CCG Consulting

The OpenVault Insights Report for the first quarter of 2022 shows that broadband usage remains high. Average household broadband usage in March 2022 was measured at 514 gigabytes, staying over half a terabyte of data used for the average household. This is a drop from 536 gigabytes in the fourth quarter of 2021, but the first quarter has always shown seasonally lower usage than at the end of the previous year. Usage for the first quarter is up 11% from the 462 gigabytes in the first quarter of 2021.

It’s hard to look anywhere in the broadband industry today and not hear about digital inclusion. One big reason for this is the two giant grant programs created by Congress in the Infrastructure Investment and Jobs Act to tackle digital equity issues. The first is the State Digital Equity Capacity Grant Program, that will allocate $1.5 billion to the States for this program – that’s $300 million per year from 2022 through 2026. The second is the Digital Equity Competitive Grant Program.

I’ve been asked three or four times in the last few weeks why anybody would invest in building rural broadband networks with the goal of getting rich. I’ve been hearing the same rumors as everybody else that there are private equity investors ready to jump into the rural grant arena. I have no specific knowledge that this is going to occur, but I’ve run across several internet service providers (ISPs) recently who claim to have access to nearly unlimited equity funding.

The Infrastructure Investment and Jobs Act made it clear that Broadband Equity, Access, and Deployment (BEAD) Program grants should be made available to everybody—commercial entities, non-profit entities, Tribes, and municipal entities. But there will be an eventual showdown since many states have barriers or restrictions against municipal participation in building, owning, or operating commercial broadband networks. If there is any one area where politics creep into building broadband, it is with state restrictions on municipalities.

There are a lot of extra costs for a broadband provider to accept Broadband Equity, Access, and Deployment (BEAD) Program funding including Environmental and Historic Preservation Reviews, Letters of Credit, Prevailing Wages, Requirements on Contractors, Reporting Requirements, and Taxes. I have to laugh when I look at these requirements and see that reaching that single remote location might get layered with hundreds of thousands of dollars of extra costs. The biggest drawback of expensive grant compliance is that it drives up the cost of every grant project.

Recently, the Minnesota Telephone Alliance and the Minnesota Rural Electric Association asked the Minnesota Public Utilities Commission to revoke the Eligible Telecommunications Carrier (ETC) status for LTD Broadband. ETC staus must awarded by a state regulatory authority or by the Federal Communications Commission to any carrier that wants to collect funding from the FCC’s Universal Service Fund. The petition stems from LTD being the winner in the Rural Digital Opportunity Fund (RDOF) auction in Minnesota to receive $311 million to bring broadband to 102,000 passing in the state.

Charter CEO Tom Rutledge said of a cable broadband comparison to fiber: "The idea that this technology [fiber] is transformative and superior is just dead wrong. It’s just another form of transmission.” There are mountains of facts that say that Rutledge is wrong. First, Charter is expanding its network around the country either through self-funding to reach areas just outside of the traditional cable territories, or by pursuing grants and subsidies, such as with the $1.2 billion that Charter claimed in the 2020 RDOF reverse auction.

There is one interesting aspect of the Broadband Equity, Access and Deployment (BEAD) Program grants that could impact any rural community that is hoping to find a broadband solution from the $42.5 billion BEAD grant process. The National Telecommunications and Information Administration (NTIA) is allowing local governments to challenge the broadband maps that will be used to determine the areas that are eligible for the grants. This is something that communities should be getting ready for today.

As states are getting ready to create their broadband plans for the National Telecommunications and Information Administration (NTIA)’s $42.5 billion Broadband Equity, Access and Deployment (BEAD) Program grants, we’re starting to see some interesting arguments being made by incumbents to influence state broadband plans. One of the aspects of the BEAD plan that hasn’t been discussed much yet is that the NTIA is stressing affordability. For example, the NOFO states several times that states must develop a middle-class rate plan.