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Sean Gonsalves: Illinois and Possibly New York Are Poised to Fumble Federal Broadband Funds

Some state laws, as written, may run counter to IIJA language and constrain the use of federal funds.

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The author of this Expert Opinion is Sean Gonsalves, senior reporter, editor and researcher for the Institute for Local Self Reliance’s Community Broadband Network Initiative

Now that the fight over federal funding to expand broadband access has been largely settled with the passage of the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, states and local communities are preparing to put those funds to work.

The President Joe Biden administration had initially hoped to tip the scales in favor of building publicly-owned broadband networks as the best way to boost local (more affordable) Internet choice, and inject competition into a market dominated by monopoly incumbents. And while the Treasury rules on how ARPA money can be spent does give states and local governments the ability to do just that, the rules for how the IIJA’s Broadband Equity, Access, and Deployment program can be spent have yet to be finalized by the National Telecommunications and Information Administration, the agency in charge of allocating those funds to the states.

Predictably, the big monopoly incumbents are focusing their lobbying efforts on state lawmakers as states funnel those federal funds into state broadband grant programs. In some states, Big Telco is getting the desired result: the shunning of publicly-owned network proposals to shield monopoly providers from competition. Of course, we expected some states – especially those with preemption laws that either erect barriers to municipal broadband or outright ban such networks – to shovel most of their federal broadband funds to the big incumbents, even though they have a long track record of over-promising and under-delivering.

But while we might expect Florida and Texas to favor the private sector and stealthily move to shut out projects that are publicly-owned, we’re surprised that the first place it’s happening is actually Illinois and New York.

Illinois lawmakers thumb nose at federal law

In January, Illinois Democratic State Senator Patrick Joyce introduced legislation in the Illinois general assembly known as the Illinois Broadband Deployment, Equity, Access, and Affordability Act of 2022 (SB 3683).

As recently detailed by Kevin Taglang, executive editor at the Benton Institute for Broadband and Society, the bill is “rumored to be on a fast track to approval and attempts to establish the exclusive processes the state will use to distribute grant funds Illinois receives from the National Telecommunications and Information Administration through the Infrastructure Investment and Jobs Act. Although SB 3683 includes some of the same findings that Congress included in the Infrastructure Investment and Jobs Act, State Senator Joyce proposes constraints on the use of federal funds that fly in the face of the clear language of federal law.”

The Illinois’ Broadband Advisory Council is dominated by Big Telco with council members representing Frontier, Verizon, Metro Communications, Comcast, and AT&T.

So it shouldn’t come as a surprise that, according to the bill summary, the state’s Department of Commerce and Economic Opportunity would be tasked with implementing a statewide broadband grant program that proposes the state “shall use money from the grant program only for the exclusive purpose of awarding grants to applicants for projects that are limited to the construction and deployment of broadband service into unserved areas” and that the state “shall not award grant money to a governmental entity or educational institution.”

That language alone validates Taglang’s assessment that this bill is a recipe for “How a State Can Blow a Once-in-a-Generation Investment to Close the Digital Divide.”

While the IIJA doesn’t have a preference for publicly owned and cooperative projects (as the Biden Administration initially wanted), it does explicitly say that states cannot exclude cooperatives, nonprofit organizations, public utilities, or local governments from being eligible as grant recipients.

For that reason alone, as Taglang notes with blunt concision:

“If Illinois adopts this law, it risks losing access to over one billion dollars of federal support for broadband deployment.”

The IIJA does say that the money from the NTIA’s BEAD program must first be used to deploy networks in “unserved” areas (areas that do not have access to broadband with minimum download and upload speeds of 25/3 Megabits per second). However, after those areas have been addressed, current statute says that the money can, and should be, then used to deploy networks in “underserved” areas (areas that do not have access to 100/20 Mbps connections).

The federal infrastructure bill also says the money can be specifically used to build-out to multi-dwelling units where Internet service affordability is an issue and to community anchor institutions such as educational institutions, which the proposed Illinois legislation would expressly forbid.

It strains credulity to think that State Sen. Joyce and the 14 other state lawmakers who have signed on as co-sponsors do not know that provisions of their bill run counter to the clear language in the IIJA. (To understand how NTIA can navigate this challenge, don’t miss our interview with Nancy Werner, general counsel of NATOA.)

What these state lawmakers are likely not telling their constituents is that if their bill passes, the state will jeopardize hundreds of millions in federal funds to improve broadband access and leave them at the mercy of monopoly providers that have failed to deliver universally reliable (and broadly affordable) high-speed Internet service.

You can read Taglang’s entire analysis here in which he explores the various other ways SB 3683 violates both the spirit and letter of the IIJA.

New York’s municipal broadband-killing Trojan horse?

In the Empire State, legislation is making its way through the New York state legislature that, while not openly violating Congressional intent the way the legislation introduced in Illinois does, it does potentially limit the viability of municipal broadband projects.

In the state Senate’s Transportation, Economic Development, and Environmental Control portion of the budget (S. 8008 B), subsection 140, paragraph (e), it directs the New NY Broadband Grant Program referred to as ConnectALL to “identify and engage any and all private partners to undertake and manage the proposal, or demonstrate to the division’s satisfaction that a private or private-public partnership model is not viable, practical or suitable to meet the needs of the consumers covered by the proposal.”

Then in subsection 141, paragraph 7(a), it stipulates that “in awarding the grants, the division shall give preference to: (a) proposals that have a business plan based on a public-private partnership model or provide a mechanism for transition of services to a private entity in the future.”

We are not lawyers, but we have spoken to community broadband advocates in New York who see these bits of legalese as a Trojan horse that would make it difficult to fund municipal broadband proposals with these unnecessary obstacles in place.

Now, in fairness to the New York state senators working on this, there is language in the bill that explicitly states that the ConnectALL program is authorized to use broadband grant funds “to solicit and receive proposals from municipalities, state and local authorities,” and other public entities for “open-access deployment and/or increasing adoption of broadband services, and to issue grants for planning and implementation of such proposals.”

So it may be that harried lawmakers and their staff do not understand the implications of those particular provisions. However, considering the outsized influence that Charter and Verizon has historically held over state lawmakers in New York, the subsections referred to above should be considered a red flag.

In our view, it is better to err on the side of clarity, and conform with both the letter and spirit of NTIA’s rules. If Charter or Verizon afterwards want to spend the wealth they’ve extracted from communities suing the state for supporting a municipal broadband project designed to solve local connectivity problems, they are welcome to do so.

It’s also worth noting the flawed premise of the bill’s language in those subsections, which is that privately-owned networks are the same as publicly-owned networks. That’s demonstrably false.

Take Chattanooga’s municipal utility EPB Fiber, for example. Because they successfully built a citywide fiber network that has kept those investment dollars in Chattanooga, the city was able to establish HCS EdConnect, which is a program that provides a decade worth of 300 Mbps symmetrical fiber-to-the-home connectivity to over 15,000 low-income students (8,500 households) in the city’s school district for free. This is in addition to the $2.7 billion return on investment already identified by an academic study. Chattanooga’s EPB Fiber uses the same gear and vendors that many of the big monopolies do.

The reason for the difference in outcome is simple: large monopoly and local publicly-owned Internet Service Providers have different incentives. The monopoly providers are looking to extract wealth from communities. Publicly-owned networks are more like roads or water and sewer systems with no demand that the enterprise turn a profit. In the community broadband approach, broadband is seen as a utility with far-reaching economic and social multiplier effects, not a mere consumer product to be sold for the benefit of company shareholders.

Keep an eye on state legislatures

If Democrats are pushing these bills in Illinois and New York, we’ll be surprised if no other states suddenly emerge with language to slow investment in new networks designed to meet low-income family needs or solve other pressing challenges in areas where the big monopoly providers prefer to continue being the only game in town.

Editor’s Note: This piece was authored by Sean Gonsalves, a senior reporter, editor and researcher for the Institute for Local Self Reliance’s Community Broadband Network Initiative. Originally appearing at MuniNetworks.org on March 24, 2022, the piece is republished with permission.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Sean Gonsalves is a longtime former reporter, columnist, and news editor with the Cape Cod Times. He is also a former nationally syndicated columnist in 22 newspapers, including the Oakland Tribune, Kansas City Star and Seattle Post-Intelligencer. His work has also appeared in the Boston Globe, USA Today, the Washington Post and the International Herald-Tribune. An award-winning newspaper reporter and columnist, Sean also has extensive experience in both television and radio. Sean has made appearances on WGBH’s “Greater Boston” TV show with Emily Rooney and was a frequent guest on New England Cable News (NECN), commentating on a variety of Cape Cod tourist attractions. He left print journalism in 2014 to work as a senior communication consultant for Regan Communications and Pierce-Cote, advising a variety of business, non-profit and government agency clients on communication strategy. In October 2020, Sean joined the Institute for Local Self Reliance staff as a senior reporter, editor and researcher for ILSR’s Community Broadband Network Initiative.

Broadband's Impact

Lindsay Mark Lewis: As Inflation Spiked, Broadband is ‘The Dog That Didn’t Bark’

Why have internet prices remained constant while demand surges? It all boils down to investment.

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The author of this Expert Opinion is Lindsay Mark Lewis, executive director of the Progressive Policy Institute.

There are many lessons to be learned from last year’s midterms, but Democrats should not take the results as some broad endorsement of the economic status quo. Midterm voters identified inflation as the most important issue driving their votes. And while the latest Labor Department data shows the producer price index decreasing by 0.1% in February, prices remain 4.6% higher than a year ago, which means lawmakers still have work to do to bring inflation under control.

And as they search for ideas, they may want to examine the dog that didn’t bark – in particular, the one sector of the economy that has been an interesting counternarrative to the otherwise troubling inflation story.

Home internet service is one of the few major living costs that isn’t skyrocketing. In fact, the most popular broadband speed tier one year ago actually costs 15% less today, on average.

This success story – and the bipartisan policies behind it – offers important lessons.

Remarkably, broadband prices are declining even as demand surges. The pandemic made home internet service more essential than ever for education, job opportunities and health care – all driving internet traffic 25% to 50% above pre-pandemic levels.

So why have internet prices remained constant – even declined by some measures – while demand surges? In short, it all boils down to investment.

When the pandemic cratered economic activity in the spring of 2020, executives in many industries – from lumber to oil refineries to computer chips – made the snap decision to pull back on long-term investments in new factories and manufacturing capacity. When the economy roared back, those industries couldn’t meet demand, sending prices soaring.

In the broadband industry, conversely, providers responded by investing $86 billion into their network infrastructure in 2021 – the biggest one-year total in nearly 20 years. These investments are fueling faster speeds – fixed broadband speeds are up 35% nationwide in the past 12 months – while making sure networks have the capacity to handle growing traffic needs.

This teaches us three things.

First, we should observe a Hippocratic oath and “do no harm.” America’s broadband system has thrived under a decades long bipartisan consensus for light-touch, pro-investment policies. Nearly $2 trillion in private capital built the networks that now deliver American consumers higher speeds at lower per-megabit prices than consumers enjoy in Europe, despite having to cover greater distances and more difficult terrain.

This further tells us that it’s precisely the wrong time to abandon this successful model in favor of price controls and utility-style regulation, as some House and Senate progressives have proposed. Even Democratic policy experts acknowledge that approach would be toxic for private investment.

Second, policymakers need to recognize that broadband isn’t immune from the supply chain crunches plaguing so many other sectors of the economy. Broadband buildouts are already getting delayed by shortages in fiber cable, network hardware and skilled labor. And that’s before $42 billion in federal infrastructure funding goes out the door starting next year, which will only intensify demand for these scarce supplies.

That means rural buildout projects funded by federal dollars are likely to see inflationary pressures – and take longer to complete – than Congress expected when it passed the infrastructure bill in 2021. That will put pressure on state broadband offices to be even more diligent about waste, and to emphasize reliable supply chains with experienced network builders. Bidders will also need the flexibility to buy fiber from wherever they can manage to source it, even if that means relaxing the program’s strict “Buy American” rules. This requires a regulator ability to do smart tweaking of rules to expedite buildouts cost-effectively.

Third, we need to help more financially struggling households get connected. Thanks to President Joe Biden’s Affordable Connectivity Program – and an agreement with 20 broadband companies – 48 million households can now get home internet service for free.

But more than a year later, just over a third of eligible households have signed up. Investing in enrollment campaigns and digital literacy training programs is the fastest way we can crank up the dial on enrollment. Relatively small investments here could pay huge dividends in bringing millions more Americans into the digital economy.

Even with these remaining challenges, the overall contours of American broadband policy – encouraging investment, competition and affordability – are working well. And as the saying goes: “If it ain’t broke, don’t fix it.” In an inflation-roiled economy that defies easy answers, we should learn from – not mess with – this all-too-rare success story.

Lindsay Mark Lewis is executive director of the Progressive Policy Institute. Contact him at llewis@ppionline.org. This piece was originally published in the Richmond Times on March 24, 2023, and is reprinted with permission.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

David Strauss: How Will State Broadband Offices Score BEAD Applications?

Fiber, coax and fixed wireless network plans dependent on BEAD funding demand scrutiny.

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The author of this Expert Opinion is David Strauss, Principal and Co-Founder of Broadband Success Partners.

Given the vital ways in which access to broadband enables America, adequate Internet for all is a necessary and overdue undertaking.  To help close the digital divide, the Infrastructure Investment and Jobs Act includes $42.5 billion in Broadband Equity, Access and Deployment funding for the last mile. Add to this the estimated level of subgrantee matching funds and the total last mile figure rises to $64 billon, according to the BEAD Funding Allocation and Project Award Framework from ACA Connects and Cartesian.

The federal funds will be disbursed by the Department of Commerce’s National Telecommunications and Information Administration to the State Broadband Offices who will then award subgrants to service providers. On June 30, each state will find out their allocation amount. By 2024, the states will establish a competitive subgrantee process to start selecting applicants and distributing funds.

A critical element of the selection process is the methodology for scoring the technical merits of each subgrantee and their proposal. Specific assessment criteria to be used by each state are not yet set. However, the subgrantee’s network must be built to meet these key performance and technical requirements:

  • Speeds of at least 100 Megabits per second (Mbps) download and 20 Mbps upload
  • Latency low enough for “reasonably foreseeable, real-time interactive applications”
  • No more than 48 hours of outage a year
  • Regular conduit access points for fiber projects
  • Begin providing service within four years of subgrant date

What level of scrutiny will each state apply in evaluating the technical merits of the applicants and their plans?

Based on our conversations with a number of state broadband leaders, the answers could be as varied as the number of states. For example, some states intend to rigorously judge each applicant’s technical capability, network design and project readiness. In contrast, another state believes that a deep upfront assessment is not needed because the service provider will not receive funds until certain operational milestones are met. Upon completion, an audit of the network’s performance could be implemented.

We, at Broadband Success Partners, are a bit biased about the level of technical scrutiny we think the states should apply. Having assessed over 50 operating and planned networks for private sector clients, we appreciate the importance of a thorough technical assessment. Our network analyses, management interviews and physical inspections have yielded a valuable number of dos and don’ts. By category, below are some of the critical issues we’ve identified.

Network Planning & Design

  • Inadequate architecture, lacking needed redundancy
  • Insufficient network as-built diagrams and documentation
  • Limited available fiber with many segments lacking spares

Network Construction

  • Unprotected, single leased circuit connecting cities to network backbone
  • Limited daisy-chained bandwidth paths on backhaul network
  • Lack of aerial slack storage, increasing repair time and complexity

Network Management & Performance

  • Significant optical ground wire plant, increasing potential maintenance cost
  • Internet circuit nearing capacity
  • Insufficient IPv4 address inventory for planned growth

Equipment

  • Obsolete passive optical network equipment
  • Risky use of indoor optical network terminals in outdoor enclosures
  • Sloppy, untraceable wiring

Technical Service / Network Operations Center

  • Technical staff too lean
  • High labor rate for fiber placement
  • Insufficient NOC functionality

While the problems we uncover do not always raise to the level of a red flag, it happens often enough to justify this exercise. Our clients who invest their own capital in these networks certainly think so. The same should hold true for networks funded with taxpayer money. Fiber, coax and fixed wireless network plans dependent on BEAD funding demand serious scrutiny.

David Strauss is a Principal and Co-founder of Broadband Success Partners, the leading broadband consulting firm focused exclusively on network evaluation and technical due diligence. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Raul Katz: Can Investments in Robust Broadband Help States Limit the Downside of Recession?

If managed effectively, the BEAD program could play a key role in allowing our economy to weather the storms ahead.

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The author of this Expert Opinion is Raul Katz, President at Telecom Advisory Services LLC.

The United States economy is still undergoing persistent inflation rates, high interest rates, and stock market volatility. According to a Wall Street Journal survey conducted in January, economists put the probability of a recession at 61 percent.

Simultaneously, we are also on the eve of the largest federal broadband funding distribution in American history. All 50 U.S. states have begun formulating plans to help connect their communities through the $42.5 billion Broadband Equity, Access and Deployment Program, and its funds are expected to be distributed within months. That, coupled with the Affordable Connectivity Program  and other initiatives designed to subsidize broadband access, will play a critical role in connecting every American to the internet. This once-in-a-generation investment in building more robust and resilient broadband networks can help states weather the coming economic storm. To learn how, we simply need to look back to March 2020.

When the COVID-19 pandemic initially cratered the economy, states that had a higher rate of fixed broadband penetration were more insulated from its disruptive effects. Simply put, better-connected states had more resilient economies according to a study I authored for Network:On. In a separate study, by using an economic growth model that accounts for the role fixed broadband plays in mitigating the societal losses resulting from the pandemic, I also found that more connected societies exhibit higher economic resiliency during a pandemic-induced disruption.

In the study conducted for Network:On, we documented that U.S. states with higher broadband adoption rates were able to counteract a larger portion of the economic losses caused by the pandemic than states with lower broadband adoption rates. The states most adversely affected by the pandemic, such as Arkansas and Mississippi, were those exhibiting lower broadband penetration rates. Conversely, states with higher broadband penetration, such as Delaware and New Jersey, were able to mitigate a large portion of losses, as connectivity levels allowed for important parts of the economy to continue functioning during lockdowns.

Nationally, if the entire U.S. had penetration figures equal to those of the more connected states during the pandemic, the GDP would have contracted only one percent— a much softer recession than the actual 2.2 percent. These findings show that investments in closing the digital divide and ensuring everyone can access a high-speed Internet connection are critical to building economic resilience.

Today, wide penetration rate disparities exist between states — such as Delaware’s rate of 91.4 percent compared to Arkansas’ rate of 39.7 percent. Because of this, public authorities should focus on creating policy frameworks that allow operators to spur infrastructure deployments and find the optimal technological mixes to deliver the highest performance to users.

Broadband access matters. It doesn’t exist in a vacuum and is crucial to an area’s economic health. As state broadband offices around the country prepare to deploy BEAD funding, they must remember that broadband access and adoption are imperative to building economic resiliency.

Beyond my own study, a review of the research examining the economic impact of digital technologies over the past two decades confirms that telecommunications and broadband positively impact economic growth, employment, and productivity. This reinforces how consequential these government investments in broadband infrastructure and adoption are to protecting America’s economic health.

The BEAD program still has its challenges, but if managed effectively, it could play a key role in allowing our economy to weather the storms ahead.

Dr. Raul Katz is the president at Telecom Advisory Services LLC and author of the study: The Role of Robust Broadband Infrastructure in Building Economic Resiliency During the COVID-19 Pandemic. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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