Largest Federal Broadband Grant Program Targeted for Major Reforms

PDF

The nation’s largest broadband grant program could face big changes under recently proposed legislation and a reexamination by the federal agency tasked with its implementation. The Broadband Equity, Access, and Deployment (BEAD) Program was created in 2021 to provide over $42 billion in grant funds to states/territories to support broadband planning, infrastructure deployment, and adoption efforts. To access BEAD Program funding, states/territories must submit proposals aligning with rules established by the U.S. Department of Commerce under the prior administration. Critics allege that many of these rules exceed statutory requirements and pose barriers to grant funding distribution. 

While all states/territories received Commerce approval of their initial BEAD proposals under the prior administration and most have begun service provider selection for grants, all signs indicate that an overhaul is coming. House Republicans recently proposed the Streamlining Program Efficiency and Expanding Deployment (SPEED) for BEAD Act, which would ease some BEAD requirements and prohibit enforcement of other project conditions. In addition, the new Commerce Secretary has launched a “rigorous review” of the BEAD Program aimed at revamping existing rules and guidance to align with current administration priorities. The proposed reforms warrant close attention as they could further delay BEAD Program implementation as states/territories work on any necessary updates and alter industry expectations regarding the types of projects receiving funding, the obligations imposed on funding recipients, and the eligible uses for such funding.  

The proposed changes include:

• Adjusting Project Technology Preferences – Subject to certain exceptions for extremely high-cost deployments, BEAD Program rules currently require states/territories to prioritize broadband projects that provide service via end-to-end fiber-optic facilities before considering projects using other “reliable broadband service” technologies such as cable and licensed fixed wireless. The initial BEAD Program rules specifically excluded satellite and unlicensed fixed wireless technologies from the definition of reliable broadband service and currently limit state/territory ability to fund such services.

Under the SPEED for BEAD Act, the fiber-optic project prioritization would remain, but the reliable broadband service definition would be expanded to encompass any technology that meets the minimum BEAD performance standards (i.e., speeds not less than 100/20 Mbps and latency no more than 100 milliseconds). As a result, satellite and unlicensed fixed wireless services satisfying the standards would no longer be considered a last resort for BEAD grants and would instead be evaluated alongside more traditional broadband technologies. Moreover, the Commerce Secretary indicated that the agency’s BEAD Program review may go even further and establish a fully “tech-neutral approach” that could eliminate project technology preferences.

• Curbing Service Provider Low-Cost Broadband Service Option Obligations – As part of their initial BEAD proposals, states/territories were required to develop a low-cost broadband service option (LCBSO) that grant recipients must offer to qualifying households. In response, many states/territories set their LCBSO at specific rates while others developed varying formulas and waiver procedures for their LCBSO. Detractors criticized the LCBSO approval process, citing an alleged lack of transparency, and Congress opened an investigation into whether LCBSO implementation constituted impermissible rate regulation.

The Speed for BEAD Act would limit state/territory ability to impose LCBSO obligations. The legislation provides that states/territories may not “regulate, set, or otherwise mandate” the rates charged by grant-funded service providers or the methodologies used to calculate such rates, including through rate caps or freezes. States/territories also would be barred from taking into account proposed service rates as part of the application scoring process, which appears to conflict with separate BEAD Program rules requiring consideration of service affordability in project scoring. Importantly, the reforms would apply even if a state/territory already received Commerce approval for its LCBSO, likely necessitating BEAD proposal revisions.

• Prohibiting Certain Project Conditions – The BEAD Program currently imposes certain conditions on grant-funded projects and encourages states/territories to adopt additional project conditions to further policy goals. The SPEED for BEAD Act would prohibit states/territories from enforcing many of these conditions, including as part of application scoring criteria or reporting requirements. As with the LCBSO, these prohibitions would apply regardless of prior Commerce approval and may require BEAD proposal updates. The prohibited conditions would include those related to:
  • Prevailing wages or compliance with Davis-Bacon Act requirements
  • Project labor agreements
  • Union workforces and commitments to union neutrality
  • Collective bargaining
  • Local hiring
  • Labor peace agreements
  • Workforce composition or reporting of workforce composition
  • Climate change
  • Regulation of network management practices, including data caps
  • Open access
  • Diversity, equity, and inclusion

Other project requirements, such as those related to the National Environmental Policy Act and the Build America, Buy America Act, would still apply under the legislation, although they may be adjusted as part of Commerce’s separate BEAD Program review. 

• Reforming Eligible Funding Uses – While BEAD Program funding is primarily directed at broadband infrastructure deployment projects, current rules allow states/territories to use leftover funds to support broadband adoption efforts, affordable device initiatives, and other Commerce-approved uses. Under the prior administration, Commerce approved a number of non-deployment uses for BEAD funding, including digital equity, inclusion, and education projects.

Under the SPEED for BEAD Act, broadband adoption efforts and affordable device initiatives would no longer be eligible uses of grant funding and Commerce would be stripped of its ability to approve other non-deployment uses such as those related to digital equity, inclusion, and education. On the cosmetic side, the legislation also would strip out any references to “equity” in the BEAD Program statute and rename the program the Broadband Expansion, Access, and Deployment Program.  Note that digital equity, inclusion, and education projects may be eligible for support under other Commerce grant programs.  However, these programs also likely will be retooled by Commerce under the new administration. In addition, the legislation would add telecommunications workforce development programs to the list of eligible BEAD funding uses, codifying prior Commerce guidance.

• Inserting Letter of Credit Exceptions – Existing BEAD Program rules generally require grant recipients to obtain a letter of credit (or performance bond) covering a funded project. The SPEED for BEAD Act would remove this requirement for grant recipients when the service provider
  • Has commercially deployed or operated a broadband network using technologies that are the same or similar to the technologies proposed for its BEAD project, and
  • Is seeking funding in an amount that is less than 25 percent of the annual revenues of the provider/affiliated entities or to provide service to a number of locations that is less than 25 percent of the total number of locations served by the provider/affiliated entities

The proposal will allow some BEAD applicants to avoid the often expensive and time-consuming process of securing a letter of credit, although it could leave states/territories with limited recourse for insolvent grant recipients that default on their BEAD projects.

Increasing Project Scope Flexibility – The BEAD Program requires states/territories to develop plans to provide broadband to all locations that are currently unserved (lacking 25/3 Mbps service) and underserved (lacking 100/20 Mbps service). Consequently, some states/territories proposed predefined project areas of varying sizes (county, census block, etc.) that applicants would apply to serve while others provided flexibility for applicants to fashion their own proposed service areas. The SPEED for BEAD Act would mandate such flexibility, allowing applicants to remove from a proposed project area any location that the service provider determines “would unreasonably increase costs or is otherwise necessary to remove.” While this proposal would enable applicants to better scope their proposed project areas to align with their capabilities and business goals, it may complicate state/territory efforts to ensure all eligible locations receive broadband service through the BEAD Program