States should partner with special districts, utility cooperatives to maximize reach of BEAD funds

A conflict between state and federal laws may delay the first distribution of funds to the states from the $42.5 billion program to expand internet access. Sixteen states bar or restrict municipally owned broadband – and nearly all of those states, according to an analysis by Route Fifty, appear unwilling to amend their laws as they finalize plans for how they will use their share of Broadband Equity, Access and Deployment, or BEAD, funds. That could put them at odds with the Biden administration, which supports having more cities and local governments offer broadband.

The 2021 infrastructure law requires that states allow local governments and utilities to receive BEAD funds to provide internet service. At the time the law was being crafted, the administration argued that local governments would be under “less pressure to turn profits” than broadband companies and, therefore, would likely offer internet access at lower prices.

https://www.cityandstatepa.com/policy/2023/12/pennsylvania-stands-alone-clarifying-bead-plan/392566/

This isn’t likely to cause any delay for the states. The Infrastructure Investment and Jobs Act (IIJA) language as Pennsylvania has apparently noticed is sufficiently open to allow BEAD funds to be granted to states that have laws restricting or barring municipally owned advanced telecommunications networks.

Per the IIJA, states “may not exclude cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments from eligibility for such grant funds.” That language does not specifically bar states that have statutes limiting or banning these networks from participating in the BEAD grant funding as eligible entities.

The reference to public-private partnerships would theoretically allow states to form a partnerships between government units and the investor owned providers who lobbied for these state laws. The public entities would function as pass through entities for private subsidies as some local jurisdictions have done with American Rescue Plan Act funds earmarked for capital improvement projects.

A superior option better aligned with BEAD program guidance would be for states to partner with non municipal entities such as public utility authorities, special districts and utility cooperatives. Doing so comports with BEAD program guidance urging states to maximize their BEAD allocations to minimize their outlay and “extend the reach of the BEAD program funding and help to ensure that every unserved location and underserved location in the United States has access to reliable, affordable, high-speed internet.”

These entities would be better situated to do so since they operate with lower cost structures that don’t require them to generate profits or pay income taxes – constraints that brought about the nation’s crisis in deficient advanced telecommunications infrastructure that the IIJA seeks to address. To comply with the IIJA’s requirement that BEAD funds be distributed in “an equitable and nondiscriminatory manner,” those entities could partner with investor owned entities for network design, construction, and operation and to offer services as ISPs.