Internet service providers will soon be competing to provide high-speed, broadband internet service to the most remote and hard-to-reach areas in the country.
Included in the 2021 bipartisan Infrastructure Investment and Jobs Act was $42.45 billion to be distributed to all 50 states, five U.S. territories, and the District of Columbia to build out the remaining infrastructure needed to provide high-speed internet service to every household, business, and organization that currently has no or low-quality service.
After completing a lengthy set of requirements, a few states could start receiving their allocations late this year from the Department of Commerce through the new Broadband Equity, Access, and Deployment Program, or BEAD. It likely will be another year or two before that money gets into the hands of most of the service providers awarded grants.
States and territories have already received $100 million each to develop and submit five-year action plans, Volume I and II proposals, and a final proposal to the National Telecommunications and Information Administration (NTIA). As of now, all 50 states, the District of Columbia, and five U.S. territories have submitted their five-year plans and their Volume I and II proposals. NTIA has approved the Volume I proposals of 12 states, but only Louisiana has had both its volumes approved. The remaining 38 states, five territories, and the District of Columbia are still working on finalizing their Volume I and II proposals.
Volume I consists of mapping unserved and underserved households, businesses, and organizations within a state or territory. In 2022, the Federal Communications Commission released an update of its broadband maps, which were intended to identify service gaps. The states and territories have been using these maps to build out their own maps showing the current service of lack of service to each building — including houses, businesses, farms and hospitals, according to Brian Whitacre, an economist at Oklahoma State University.
Once a state has determined which locations are underserved or unserved, the challenge process begins. Most states, territories, and the District of Columbia are currently in the challenge process, which allows both users and providers to challenge the map, said Shirley Bloomfield, CEO of NTCA-The Rural Broadband Association.
“Rural broadband providers are now wildly focused on the maps, including whether areas marked as being served are truly being served at the speeds they say they are,” Bloomfield said. “Broadband providers and states are saying, ‘Let’s get the maps right. We still have time for challenge, review, challenge, review.’ Whether you are a provider, a consumer, a school, or a library, you can say, ‘I show up as having this level of service on the map, but I don’t.’ It’s a really robust process.”
![Shirley Bloomfield](/ext/resources/Newsletter-photos/2020/12-2-20/Shirley-Bloomfield_2020_300.jpg)
Total allocations are primarily based on the number of unserved and underserved locations within each state and territory. Missouri, the 18th largest state by population, is currently in the challenge process while concurrently working to cure Volume II, which details how it will award grants to providers. The state’s total allocation of nearly $1.74 billion is the third largest BEAD allotment, following Texas’s $3.31 billion and California’s $1.86 billion.
B J Tanksley, director of the Missouri Office of Broadband, said Missouri completed a study two years ago that showed it would cost $2 billion to bring broadband service to every unserved or underserved location in the state. Missouri also has $265 million from the American Rescue Plan Act (ARPA) that it plans to add to its BEAD allocation.
“We are currently trying to cure the map to make sure it is as good as it can be. We don’t want to waste funds where there is service, but we also don’t want to look back in five years and say we have thousands of people who are underserved,” Tanksley said.
Both volumes and the final proposal need to be approved by NTIA before BEAD allocations can be disbursed. After Volumes I and II are approved, the states and territories have 365 days to submit a final proposal, which will include all the grants they intend to award to the providers.
South Carolina was allotted $551 million in BEAD money to help the state reach roughly 60,000 unserved and underserved locations. The state is currently deciding how it will allocate its remaining ARPA funds, while simultaneously working on curing its BEAD Volume I and II initial proposals.
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“It’s been very frenetic,” said Jim Stritzinger, director of South Carolina’s broadband office.
In addition to BEAD and ARPA funding, states continue to have access to USDA’s ReConnect program, which invested $1.72 billion in 88 projects, representing 94,147 households, in fiscal year 2023, its fourth round of projects. In addition to the magnitude of funding, one main difference between the two programs is that ReConnect determines how funds are awarded, while BEAD allows states to make those decisions, which ultimately could determine whether a provider is interested in applying for a BEAD grant.
“We have members that are very interested in BEAD, and I think they are going to go for it,” said Brian O’Hara, senior director of regulatory affairs for the National Rural Electric Cooperative Association.
However, the decisions made in Volume II will be critical as to whether these rural electric co-ops and independent providers can compete with the national telecom companies, which will also be bidding for BEAD projects. For instance, NTIA has stipulated that providers must offer a 25% match and that those that provide a larger match should be given even higher consideration.
“This could be a reason for some of our members to go for a smaller area because it can be harder to serve,” O’Hara said. “The match gives more incentive to the large guys because they have deeper pockets, but the big guys don’t want to go to the most rural areas. The harder-to-reach areas may be easier for them to overlook.”
If needed, states can decide to use remaining ARPA funds to provide a match if a company bidding on a project area cannot, but these funds by law need to be committed by the end of this year, meaning states must first decide how to use those funds before they can move on to deploying BEAD allocations, according to Stritzinger.
Some states will be flexible, said Bloomfield. The areas targeted by BEAD are underserved or not served for a reason, she said. There are fewer people in these areas and the areas provide the least financial return for providers. Bloomfield’s 850 members are independent local exchange carriers or communication providers that currently cover 35% of the U.S. land mass.
“The matching requirement makes it tough for a small company and could allow larger companies to aggressively get into the game,” she said. “There are two things at play. Will my members be able to compete against Charter, Comcast, AT&T? These larger companies can outbid our companies.”
The other issue is whether independent providers will find BEAD attractive, and “that’s up for debate,” she said. “It’s become burdensome for some; there are a lot of regulatory requirements. A lot of my members have already built out 90% of their customer base. Our companies may say it’s just not worth it.”
Another issue: some rural electric co-ops can’t work outside their FCC designated areas, so being able to define their area when they apply for a grant will be key. Some states are allowing this in their Volume II proposals, but other states are planning to award grants based on a provider serving an entire county or a census block, for example, O’Hara said.
Missouri is one state that will allow providers seeking grants to define their own service area, and Tanksley is confident that once the money is allocated and the infrastructure is built, the state’s 230,000 locations currently underserved, unserved, and unfunded will finally have high-speed broadband service.
“Missouri has a diverse provider community, large companies, independent providers, electric cooperatives. They know what they can do better than we know what they can do. Allowing them to define their service areas allows them to be competitive, and it saves us on funding the toughest-to-reach places,” Tanksley said.
Unlike Missouri, South Carolina is planning to require providers to bid on a project on a ZIP code-wide basis, and currently 422 ZIP codes in the state have at least one location that needs service. Applicants will need to serve all unserved and underserved locations within a ZIP code, which allows for side-by-side comparisons and a fair and transparent way of awarding the grants, Stritzinger said.
Oklahoma will use $350 million of remaining ARPA funds along with its more than $797 million BEAD allocation to bring service to 300,000 unserved and underserved households (about 18% of total households). The download and upload speed of underserved locations will be upgraded to 100 megabits per second, a requirement under BEAD.
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Whitacre noted that Oklahoma is counting on the BEAD money to bring the last locations high-speed internet but added that “we probably can’t get everyone the best service — fiber — but we can probably give everyone fixed wireless.”
However, maintaining some of these investments, especially in the most remote locations, could be challenging moving forward.
“While the goal to serve everyone is laudable, there will be pockets that are extraordinarily difficult,” Bloomfield said. “You can’t build in these areas without federal support. In areas with only two or three customers per mile, companies may not be able to recoup their costs. The challenge may become how do we sustain and maintain this network.”
If it does not make financial sense to serve some of these areas long term, “we could wind up with stranded investments,” she said.
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