Should BEAD green subsidize greenfield FTTH?

Legacy incumbent telephone and cable companies might conceivably seek state subsidies under the federal government’s Broadband Equity, Access and Deployment (BEAD) program is to edge out their footprints to serve new “greenfield” housing developments. These providers prefer new housing developments for multiple reasons. The homebuyer is going to need service and new homebuyers tend to be relatively higher income and generate good ARPU and ROI. Deals can be cut with homebuilders to bring fiber to each homesite. It’s easier to trench fiber in new and unoccupied housing developments as lots and streets are being finished.

From the service provider’s perspective, greenfields are  a better risk to extend fiber to the home (FTTH) than a brownfield development that is already generating revenues, often on non-FTTH delivery infrastructure, thus requiring households to upgrade to fiber or to overbuild an existing provider. In a greenfield development, every household can be connected to FTTH before the new homeowners move in.

Greenfields nominally qualify for BEAD subsidies because there’s not yet an existing provider offering service, thus meeting eligibility threshold of not less than 80 percent of broadband-serviceable addresses being unserved or underserved. BEAD guidance defines a “Broadband-Serviceable Location” as “a business or residential location … at which fixed broadband Internet access service is, or can be installed” (as with a new housing development).

Providers that have historically preferred greenfields as better risks might also be willing to pay higher BEAD match amounts than the minimum 25 percent, possibly 50 percent or more, given BEAD guidance that encourages states to incentivize proposed projects with higher match amounts.

Greenfield projects seeking BEAD subsidization could however raise digital equity concerns by federal and state BEAD administrators. They might conclude the use of subsidies for these lower risk builds does not comport with the legislative intent expressed in the Infrastructure Investment and Jobs Act (IIJA). The statute notes the “persistent ‘‘digital divide… disproportionately affects communities of color, lower-income areas, and rural areas”— populations that typically face affordability challenges to buy in new home developments and may resent adjacent neighborhoods being offered government subsidized FTTH when they are not served by it.