Patrick Halley: States Must Be Smart When Defining ‘Extremely High-Cost Locations’

States have a lot to think about as they determine how to prioritize investing federal broadband dollars. Efficiently connecting every unserved and underserved home and business will take priority, but other considerations, like workforce development, advancing 5G, service to libraries and other anchor institutions, and increasing broadband adoption, will also be critical.

Even with the largest federal investment in broadband expansion ever, hard choices abound on how states will spend their federal broadband dollars to close broadband access and equity gaps.

Every state that receives federal funding via the Infrastructure Act’s Broadband Equity, Access, and Deployment Program should have the flexibility to design and implement a plan that meets its policy prerogatives – just as Congress envisioned. However, there is a sleeper issue not receiving much attention that could derail a state’s ability to spend its BEAD allocation effectively.

It’s called the “Extremely High Cost Per Location Threshold,” and if states are not careful, this wonky issue could hamstring their ability to maximize the impact of federal broadband funding.

You won’t find the term in the statute, but the BEAD Notice of Funding Opportunity requires states to propose, and NTIA to approve, an extremely high-cost threshold – a minimum cost-per-location-passed below which states cannot consider a non-fiber alternative, regardless of the cost differential.

Why does the ‘Extremely High-Cost Per Location Threshold’ matter?

Some have called for this threshold to be set as high as possible so that fiber is virtually guaranteed to win every time. This is a mistake. If a state sets the threshold too high, it could be forced to allocate all of its funds for a limited number of fiber deployments, likely to the exclusion of alternative high-speed technologies and other state priorities. That doesn’t make sense for several reasons.

First, let’s recognize that choosing a non-fiber alternative does not mean providing a second-class service. Quite the contrary. Fixed wireless to the home is a reliable, high-speed, affordable alternative to fiber, and it is much faster to deploy. In fact, fixed wireless broadband is the fastest growing broadband service to the home in the marketplace today, with multiple providers delivering blazing fast service to millions of Americans.

In the third quarter of 2022, the top two fixed wireless providers alone added over 900,000 new subscribers, compared to a net loss of nearly 100,000 subscribers for the top cable and wireline ISPs. Another carrier recently announced it is doubling its FWA subscriber base every 18 months. Nearly ten million homes are expected to be using fixed wireless at the end of 2022. With consumers flocking towards fixed wireless, why create an unnecessary barrier to further deployment of this growing technology?

Second, rural fixed wireless offers an important additional benefit – mobile 5G. The right mix of spectrum and technology often enables the same radios and antennas being deployed for fixed wireless to also expand access to mobile broadband service in remote areas.

Third, states are faced with the challenge of designing a bidding process that results in reasonable subsidy levels to sufficiently stretch limited federal funds. Experts are already starting to do the math, and there will be significant variation in terms of which states receive enough funding to connect the unserved and still have additional dollars to address other issues. At the initial program design stage, states will presumably have no way of accurately predicting provider deployment and operating costs, and continued inflation and potential supply chain shortages make determining reasonable per-project subsidy amounts difficult. Why set a threshold so high that it precludes even the consideration of lower-cost alternatives?

Fourth, some states are big and topographically diverse, resulting in systematic broadband deployment cost differences. A high threshold in the eastern part of a state might ensure that all homes there get fiber, but in the process consume the vast majority of BEAD funds, leaving fewer options for the entire western region, even if the state’s goal is to ensure a regionally diverse mix of projects. Thus, it would make sense to set the threshold relatively lower, not higher.

Finally, in addition to physical infrastructure buildout, BEAD dollars can be used for digital literacy and equity programs, workforce development, telehealth facilities, and even device subsidies. Set the threshold too high, and the state may not have enough money for important non-deployment priorities. In fact, some states are likely to receive BEAD allocations large enough relative to their unserved location needs that they could technically “afford” to pay shockingly high amounts to reach their very last unserved locations with fiber. Is that the best use of funds?

How might this play out?

A state could set the extremely high-cost threshold so high, let’s say $50,000 per location, that it would effectively mean all of the state’s money goes to fiber projects. Don’t believe me? Federal funds have already been approved to fund fiber projects at over $200,000 per location! For example, a fiber builder could bid $4.9 million to serve 100 unserved locations at $49,000 per location. In that same area, a competing provider could propose a fixed wireless network to serve the same 100 unserved locations for $500,000 at $5,000 per location. In that case, the state would be required to select the fiber proposal, even though it is nearly 10 times more expensive, regardless of the network’s speed/capacity, deployment schedule, or ability to enable mobile service in the same area.

Setting the threshold sufficiently low will give a state maximum flexibility to decide how to spend its money. For one state, that priority might be as much fiber as possible. For another state, it could be getting everyone served as quickly as possible or to lower deployment costs to ensure significant funds remain available for critical non-deployment uses.

Bottom-line conclusion

This is not a battle between technologies. Fiber and fixed wireless are both incredible technologies that will make sense for a state to deploy in different areas. But states should not unnecessarily tie their own hands by setting an overly high threshold. Instead, states should allow themselves the opportunity to choose the right mix of technology to meet their deployment and non-deployment policy objectives.

Patrick Halley is the President and CEO of the Wireless Infrastructure Association, which represents more than 140 companies that develop, build, own and operate the nation’s wireless infrastructure and is the leading authority on all things wireless. Halley joined WIA in August of 2022, and previously was Senior Vice President of Policy & Advocacy and General Counsel at US Telecom – The Broadband Association. He also served at the Federal Communications Commission as a legal advisor to the FCC Chairman and two Bureau Chiefs, as Associate Chief of the Wireline Competition Bureau, and Acting Director of the Commission’s Office of Legislative Affairs. This Expert Opinion is exclusive to Broadband Breakfast.

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