BEAD requires states to plan for universal service. But it doesn't fully subsidize it, necessitating states to develop their own funding sources.

As required by the Broadband Equity Access and Deployment program, each CUD must come to the state with a universal service plan to serve every address in their jurisdiction with high-speed internet. This is especially important for solving climate change, said Hallquist. “We have to get fiber to every address to solve climate change,” she said. Fiber is critical because it reduces latency and allows for faster reaction times. The smart grid enables faster responsiveness to electrical outages, even issuing warnings when equipment is about to fail.

Unfortunately, there are several barriers implemented in the BEAD program that may affect CUDs ability to use BEAD funds in their deployment, said Hallquist. The letters of credit requirement, which mandates that grantees receive a 25 percent letter of guaranteed payment from a bank on top of the 25 percent match requirement affects CUDs and smaller providers while favoring large, established providers, she said.

 Vermont’s Unique Communications Union Districts Support BEAD Outlays

The National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program – part of the Infrastructure Investment and Jobs Act (IIJA) targets capital cost subsidies to high cost areas. They are primarily limited to addresses based on the bandwidth advertised to them; those with 80 percent of addresses not advertised at least 25 Mbps down and 3 Mbps up with latency exceeding 100ms are eligible. Public entities building fiber to the premises (FTTP) infrastructure such as Vermont's Communications Union Districts (CUDs) should thus regard them as a limited, supplemental, one time opportunistic funding source.

Notably, BEAD requires states to develop “a comprehensive, high-level plan attain universal service.” But the program contemplates states develop their own funding sources to finance it. In other words, while BEAD requires states plan for universal service, it is not intended to fully fund the construction and operational costs of universal FTTP. States and regional entities like the CUDs can do this via bond funding and utilize end user fees to service the bond debt.

California legislation imposing universal service mandate on commercial providers founders

Two California bills that would establish a statutory requirement on commercial providers of advanced telecommunications to provide service to all addresses in their service areas have foundered. AB 1714 would effectively do so by defining such providers as common carrier public utilities. The bill has not been set for hearing since it was introduced in February.

The second measure, AB 41, would have required providers issued franchises under the state’s video franchise law by the California Public Utilities Commission to make service available to all residences in its service area within five years following renewal of a franchise. That requirement was deleted from the bill in a July 13 amendment. The bill includes a legislative finding that “Thousands of California households still lack access to video or broadband service, including households that are within the existing service territories of state video franchise holders.”

Bountiful, Utah offers states business model for BEAD Five Year Action Plans

While states and local communities are gearing up for the disbursement of $42.5 billion from the federal BEAD program courtesy of the bipartisan infrastructure law, Bountiful joins a growing list of cities who have figured out a way to build a municipal broadband network without relying on grant funds, providing yet another example how publicly-owned, locally controlled networks can still be built and financed even without federal or state subsidies.

https://communitynets.org/content/garden-spot-utah-moves-build-bountiful-fiber-network-face-dark-money-campaign

The business model and financing scheme employed in Bountiful, Utah offers states a model to use in their planning for universal service mandated by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program – part of the Infrastructure Investment and Jobs Act (IIJA). States must develop Five-Year Action Plans this year that include “a comprehensive, high-level plan for providing reliable, affordable, high-speed internet service throughout the (state) including the estimated timeline and cost for universal service.” Additionally, the plans must include an estimated timeline and cost for universal service and planned utilization of federal, state, and local funding sources to pay for it.

In Bountiful’s model, the municipality finances and owns the distribution fiber. A separate entity – the Utah Telecommunication Open Infrastructure Agency (UTOPIA) -- was selected by a competitive bidding process to build, operate, and maintain the network. The city leases access to providers to deliver services over the open access network.

The city is issuing a $48 million bond to finance construction costs, with end user fees servicing the bond debt. While the project is municipal in scope, the business model is also employed on a regional basis like UTOPIA in Utah and by California’s Golden State Connect Authority. Regional entities -- similar to the bell operating companies formed in the 1980s offering analog voice and long distance service -- offer enhanced economies of scale beyond that of a single municipality or county. That's an important consideration to reduce costs and produce greater revenue to service bond debt obligations.

As the excerpted article above notes, this model provides a sustainable funding mechanism that does not depend on one off grant subsidies such as the BEAD grants allocated by the NTIA to states in June. Those funds are most likely to be awarded to large incumbent telephone and cable companies to selectively edge out their distribution infrastructure in less densely populated exurban and rural areas lacking wireline advanced telecommunications infrastructure or served by legacy ADSL over copper.

The Bountiful model could also be employed in less densely populated areas with state and federal grant subsidies used opportunistically for qualifying construction. It also comes with the cost advantages of not having to generate profits or pay income taxes unlike investor owned entities, making subsidy funding go farther. It also builds in a source of local funding that states can include in their Five-Year Action Plans.

U.S. Senator Michael Bennet: Federal infrastructure funding shouldn't subsidize big telecoms

Previous federal efforts to expand broadband infrastructure, totaling $50 billion by Bennet’s estimation, were ”in reality subsidizing the biggest telecom companies in America not to build that broadband out,” he said. The money instead went to expansion that left out rural America.

https://www.denverpost.com/2023/07/06/federal-beads-broadband-funding-program/

The problem with modernizing telecom infrastructure to fiber to the premises is there has been no well thought out, coordinated high cost area subsidization policy. Instead, it's been a series of highly restricted one off grants, treating advanced telecom infrastructure more as a special charity case instead of essential infrastructure. 

Moreover, subsidies have come without universal service obligations or rate regulation as existed for legacy voice plain old telephone service (POTS) under Title II of the federal Communications Act. Telecom utility infrastructure functions as a natural monopoly and requires regulation to protect the public interest in access and affordability.

Comcast is correct that public-private partnerships are the way forward. The public sector should own the infrastructure and competitively contract with private entities to design, build and operate it.

Metro fiber “overbuilder” SiFi Networks announces $350 million JV debt raise

SiFi Networks, an investor owned delivery fiber infrastructure company, announced its Future Fiber Networks LLC joint-venture with European pension fund APG raised $350 million of bank financing in its debut debt raise. The company said the financing will be used alongside APG’s $500 million equity investment in Future Fiber “to deliver future-proof FTTH connectivity and smart city solutions across the U.S. via its fiber wholesale business model.”

SiFi Networks is one of several non-incumbent fiber players targeting metro markets in the U.S. including most prominently Google Fiber and Ting Internet. Sonic, currently in Northern California, is another among what incumbent telephone and cable companies describe as “overbuilders” within their nominal service territories.

Access to advanced telecom isn't a human right. But it is essential utility infrastructure.

The White House on Monday announced more than $42 billion in new federal funding to expand high-speed internet access nationwide and ensure even the most rural communities can reap the economic benefits of the digital age.

In an interview with TIME after the plan was unveiled, Commerce Secretary Gina Raimondo, whose department will oversee the new funding, said that high-speed internet is no longer a luxury but a “basic human right” as modern life becomes more digitized. Her comment echoes a sentiment from President Joe Biden, who on Monday reaffirmed his pledge that every household in the nation would be connected to the internet by 2030.

https://time.com/6290366/gina-raimondo-internet-access-us-interview/ 

It's an overstatement to describe affordable access to advanced telecommunications services as a basic human right. But in any advanced nation like the United States with a well developed information socio-economy, it should be regarded as essential infrastructure and treated as basic utility. As such, it should not require any given community to advocate for it.

That requires reconnoitering telecom policy that has since the 1990s treated it as privately owned market commodity sold based on throughput measured in megabits per second and latency. The Biden administration's Infrastructure Investment and Jobs Act of 2021 is a good first step in this redefinition. And the administration is remedying a defect in the law that retained the market commodity framework by favoring fiber to the premise (FTTP) infrastructure for some $43 billion in grants to the states authorized by the Act to subsidize its long overdue construction. 

The administration and Congress should look to regional public entities to provide FTTP as that essential utility, much like regional airports to use a metaphor offered by the president of one such entity, the Golden State (California) Connect Authority.

Handful of states draft BEAD Five-Year Action Plans

A handful of states have drafted Five-Year Action Plans required under the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program – part of the Infrastructure Investment and Jobs Act (IIJA). The Action Plans due this year must include “a comprehensive, high-level plan for providing reliable, affordable, high-speed internet service throughout the (state) including the estimated timeline and cost for universal service.”

Montana estimates universal service between 2026 and 2029, cautioning several factors could delay universal service including a labor gap, supply chain issues and industry participation. “In keeping with the BEAD NOFO, Montana has analyzed the estimated amount of subsidy needed to serve all unserved and upgrade all underserved in Montana with fiber,” the plan states. It notes the state is not anticipated to have sufficient funding to connect all unserved and underserved locations with fiber but does not address how the funding shortfall will be bridged. The state estimates it would need an estimated subsidy allocation of $628-754M to serve all unserved locations. Montana was awarded $629M in BEAD funds this week by the NTIA.

Utah “will ultimately make broadband adoption universal for all Utahns by December 31, 2028, based on the expected funding amounts from the BEAD program as well as an assumption that the other funding programs maintain their historical investment levels in Utah.” The plan calls for fixed wireless or alternative solution to serve 4,000+ locations beyond the extremely high cost per location threshold. No cost estimate for universal service was provided in the Beehive State’s plan.

“Barring significant variation between actual deployment costs and initial estimates, Ohio is therefore estimated to reach universal service by the conclusion of BEAD in 2030, according to the Buckeye State’s draft plan. “When all funds – both allocated and modeled – for unserved and underserved locations are combined, the estimated deployment cost of reaching universal service in Ohio ranges between ~$1.142 billion and ~$1.612 billion.” The plan estimates the cost of extending fiber connections to all unserved and underserved locations would range from $515 million to $830 million. Ohio was awarded $794 million in BEAD funding by the NTIA.