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Will Federal Broadband Funds Just Go to Big Companies Again?

The bipartisan infrastructure bill appears to transform how the federal government subsidizes broadband infrastructure. But evidence suggests that big companies may not allow the status quo to change without a fight.

A pile of $100 bills.
For many, about $42 billion of new federal broadband funds represents hope that the digital divide in the United States can be significantly reduced.

For others, it appears to be the start of a war.

In a break from the past, the majority of new broadband infrastructure money won’t be distributed by the Federal Communications Commission (FCC), which tended to award grants to the biggest companies. This time, the National Telecommunications and Information Administration (NTIA) will distribute the funds through the states as part of a program called Broadband Equity, Access and Deployment (BEAD).

Peggy Schaffer, executive director of the ConnectMaine Authority, said BEAD shifts the broadband conversation toward the consumer and state economic development, which has caused “a lot of angst on part of the industry who have never worked with the states before, who have maintained a monopolistic view of their network and controlled their network.”

“This is the first time Congress has stopped and said, ‘You know, what we had been doing through the FCC and others — giving money to big companies who can get their stuff together and bid — is not working. It is time to have a new strategy,’” Schaffer remarked.

The new strategy has made companies work “hard to make sure this money doesn’t accidentally create competition,” said Christopher Mitchell, director of the Community Broadband Networks Initiative with the Institute for Local Self-Reliance. For example, Michigan has adopted legislation that “imposes limits on governmental entities that are far more rigid than what is laid out” in the bipartisan infrastructure bill, according to an analysis published by Community Networks. Although final NTIA rules might override such a restriction, Mitchell pointed out that similar bills have been considered in Illinois and New York, thanks in part to the influence of big companies.

“I have to believe it’s being considered in the 47 other states,” Mitchell said.

Mitchell explained that big broadband companies can drag out legal fights to exhaust their opponents. He’s observed these types of battles in a number of states.

“Because there are no good data sources on where good broadband exists, we see cities and towns develop a broadband application for areas that don’t have existing service, and the companies will challenge that for the majority of the census blocks ... When the dust settles, it turns out most of the challenges were bogus. But they [governments] spent a lot of time and money in that fight, and that just makes it harder to make better networks,” Mitchell explained.

Schaffer said Maine wants “every tool on the table,” and municipal ownership is just another tool. Maine is also one of the few states that doesn’t have a challenge process where companies can delay local broadband projects.

For states that have the challenge process, Schaffer offered commiseration, as state broadband offices tend to have very few staff.

“I actually pity them ... What that means is you put out an application, and people come in with their plans, and then you have to put out their plans, then the existing providers come in and say, ‘Wait, I serve that area,’ and that leaves the state often in a place where they’re playing the ‘he said, she said’ thing,” Schaffer said.

Some states have taken steps to build strong partnerships with their local Internet service providers (ISPs) in anticipation of future funding opportunities like BEAD. Matt Schmit, chair of the Illinois Broadband Advisory Council, said he expects both large and small ISPs “to get into the game” for funds. In particular, he emphasized how local companies have proactively come to the state to help communities in need through the Connect Illinois grant program.

“Approximately 90 percent of [Connect Illinois] grant dollars in round one and two went to local broadband providers, and that’s because of their interest in partnering with the state and our interest in the programming,” Schmit said.

As for how the situation with the BEAD dollars might play out, Mitchell said Congress makes it clear in the bipartisan infrastructure bill that governments shouldn’t be excluded from applying for BEAD money. Mitchell is curious to see what NTIA will say about this subject when it announces rules for the program, as the rules can influence how much actual competition occurs in the broadband industry.

If NTIA ends up allowing states to ignore Congress when it comes to the legitimacy of local government applicants, does that mean states can ignore other stipulations, such as speed requirements?

“If they follow what Congress requires, they will say states can’t prohibit cities from taking this money … we’ll see if NTIA blinks or not,” Mitchell said.

Schaffer shared a strictly pragmatic view when it comes to BEAD applications. As much as anyone may or may not like the new status quo with federal broadband dollars, it’s up to each organization to adapt.

She added that she understands why big companies are feeling a pinch of danger.

“[It‘s] a very different conversation than the one they’ve had before, and they’re nervous about it,” Schaffer said. “I get it. But it doesn’t mean that they can’t play in this field. They just have to abide by the new rules, and the new rules benefit customers and not necessarily monopolies.”

Editor's Note: A sentence about Michigan's legislation has been updated for maximum clarity.
Jed Pressgrove has been a writer and editor for about 15 years. He received a bachelor’s degree in journalism and a master’s degree in sociology from Mississippi State University.