per BSL will ultimately vary a lot across states. This is mostly because the actual broadband coverage landscape is uncertain and changing, and funding determinations made in 2022 are based on different counts from the number of BEAD-eligible BSLs that will actually be targeted after the NTIA approves challenge-tested lists.

It’s not that BEAD was supposed to have exactly the same amount of money per BSL. The IIJA gave a minimum of $100 million per state, even to ones with very small coverage gaps, resulting in high BEAD allocations per BSL there. And some identified “high-cost” BSLs were given extra weight in making state-by-state allocations. But large gaps have also opened between states that look similar, such as Colorado and South Carolina.

According to FCC maps, 92.72% of BSLs in South Carolina, or about 2.6 million units, lack 100/20 Mbps broadband service by reliable technologies. That would suggest that BEAD needs to find solutions for over 200,000 units. But the lists of BEAD-eligible locations posted by the South Carolina Broadband Office contain only 14,072 underserved and 18,270 unserved BSLs. Because of this dramatic reduction in the number of target BSLs, South Carolina has over $17,000 in BEAD funding per eligible BSL.

Colorado looks fairly similar to South Carolina in the FCC maps, with 92.61% reliable 100/20 coverage, amounting to 2.7 million units, and implying a bit over 200,000 units need BEAD solutions. But the NTIA-approved post-challenge BEAD-eligible BSL lists posted by Colorado exhibit coverage gaps only mildly smaller, with 100,022 unserved and 61,863 underserved BSLs.

Colorado’s BEAD allocation is larger than South Carolina’s, but because Colorado is targeting a much larger number of BSLs, it has just $5,105 in BEAD funding per eligible BSL, less than one-third of what South Carolina enjoys. So, while South Carolina is making plans for what to do with its non-deployment funds, Colorado is receiving more projects than it can afford to fund but still too few to close its gaps.

The differences go on. South Dakota has about the same number of BEAD-eligible BSLs in its post-challenge location files (just under 34,000) as the FCC maps would suggest (about 33,000), implying $5,966 per eligible BSL. Montana has 48,124 unserved and 21,895 underserved BEAD-eligible BSLs, compared with over 100,000 unserved and underserved units in the FCC maps, and $8,982 per BSL. Vermont has, post-challenge, only about 22,000 BEAD-eligible BSLs, compared with over 58,000 unserved and underserved units in the FCC maps. That gives it $10,306 per eligible BSL.

There’s no plan to “true up” the BEAD allocations considering the results of the challenge process. Some of the differences are luck-driven, but states also made different policy decisions about how to run their challenge processes, which to some extent were affected by the availability of funds.

States that expected plenty of BEAD funds tended to be more aggressive in questioning ISPs’ coverage claims, to make sure that BEAD didn’t leave any locations behind because of bad data. States that foresaw funding shortfalls tended to be less aggressive in challenge-process design, preferring to focus on the known unserved locations rather than adding more to the list.

If states had expected the allocations to be redrawn, the incentives in challenge-process design would have been very different. That said, the state-by-state differences may lead to some odd and hard-to-understand outcomes.

The BEAD low-cost service option

When ISPs accept BEAD subgrants, they will incur an obligation not only to deploy broadband to specified areas and offer service at specified speeds, but also to provide a low-cost service option to eligible customers at prices specified by each state. The “BEAD low-cost service option” is on track to becoming an interesting wrinkle in the broadband pricing landscape for years to come.

Although the BEAD low-cost service option has been criticized by the telecom industry as illegal “rate regulation,” it was prescribed by Congress in the IIJA itself. The IIJA did not, however, define a specific price point. Rather, it required each state to define its own low-cost service option. The NTIA included in the Notice of Funding Opportunity (NOFO) a suggested definition for the low-cost service option, with a price point of $30/month for a minimum subscription package of 100/20 Mbps, which, combined with the now-defunct Affordable Connectivity Program (ACP), would have made broadband free for eligible subscribers.

States that adopted the suggested $30/month price point in their BEAD low-cost service option include Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Kansas, Maryland, Massachusetts, Mississippi, New Jersey, North Carolina, Oregon, Rhode Island, and Washington. New York set the lowest price point at $15/month.

Other states mostly set the price point higher, e.g., $40/month (Wisconsin), $50/month (New Mexico, Nevada, West Virginia), $60/month (Oklahoma, Tennessee), or $70/month (Montana, Wyoming). The highest price points were in North Dakota ($75/month) and South Dakota ($74.95/month). There are many nuances, with some states adjusting for inflation and others setting the price on a sliding scale. In Louisiana, for example, the base rate is $30/month, but ISPs can request, with justification, a higher price point up to $65/month.

In the BEAD NOFO, eligibility for the BEAD low-cost service option depended first on participation in the ACP, participation in which is often administered through broadband providers. But it could also be established on several other criteria, such as household income below 200% of the federal poverty line, receiving SNAP, Medicaid, the National School Lunch Program, or other means-tested federal program support, and Pell Grants. ISPs do not, in the normal course of business, know about their customers’ participation in these programs, so providing the low-cost service option is trickier. With the sunsetting of ACP, participation rates in the BEAD low-cost service option may be low.

Even the ACP itself achieved participation rates that were estimated by Pew at only 38% in 2023, before the program ran out of money.  

ISPs accepting BEAD grants must accept some risk that the BEAD low-cost service option will significantly reduce customer revenues. The obligation will eventually sunset, but not until the 2030s as the low-cost broadband service options must remain available for the useful life of the network assets.

Conclusion

Three years after it was established by Congress, the BEAD program is well on its way to reshaping the broadband landscape across the country. With apparently robust industry participation in Louisiana and Colorado, and many other states posting project areas and opening application windows, BEAD appears to be on track to harvesting a large crop of broadband deployment commitments over the next year, which will get the United States closer to “internet for all.”