Commerce Secretary Defends BEAD Low-Cost Plans Amid Senate Scrutiny

WASHINGTON, May 15, 2024 – Commerce Department Secretary Gina Raimondo was pressed by U.S. Senators on Wednesday on the department’s execution of a $42.5 billion broadband initiative, and whether the department’s practices are crossing into the territory of rate regulation.

During a Senate Appropriations Committee hearing, Sen. Jerry Moran, R-Kansas, confronted Raimondo with allegations that her department was setting prices for states involved in the Broadband Equity Access and Deployment program, being overseen by the National Telecommunications and Information Administration within the Commerce Department. 

Moran highlighted feedback from Virginia, where state officials were reportedly asked to provide “an exact price or formula” for low-cost service plans under the BEAD initiative. “Your agency required Virginia to have a preset price as a condition to be funded,” Moran said,  “I keep hearing this from other states, too.”

During the hearing centered on Commerce’s fiscal year 2025 budget request, the center of conversation was the provision within BEAD that requires participating internet service providers to offer affordable service options for low-income households.

Raimondo defended the department’s actions by emphasizing Congress gave Commerce the dual mandate to connect every American to affordable, high-speed internet – without engaging in rate regulation – under the Infrastructure Investment and Jobs Act.

“Look, this is a hard thing to do,” Raimondo said, but “we have to do both. It has to be to everyone and affordable.”

The NTIA  has guided states to either define a low-cost price point or develop a formula for setting such rates. Of the states with NTIA approval, most have gone with a $30 or $50 per month cap for low-cost plans.

Senator Deb Fischer, R-Nebraska, expressed skepticism regarding the statutory authority of the department to enforce low-cost provisions in BEAD, suggesting that Congress had prohibited such regulation. “I don’t believe Congress did that,” Fischer said of the low-cost mandate for BEAD in IIJA. 

In response Raimondo said: “The law is quite clear. I will testify to you today that we are not in the business of rate regulation.”

On the same day, NTIA Administrator Alan Davidson faced similar scrutiny from House Republicans during an oversight hearing. Davidson reinforced the department's stance, saying the statute of IIJA requires a low-cost option.

It is a condition to get a federal grant, and NTIA does not believe states are engaging in rate regulation, Davidson said. Participation in the program remains voluntary for service providers.

What’s in the FY2025 budget for Commerce?

The fiscal year 2025 budget request for the Commerce Department, in many ways, builds on the investments that the same senate committee made in 2024.

The budget requests $11.4 billion in discretionary funding and $4 billion in mandatory funding for fiscal year 2525, which is a 6 percent increase compared to the previous year. Concerns were voiced by senators about the risk of the budget surpassing its limits.

The FY25 budget proposes significant investments to enhance the United States' technological infrastructure, economic competitiveness, and security, including billions for the CHIPS and Sciences Act to boost semiconductor research, development, and production. It also allots $65 million to regulate and advance artificial intelligence, focusing on protecting the public from its societal risks.