BEAD funding fight between private, public sectors joined

With the naming of former U.S. Federal Communications Commission nominee and staffer Gigi Sohn as the first executive director of the American Association for Public Broadband, the battle between the public and private sectors over $42.5 billion in advanced telecommunications infrastructure funding has been joined.

The AAPB’s mission is to “build a diverse membership of public broadband networks from around the country, and advocate in support of municipal broadband and local choice at the federal, state, and local levels.” Sean Gonsalves of the Institute for Local Self Reliance’s Community Networks reports from the Broadband Communities Summit held in Houston this week where Sohn announced her new role after withdrawing as the Biden administration’s nominee to fill a vacant FCC seat amid strong opposition from telephone and cable companies:

When (Sohn) officially takes the reins at AAPB beginning in June, she said her top priorities would be to increase AAPB membership beyond its current “handful of members,” advocate for municipal broadband and other public entities to have access to the $42.5 billion in broadband deployment funds forthcoming from the Infrastructure Investment and Jobs Act (IIJA) – “at least on an equal basis as private providers” – and to tell the positive stories that will “make public broadband a thing that towns and communities want to have.”

Those companies also hope to snag some of the funds once they are allocated to the states as federal block grants later this year under National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program. Like the AAPB, they too will claim they deserve an equal shot at the funds. One recently urged Oregon state officials to adopt a “business model agnostic” stance in awarding subgrants, a talking point likely to be repeated in other states. But that could run into local opposition as states do their community and outreach and engagement as required by BEAD from residents and businesses that for years complained of redlining and poor service by the legacy providers.

Federal, state legislation that would regulate Internet as common carrier telecom utility stalls

H.R. 8573, proposed legislation that would subject internet service to regulation as a common carrier telecom utility under Title II of the Communications Act has stalled in Congress. A similar measure introduced in the California legislature, AB 1714, is also not advancing. Neither bill has been set to be heard in committee.

FCC’s seesawing stance on regulation of internet services could soon end

The two-decade-long back and forth at the U.S. Federal Communications Commission over whether internet access should be regulated as a common carrier telecommunications utility under Title II of the Communications Act or as an Information Service under Title I of the law could soon end.

That’s the likely upshot if the U.S. Supreme Court as predicted by legal pundits overturns its 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984). That ruling -- which established the doctrine of judicial deference to agency administrative law interpretations of statutes when they could be construed ambiguously -- will be revisited by the high court in Loper Bright Enterprises v. Raimondo, granted review this week.

If the court abandons the Chevron doctrine as expected, the question of how internet service is to be regulated would be left to Congress and the courts rather than administrative agencies like the FCC. That could have major implications for the FCC’s current policy expressed in its 2018 Restoring Internet Freedom order, classifying internet service as an information service under Title I. Accordingly, providers are not required to honor reasonable requests for connections or subject to rate regulation by state public utility commissions had they would if classified as telecommunications providers under Title II.

Should that order come back before the Supreme Court should it overturn the Chevron doctrine, it could also be invalidated along with the court’s decision in National Cable & Telecommunications Association, et al. v Brand X Internet Services, et al. 545 US 967 (2005). Supreme Court Justice Clarence Thomas, who wrote the decision for the majority, has expressed misgivings over it. In that case, the high court ruled the FCC’s determination that internet service provided by cable companies should be regulated under Title I was a reasonable interpretation of ambiguous provisions of the 1996 Telecom Act under the Chevron doctrine. In the 18 years since the Brand X ruling, cable companies have become the dominant provider of internet connectivity in the United States.

Lacking public policy establishing universal service, U.S. will continue to struggle and spin its wheels to achieve it.

As the U.S. General Accountability Office report noted in a report issued in May 2022, the United States lacks a national strategy to guide the deployment of advanced telecommunications infrastructure. Instead, the report found, there are numerous, uncoordinated subsidy programs administered by multiple federal agencies.

The Biden administration has stated a policy principle of universal service: “Internet for All.” That was emphasized in March by Commerce Secretary Gina Raimondo at an interview with Yahoo Finance. "The reality is, if we're going to connect every American, including the tens of millions of Americans who now don't have the internet, we're going to have to lay fiber all across this country,” Raimondo said.

But the administration’s context here is yet another subsidy program – the Broadband Equity, Access, and Deployment Program authorized by the 2021 Infrastructure Investment and Jobs Act (IIJA) – and not affirmative public policy ensuring fiber reaches most every American doorstep as Raimondo described the mission.

Like the 1996 Telecom Act that “encourage(s) the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans … in a manner consistent with the public interest, convenience, and necessity” the IIJA does not create universal access as public policy. It merely states that it’s “essential to full participation in modern life in the United States.”

Nor has public policy that has primarily relied on investor-owned companies to deploy fiber to the premise (FTTP) infrastructure been “consistent with the public interest” since investor-owned providers must naturally place the interests of their owners ahead of the public interest of ubiquitous, affordable connectivity. That’s arguably inconsistent with the public interest. (Emphasis added)

Until affirmative public policy that actually has the means to expeditiously attain universal, affordable access is put into federal statute or administrative law based on a unifying and action-based policy principle, the nation that invented the internet will continue to struggle and spin its wheels to achieve this goal.

After decades and a patchwork of grant programs, what’s next for U.S. advanced telecommunications infrastructure policy?

By the late 1980s and early 1990s when it became apparent internet protocol-based telecommunications would replace legacy analog voice and cable TV, the United States failed to put in place policies to ensure the timely modernization of its delivery infrastructure – twisted pair copper telephone and coaxial cable, respectively – to fiber optic lines. Instead of integrated, comprehensive policy, it developed a patchwork of grant programs to attempt to fill in holes in a giant Swiss cheese, crazy quilt pattern of fiber infrastructure construction by a mix of public, consumer cooperative and mostly private sector corporations.

That became a paper chase of “broadband mapping” designed sort grant eligible holes from the cheese, including controversy over what meets government quality standards for the cheese. While nominally intended to expand affordable access to advanced telecommunications – something that enjoys widespread support -- the process is an adversarial one prone to delay and controversy. Incumbent providers – typically investor owned – claim they already sell cheese where another entity insists there’s a hole, requesting grant funding to build fiber to fill it.

The competitive paper chase is posed to heat up considerably in 2023 as the federal and state governments determine how to allocate nearly $43 billion in grants earmarked for advanced telecommunications infrastructure in the Infrastructure Investment and Jobs Act (IIJA) of 2021.

Even after all that "once in a generation" money is spent, the nation will likely continue to come up short getting fiber to every doorstep without resolving the larger question of how is the infrastructure optimally owned and operated to ensure universal affordable access and uniform service level and reliability standards. Government owned regional advanced telecom authorities along with utility cooperatives are the best option since the short term, market segmented business models of investor owner/operators don’t lend themselves to attaining these. They are also better able to ensure ongoing financial support and stability without the need to generate profits for investors.

This is not to say there isn’t a role for investor-owned entities. There is plenty of work for them to design, build, operate and offer services over the fiber infrastructure just as is the case with other public works such as transportation infrastructure. But as history has shown with the nation’s fragmented Swiss cheese advanced telecommunications infrastructure, they can never place the public interest in ubiquitous, affordable access to modern infrastructure ahead of that of their shareholders and can only build fiber where it generates a relatively rapid return on investment. Telecom policymakers should act accordingly and appropriately assign the roles and players instead of the futile effort of sorting the “broadband” holes from the cheese.

IIJA provides NTIA opportunity to route around flawed "broadband map," use infrastructure-based standard for subsidization.

Extending the process to challenge the U.S. Federal Communications Commission’s data on the availability of broadband Internet access service proposed in recently introduced federal legislation won’t ultimately lead to complete and accurate data for the allocation of infrastructure subsidies to the states. The reason as Doug Dawson details in a blog post is the data is based on marketing claims of providers of where they provide service.

ISPs are pretty much free to claim whatever they want. While there has been a lot of work done to challenge the fabric and the location of possible customers – it’s a lot harder to challenge the coverage claims of specific ISPs. A true challenge would require many millions of individual challenges about the broadband that is available at each home.

While that’s consistent with the nation’s current market-based regulatory paradigm for advanced telecommunications, it can’t possibly be complete and accurate. Nor is it intended to be. The purpose of marketing is to create brand awareness and attract potential customers, not for planning the deployment of critical infrastructure.

Fortunately, the Infrastructure Investment and Jobs Act (IIJA) provides a workaround to the fool’s errand of “broadband mapping” based on marketing claims. It does so with a flexible definition of “broadband” that would allow it to be defined in administrative versus statutory law. Section 60102(a)(2)(B) of the IIJA defines it by reference to 47 Code of Federal Regulations 8.1(b):

Broadband internet access service is a mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence or that is used to evade the protections set forth in this part.

or any successor regulation. (Emphasis added)

Although the context clearly refers to the FCC, there is nothing in the statutory language that limits the promulgation of a successor regulation to the FCC. The National Telecommunications and Information Administration (NTIA), which has prioritized fiber to the premises (FTTP) delivery infrastructure for subsidization in its Broadband Equity, Access and Deployment (BEAD) program, could promulgate its own regulation citing this authority in the IIJA. 

Such a rulemaking could use a fiber infrastructure-based subsidization eligibility standard, consistent with the IIJA’s intent to modernize and expand critical infrastructure in the 21st century. That could include a different challenge process based on the rebuttable presumption that FTTP doesn’t exist -- very likely in what the IIJA identifies as subsidy eligible areas with poor existing service. Those that would challenge FTTP subsidies would be required to show that it does and passes all addresses in their service areas with an exception for extremely remote locations. 

As Dawson writes, "Grant funding could have been done in other ways that didn’t rely on the maps. I don’t think it’s going to make much difference if we delay six months, a year, or four years – the maps are going to remain consistently inconsistent." 

Investor-owned providers make FTTP “land grab.”

Just a few years ago, it would have been hard to imagine investor owned legacy telephone and cable companies would consider a major push into fiber to the premise (FTTP) due to their extractive business model constraints averse to major capital expenditures. That tends to favor fiber builds in high end condominiums and select “fiberhoods” as a luxury amenity.

A recent roundup in Broadband Communities paints a picture of regime change in what an economist quoted in the article calls a fiber “land grab” even in historically less densely developed areas where ROI was too far out to justify investment in FTTP. Cable providers are abandoning coaxial cable and migrating to FTTP. Overbuilding incumbents with fiber – also previously unheard of – is occurring. The overall impression from the article is FTTP is busting out everywhere, albeit a generation late relative to the demand for Internet-based services. (Separately, even private equity -- impatient capital hardly a source for long term capital investment - is getting in on the fiber real estate rush, looking for a future profitable flip.)

What’s driving the change? A couple of likely factors. There’s first mover advantage: whichever provider gets fiber to the prem first gets a very sticky customer thanks to the terminating monopoly characteristic of these connections. It’s not as though they have multiple fiber connections and can chose among them. Nor is it economically feasible to provide them. Legacy providers may also be lengthening their investment timescale away from the traditional internal ROI standard in order to gain first mover advantage, knowing they’ll own the customer over the long term and the opportunity to sell services to them.

Second, to foster an impression of progress and momentum after years of minimal investment in FTTP fueling public policy discussion of the nation’s advanced telecommunications infrastructure deficiencies displayed in stark relief during the public health restrictions of the 2020 pandemic outbreak. Investor-owned providers probably know that they don’t appear to be making rapid progress to remedy them, support for public and consumer utility coop owned FTTP and appropriations to help fund them will grow despite plying elected officials with campaign contributions. That could also spark proposals to regulate commercial internet delivered services as common carrier public utilities. That would bring with it requirements to honor customer requests for FTTP connections and state rate regulation that are anathema to investor-owned providers.

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.