Most states (45 as of Friday) have released their recommended awards in the Benefit of the Bargain round in the Broadband Equity, Access and Deployment (BEAD) Program. The total value of the award recommendations for those states is less than half of initial allocations, according to a Telecompetitor analysis.
The initial allocation for the 45 states was about $32.8 billion. The total value of the award recommendations for the states is about $15.2 billion, or about 46% of the initial allocation.
Changes to BEAD rules imposed in June are a key reason for the results. But other factors are at work as well. And of course, aggregate numbers only tell part of the story.
States whose recommended awards approach the total amount they were allocated include Oregon (90.1%), Idaho (74.5%), Washington (69.2%), and Pennsylvania (68.3%). States with the greatest spread between recommended awards and allocated funds are Connecticut (5%), North Dakota (5.2%), and South Carolina (7.5%).
It’s important to keep in mind that the states’ recommendations for BEAD awards are not final. The recommendations still must be approved by the National Telecommunications and Information Administration (NTIA), which is rumored to be seeking reductions to the award amounts.
BEAD Awards vs. Allocations
Here are some things to consider about BEAD awards vs. allocations.
Eligible locations reduced. Between late 2022, when Congress decided that $42.5 billion was the appropriate budget for BEAD deployments, and today, the number of eligible locations dropped by 65%, according to an analysis from the Advanced Communications Law and Policy Institute (ACLP) at New York Law School.
This occurred, in part, because of broadband deployments that occurred in the intervening months. Another consideration is the rule change that made locations served by fixed wireless operating in unlicensed spectrum ineligible for funding.
As of December 2022, more than 11.9 million locations were eligible for BEAD. That number dropped to between 4.8 and 4.9 billion before the June rule changes and to nearly 4.2 billion after the rule changes, ACLP said.
An analysis from Virginia Tech University made just after the new BEAD rules were announced estimated that the rule changes involving unlicensed fixed wireless would be responsible for a 12% decrease in the number of eligible locations.
All states were allocated at least $100 million. It’s no surprise to see the states whose award recommendations are a small fraction of what the state was allocated: All states were allocated at least $100 million, even if they had relatively few eligible locations.
From the start, the expectation was that these states would use some of that funding for non-deployment purposes. The legislation that created the BEAD program allows states to use any surplus deployment funding for certain other purposes such as workforce development and education, although there are rumors that NTIA may try to change that.
Of the eight states whose BEAD awards represent less than 15% of allocated funding, six were allocated less than $200 million. All but one of those states is in the densely populated Northeast. These Northeastern states include Connecticut, New Hampshire, Delaware, Massachusetts, and Rhode Island.
The one non-Northeastern state was North Dakota, which was allocated only $130 million. That state has a high percentage of small rural telecom providers and, compared with larger providers that are more heavily focused on metro areas, smaller providers traditionally have been more aggressive in deploying high-speed broadband.
New rules eliminate the preference for fiber. Initial BEAD rules called for states to award funding for a project area to fiber broadband unless the cost to do so was too high or no provider applied for fiber funding for that area. The thinking was that fiber broadband is more future proof than other options and would eliminate or reduce the need for future funding programs.
The rule changes that were imposed in June eliminated the preference for fiber but left some room for interpretation on the part of the states. The results suggest that the new rules shifted some funding that could have gone to fiber to instead go to less costly but less future proof technologies, including low-earth orbit (LEO) satellite broadband. That shift wasn’t as dramatic as fiber advocates feared, however.
According to a recent analysis from New Street Research based on 39 states that had reported at that time, two thirds of eligible locations are slated to receive fiber, representing 83% of funding. Nineteen percent of locations are slated for satellite, representing 5% of total funding.
The remaining 14% of locations and 12% of funding will go to fixed wireless and cable, with fixed wireless having the larger share of both locations and funding.
Variations by state. Telecompetitor was wondering if the states that expect to award most of their BEAD allocation were favoring fiber. And we thought that perhaps states that expect to award a relatively small percentage of their funding were not doing that. That’s not what the numbers show, though.
To gauge this, we compared states that expect to award the highest percentage of their allocation with those that expect to award a relatively low percentage. We got the percentages from data compiled by Benton Institute for Broadband & Society, Connected Nation and state broadband offices.
On the high end, we looked at the nine states that want to award more than 60% of what they were allocated. On the low end, we looked at the six states that expect to award between 15% and 30% of what they were allocated. (We didn’t look at the states that expect to award less than 15% of what they were allocated for the reason cited above regarding the minimum allotment per state.)
What we found was that the states that expect to award a high percentage of their budget aren’t targeting an unusually large percentage of locations for fiber.
Three out of nine states in the high-end group expect to fund fiber for 60% or more of locations, as do three out of five states in the low-end group.
Similarly, four out of nine states in the high-end group and two out of six states in the low- end group expect to award funding for fiber for less than 50% of locations.
Importantly, though, the states that want to award a high percentage of their overall BEAD allocation are primarily in the West. That includes five out of the nine states in the high-end group — Oregon, Idaho, Washington, New Mexico, and Montana — or seven if you include Oklahoma and Hawaii.
Telecompetitor’s observations appear to confirm something New Street Research analyst Blair Levin also has noted: Ultimately, it’s just more costly to deploy high-speed broadband in the West.
Some big states have yet to release award recommendations. Before we close, it’s important to note that Texas was allocated the largest amount of BEAD funding by far ($3.3 billion) and was granted an extension to report its award recommendations. Of the other four states that have not yet reported (California, Florida, Illinois, and Utah) three also were allocated over $1 billion each.
The results for the remaining states potentially could skew the results significantly. Collectively, those states were allocated about 23% of total BEAD funding.
A note of thanks to Ian Doescher. I wanted to make sure to acknowledge Telecompetitor Managing Editor Ian Doescher, who has been toiling tirelessly to keep Telecompetitor’s list of BEAD Benefit of the Bargain round results up to date. I could not have done this analysis without the foundational work he had already undertaken.
