Critics Say Rules Affixed To Biden’s Massive Broadband Subsidy Program Boxes Out Small ISPs And Community Broadband

We've already noted how the 2021 infrastructure bill aims to spend a whopping $42 billion on broadband deployments via the Broadband Equity and Deployment program (BEAD). We've also noted how big regional monopolies are doing everything in their power to ensure the lion's share of that money goes to them, and not smaller ISPs or a number of popular, community-owned broadband networks.

The funding is an historic opportunity to address patchy U.S. broadband. Throwing the lion's share of that money at giant regional monopolies like AT&T (with long, detailed histories of taking taxpayer money then delivering either fraud or half-completed networks) would undermine the whole point of the program. Especially given that data shows community-owned ISPs provide better, faster, cheaper service.

So last week, a massive coalition of more than 300 smaller ISPs and broadband policy experts wrote a letter to the NTIA (the agency in charge of BEAD), pointing out that rules affixed to the program are unfairly boxing out many smaller and community-owned ISPs.

Under program rules, grant winners not only must obtain a letter of credit (LOC) from a bank to receive the grant, they have to pony up matching funds of not less than 25 percent of project costs." According to the coalition of experts, this requirement to set aside huge swaths of cash (that can't be used for actual project builds) just to get a grant that unfairly benefits giant, regional monopolies:

Awardees will have to lock away vast sums of capital for the full duration of the build, likely several years. With the additional 25% match requirement, recipients will have a capital hurdle of more than 60% of their grant. Weestimatea provider seeking a $7.5 million grant for a $10 million project will need at least $4.6 million of their own capital up-front."

Money set aside to ensure a grant applicant qualifies under these guidelines is money that's not being used to actually build broadband networks. That's not a big deal for AT&T or Comcast, but it's a big deal for a local, community-owned broadband ISP dealing not only with tight budgets, but lawsuits from giant providers looking to undermine them:

by establishing capital barriers too steep for all but the best-funded ISPs, the LOC shuts out the vast majority of entities the program claims to prioritize: small and community-centered ISPs, minority and women-owned ISPs, nonprofits, and municipalities. Rather than demonstrating a provider's ability to construct a broadband network and provide high-speed broadband services to unserved and underserved Americans, the LOC is a measure of whether they can lock up valuable working capital over multiple years."

Many community broadband networks can't even obtain LOCs due to local rules, which often include shitty state laws lobbied for by regional monopolies with an eye on undermining competition.

The coalition suggested the NTIA either eliminate the restrictions, or add a few practical alternatives, including delayed reimbursement (where a state and provider releases grant funding as set goals are met), or performance bonds (commonly used in construction projects), which provide a financial guarantee for project delivery without requiring providers to set aside such a large amount of capital.

When asked for comment, the NTIA basically gave a non-answer, so it's not clear if rule changes are coming anytime soon:

We have received the letter and appreciate these advocates raising their concerns and suggestions. Our goal is to connect everyone in America with affordable, reliable high-speed Internet service while being good stewards of taxpayer dollars."

The NTIA is likely trying to avoid the problems seen with the Trump-era FCC RDOF program, which failed due to a lack of agency scrutiny over whether ISPs could actually build the networks they promised (it's a major reason why the NTIA was put in charge of BEAD). But the LOC restrictions pretty clearly run contrary to the whole program's stated goals.

Giant regional monopolies dominate every last part of U.S. broadband policy, from determining what defines broadband" and terms like underserved," to mapping access and the grant approval process. Putting predatory monopolies with a history of taking taxpayer funds in exchange for bupkis in the driver's seat of an historic subsidy program isn't going to end well. It never does.