As newly installed Commerce Secretary Howard Lutnick gets set to announce rule changes to the $42.5 billion Broadband Equity, Access, and Deployment (BEAD) funding program, industry financial analyst and D.C. insider Blair Levin looked at the impact of various potential reforms. As part of his analysis, he offered his take on which reforms would cause the greatest delays, which reforms would have the most and least impact, and more.
“There is a relatively pain free way for the rules to change without additional costs to the states or delays in deployment,” wrote Levin in a research note.
Levin headed up the 2009 National Broadband Plan initiative and is now the policy advisor for New Street Research.
Of course, how disruptive the BEAD changes will be will depend on how extensive the changes are, including whether they apply to all states or only those that have not already awarded funding or begun taking applications for funding.
According to Levin, 36 of 50 states are either finished with or well into an application process that has already closed or will close by mid-April.
BEAD Rule Changes
One of the Republicans’ major concerns about the current BEAD rules is that it’s too costly to fund fiber to the extent called for by the current rules. Republicans also have expressed concern that some of the rules — such as those involving union labor or climate change — are too restrictive, thereby reducing potential participation in the program.
It’s not yet clear how Lutnick will define “too costly”.
As Levin notes, one possibility is that Lutnick will seek to divert as much as 50% of BEAD funding to low-earth orbit (LEO) satellite broadband services such as Starlink. Another possibility is that a maximum support level per location will be imposed, potentially in the range of $7,500 to $10,000 per location.
Changing the rules to divert more funding toward satellite broadband would likely require all states to revamp their application process, including re-doing the process for the 36 states that already have concluded that process or where that process is currently underway.
Capping the amount per location would be easier to implement and could be done as a “true-up” to existing processes, Levin said.
He provided data suggesting that the true-up process would not be tremendously disruptive. For example, he noted that in Louisiana, the first state to make BEAD awards, 80% of fiber broadband awards were below an average of $4,000 per location and 50% were below $3,000.
Levin also argued that other BEAD rules that the Republicans want to change could be handled in the true-up process.
“We believe, for example, that Louisiana (both the state itself and their BEAD winners) would be happy to be allowed to simply remove from the final grant agreements the various requirements related to. . . DEI, low-cost plan commitments, and climate resiliency plans,” Levin wrote.
NTIA, he said, “could simply amend its current Notice of Funding Opportunity accordingly… If there are Blue State holdouts, we believe NTIA has clear authority to insist on those kinds of changes in final grant agreements.”
If Do-Overs are Required
Making broader changes to BEAD rules would be much more disruptive, Levin argues.
The most disruptive change, potentially, would be to shift funding to satellite broadband, which would require states to broadly revamp their application process, including re-doing or re-starting that process in 36 states. Levin estimates that this would delay the program by at least a year and would add about $250 million to implementation costs.
“Further, it is not clear that redoing the bidding process will reduce the state expenditures,” Levin wrote. “Looking at the states which have completed their process does not suggest that there are huge savings to be had. . . As a matter of math, it appears that the states already underway are very likely on track to award about 75% or so of their locations to [fiber broadband] at quite low/reasonable levels.”
Levin expects Lutnick to announce BEAD rule changes no later than next week and possibly before the end of this week.
