10 Things Communities Seeking B.E.A.D. Grants Should Know
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- Congressional materials
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- 2023 12 05 A31443 D263208 Business Forward 10 Things Communities Seeking B E A D Grant
- Date
- 2023-12-05
- Case
- 2023 12 05 A31443 D263208 Business Forward 10 Things Communities Seeking B E A D Grant
Summary
A Business Forward presentation dated Q2 2023, titled 10 Things Communities Seeking B.E.A.D. Grants Should Know, subtitled best practices, known risks and long-term costs. It argues that federal broadband funds are small relative to private spending and describes technology, market, grant and start-up risks facing government-owned networks (GONs). The slides cite a University of Pennsylvania analysis of 15 GONs, past federal investigations of broadband grant spending, and a case study of a $29M middle mile loop proposed in Cumberland and Salem (NJ) counties. The final points contrast adoption programs in Boston with a Detroit GON plan and argue that funding adoption support reduces failure risk. A numbered reference list closes the document.
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Cite this document
“2023 12 05 A31443 D263208 Business Forward 10 Things Communities Seeking B E A D Grant.”
Original at app.leg.wa.gov, dated 2023-12-05. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-12-05-2023-12-05-a31443-d263208-business-forward-10-things-communities-seeking-b-e-a-d-grant/
, SHA-256 2e01b6983d7f550f7560977c0db1ef8fa7d566c3d4475eff4cc5d6deb56d5443.Full text
Q2 2023
10 THINGS COMMUNITIES SEEKING
B.E.A.D. GRANTS SHOULD KNOW
BEST PRACTICES, KNOWN RISKS, AND LONG-TERM COSTS
#1: FEDERAL BROADBAND SPENDING IS MASSIVE, UNLESS YOU COMPARE IT TO THE COST OF
BUILDING, MAINTAINING, AND IMPROVING BROADBAND NETWORKS
CURRENT INVESTMENT VS. “ONCE IN A GENERATION” FUNDS1 QUESTION:
$120B How could we allow
ourselves to spend
$100B billions on broadband
and not reform
$80B the industry?
$60B
ANSWER:
$40B
$77B = just 12% of total
$20B
broadband spending over
those seven years – and
less than 9% of what will
0 be spent this decade.
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Yes, it’s an historic
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investment, but we
BROADBAND PROVIDERS DIGITAL EQUITY GRANT depend a lot more on
PROGRAM (NTIA)
BROADBAND, EQUITY, ACCESS, AND DEPLOYMENT
what private companies
ARPA CORONAVIRUS CAPITAL PROJECTS
PROGRAM (NTIA) FUND (TREASURY) spend than what Congress
AFFORDABLE CONNECTIVITY PROGRAM (FCC) EMERGENCY CONNECTIVITY authorized.
PROGRAM (FCC)
2
#2: RISKS FACING BROADBAND OPERATORS HAVE ALWAYS BEEN SUBSTANTIAL
TECHNOLOGY RISK MARKET RISK GRANT RISK WISHFUL THINKING
Investing in today’s
technology (fiber) with
delivery in 4-10 years.
Streaming services, like
Netflix, are reducing
demand for some cable
Broadband funds spread
across Treasury, FCC,
Agriculture, and
9
services, hurting revenue Commerce Departments = OUT OF
Current providers testing
applications that make
and reducing margins. multiple streams
of funds, beginning in 10
fiber + coaxial 8x faster Last year, streaming volume different years, with GONS ARE
than today’s fiber. increased 22.6%, while different deadlines, and
LOSING MONEY
cable usage dropped 2% in conflicting rules of
Microsoft, Amazon, the same period.3 engagement. the result of
SpaceX, Qualcomm and construction delays,
others investing in “...cable providers could Federal funds being unrealistic cost and
spectrum, satellites, and be at flat growth next year distributed in-state by revenue assumptions,
5G technologies.2 and potentially negative small, start-up-like teams. and recurring capital
thereafter...”4 expenditures.5
- KANNAN VENKATESH, BARCLAYS
3
#3: THAT’S WHY MOST GONS STRUGGLE, AND MANY FAIL
FEW GONS ACHIEVE MARKET SHARE
CONSULTANTS PROMISE6 OF 15 GONS
THAT SHARE COMPLETE FINANCIAL DATA AND WERE FUNDED IN OR
BEFORE 2011,7
2
GON MARKET SHARE (2018)
80%
80%
70%
Cedar Falls, IA
10 14
70% WILL BREAK EVEN WILL NEVER
REQUIRED ADDITIONAL
BY THE TIME THE GOVERNMENT FUNDING
60% BREAK EVEN
60% BONDS TO KEEP OPERATIONS
BECOME DUE RUNNING
50%
50%
40%
40%
30%
30%
20%
Salisbury, NC 11 6 3
20% REQUIRED CONTRIBUTED TO SOLD THEIR
INTERFUND LOANS “SIGNIFICANT OPERATIONS AT
10%
FROM OTHER DOWNGRADES” IN SIGNIFICANT
MUNICIPAL UNITS THE MUNICIPALI- LOSSES
0%
10%
Salisbury, NC TY’S BOND RATING
0%
SOURCE: UPENN CASH FLOW ANALYSIS of 15 GONs (2010–2019)
4
#4: NEW RISKS ARE EMERGING, WHICH COULD MAKE GON FAILURES MORE EXPENSIVE
INFLATION START-UP RISK CLIMATE CHANGE
On top of rising labor, energy, and The “non-traditional” partners Severe weather – particularly
parts costs, historic broadband officials favor are undercapitalized, flooding – is damaging fiber
spending creates fiber shortages, less experienced, and lack networks, hurting margins.
price spikes. other sources of revenue to
survive setbacks.
“ Inflation is wreaking
In 2020, the FCC awarded LTD, a
havoc… making
company with fewer than 100
financially tough Risk rises with
employees, $1.3B in grants to build
projects even tougher “microtrenched” lines just
“
fiber loops across 15 states.
2’ below ground level.
- FIERCE TELECOM8
When LTD defaulted across 7 of those
states, FCC canceled the rest.
18 months after FCC awarded States, counties on the hook
$9B in RDOF grants, providers for GON repairs.
receiving 1 out of 3 grants have 528,000 households that should
already defaulted – putting have been served by LTD go to the back
families in those tracks at the of the line, paying the price for FCC’s
back of the line. risky bet.9
5
#5: GONS FAIL BADLY
FEW GONS ACHIEVE MEANWHILE, WHEN COSTS > REVENUE, INSTEAD, GONS TEND TO
MARKET SHARE CONSTRUCTION AND THE FAIR SOLUTION IS TO RAISE TAXES OR USE FUNDS
CONSULTANTS PROMISE OPERATING RAISE SUBSCRIPTION MEANT FOR SCHOOLS,
COSTS KEEP RISING PRICES… BUT THAT DRIVES FIRST RESPONDERS,
GON MARKET SHARE (2018)10 SUBSCRIBERS TO QUIT, WHICH AND OTHER PRIORITIES
MAKES THE DEFICIT WORSE
100% NTPs face 18-month
delays for fiber orders.
Reinforcing cycle of MORE DEBT (NEW BONDS)
Small towns and counties higher prices, causing
are competing for a finite subscribers to leave, APPLYING STATE GRANTS
75% requiring higher prices, TO GON DEFICITS
number of engineers and
other skilled workers. causing subscribers
to leave. FEWER TEACHERS, COPS,
FIREFIGHTERS
50%
25%
0%
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#6: NON-TRADITIONAL PARTNERS DO NOT ELIMINATE “FOR-PROFIT” RISK; MANY COMPOUND IT
“ 1.
NTPs ARE UNDERCAPITALIZED
AND LESS EXPERIENCED
Our approach prioritizes support
2.
for broadband networks owned,
operated by, or affiliated with local
governments, non-profits, and
co-operatives — providers with less
pressure to turn profits and with THE CONSULTING, ENGINEERING,
a commitment to serving entire AND OPERATING COMPANIES NTPs
HIRE ARE FOR-PROFITS
communities.
“ 3.
- THE BIDEN-HARRIS ADMINISTRATON, INEXPERIENCE + GREED =
MARCH 202111
WASTE, FRAUD, AND ABUSE
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#7: “NON-TRADITIONAL PARTNER” RECORD ON WASTE, FRAUD, & ABUSE SHOULD CONCERN YOU
6 INVESTIGATIONS OF FEDERAL BROADBAND SPENDING FAKE INVOICES, INFLATED EXPENSES
(2000-2017) FOUND GRANTEES IGNORED THE UNCONNECTED
AREAS THEY WERE SUPPOSED TO HELP AND “OVERBUILT”
AFFLUENT SUBURBS.
$101M GRANT
2004 INVESTIGATION: for rural Kansas spent on an
entirely different city
58%
OF FUNDS MISSPENT12
Austin, TX, hotel parties part of
2009 INVESTIGATION: $400K FRAUD
ONLY 4%
OF GRANTS WENT TO $12M FIBER LINE
UNSERVED COMMUNITIES13 in IL redirected from unserved areas
to contractors’ neighborhood
2014 INVESTIGATION:
43% $2.4M
OF LOANS (AND 53% OF LOAN VALUE) in doctored invoices by
SINCE 2002 IS IN DEFAULT OR RESCINDED14 grantee in WV and OH15
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#8: HOW “LAST MILE” SPENDING WORKS – AND WHY “MIDDLE MILE” SPENDING IS RISKY
IN REMOTE OR RURAL AREAS, CUMBERLAND AND INSTEAD OF PROVIDING LAST MILE CONNECTIONS
“LAST MILE” CONNECTIONS SALEM (NJ) COUNTIES FOR THOSE ~2000 HOMES, COUNTIES PROPOSE A NEW
TO HOMES CAN COST CASE STUDY $29M “MIDDLE MILE” LOOP THAT DUPLICATES MIDDLE
$10,000/EACH MILE LOOPS ALREADY SERVING CUMBERLAND AND
SALEM COUNTIES’ OTHER 77K HOUSEHOLDS
Two counties cover 79,000
Private companies households; ~2000 (2%)
can typically afford to remain unconnected. Local communities still have to pay for $10,000/household
cover about $2,500 of last mile connections.
that amount. They earn At $10K/household,
back their investment $20,000,000 = $15,000,000 Federal grants could cover $13M of the $29M loop, but taxpayers
in 5+ years.16 government + $5,000,000 pick up the rest – and taxpayers pay full cost of maintaining the
private companies. loop (assuming 5% of original cost, that’s $1.5M/year).
In other words, this is a
$7,500/house problem, WITH THE $16M COUNTIES WILL SPEND BUILDING
and each government A GON MIDDLE MILE, THEY COULD CONNECT THOSE ~2,000
dollar can attract 33 cents
in private investment.
$15M WITH $1M LEFT FOR DIGITAL LITERACY TRAINING,
AFFORDABLE LAPTOPS, CUSTOMER SUPPORT
GOVERNMENT
FUNDS
WORSE, COUNTIES ASSUME PRIVATE COMPANIES
WILL SHUT OFF THE LOOPS THEY HAVE THERE AND PAY THE
$5M COUNTIES TO USE THEIRS. BUT WHY?
PRIVATE
FUNDS
9
#9: ADOPTION IS A “PUZZLE” PROBLEM
LIKE A PUZZLE: TRUSTED, LOCAL ADVISORS REQUIRED – HOUSING AND FOOD INSECURITY
IF YOU MISS ONE PIECE, YOU FAIL PREFERABLY IN-PERSON ARE SOURCE AND SYMBOL
OF THE ADOPTION PROBLEM
FOR MANY, MAKING
BROADBAND FREE
BOSTON PAID 23 DIFFERENT
ISN’T ENOUGH
ORGANIZATIONS TO HELP GET PEOPLE
ONLINE, BASED ON THEIR AGE,
RACE, ETHNICITY, INCOME,
DIGITAL LITERACY, AND HOUSING17
ALLSTON BRIGHTON COMMUNITY DEVELOPMENT CORPORATION
BOSTON CENTER FOR INDEPENDENT LIVING 1 IN 5 DETROIT RENTERS
BOSTON HIGHER EDUCATION RESOURCE CENTER
FACES EVICTION
BOSTON PROJECT MINISTRIES
AFFORDABLE DEVICE CASTLE SQUARE TENANTS’ ORGANIZATION (CSTO)
CENTRAL BOSTON ELDER SERVICES
CENTER FOR COMMUNITY HEALTH EDUCATION RESEARCH AND SERVICE
DIGITAL LITERACY CODMAN SQUARE NEIGHBORHOOD DEVELOPMENT CORPORATION
EAST BOSTON COMMUNITY COUNCIL
RELEVANCE (VS. SMARTPHONE) ETHOS 1 IN 4 CAN’T PAY THEIR
FOUND IN TRANSLATION
HARVARD STREET NEIGHBORHOOD HEALTH CENTER
WATER BILLS
ONLINE SUPPORT MOTHERS FOR JUSTICE AND EQUALITY
NEIGHBORHOOD OF AFFORDABLE HOUSING
PRINCE HALL COMMUNITY CORPORATION
BROADBAND CONNECTION ST. MARK COMMUNITY EDUCATION PROGRAM
VICTORY PROGRAMS
X-CEL EDUCATION
1 IN 2 GO HUNGRY18
ZUMIX
10
#10: IN MARKETS WITH SUBSTANTIAL ADOPTION GAP, PUTTING MONEY TOWARDS FIBER
(INSTEAD OF ADOPTION) INCREASES FAILURE RISK
=
WHAT IS THE OVERLAP BETWEEN DOLLARS SPENT ON FIBER = TO COVER ITS COSTS, DETROIT’S
DETROIT’S 30% ADOPTION GAP AND DOLLARS NOT SPENT ON DIGITAL GON MUST ATTRACT 2 OUT OF 3
ITS HOUSING AND HUNGER PROBLEM? LITERACY TRAINING, AFFORDABLE HOUSEHOLDS. ANYTHING LESS, AND
LAPTOPS, AND ONLINE SUPPORT TAXPAYERS GET STUCK WITH THE BILL.
Detroit GON plan assumes it will serve
If 1 in 5 Detroit households are behind on 175K of city’s 270K households.
their rent/mortgage - and 1 in 4 can’t pay
HAVE ACCESS, their water bill - should we be surprised That’s about the number of households
NOT SIGNED UP when 1 in 3 choose not to subscribe to online. If half switch to the GON (very
broadband, even if the ACP makes it ambitious), Detroit needs another 88K
essentially free? households – currently unconnected – to
break even.
Successful broadband adoption
programs, like Boston’s, surround families In other words, to stay afloat, the GON
with affordable laptops, discounted must eliminate Detroit’s adoption gap
connections, digital literacy training, and without spending money on training and
customer support from multiple trusted support. If it signs up fewer, it must cover
community organizations - in person.19 the difference by raising prices or cutting
spending somewhere else.20
TROUBLE PAYING RENT,
DEALING WITH It’s expensive, but it works.
SPENDING MONEY ON FIBER – INSTEAD
HUNGER OF TRAINING AND SUPPORT – COULD
(1) LEAVE HUNDREDS OF THOUSANDS OF
DETROITERS UNSERVED; AND, (2) STICK
TAXPAYERS WITH TENS OF MILLIONS IN
COST THE GON CAN’T COVER.
11
REFERENCES
1. New Street Research. “Biden’s Choice: Infrastructure Investment or Lower Prices; Pick One.” May 2021. 17. ACA Connects and Cartesian. BEAD Program: A Framework to Allocate Funding for Broadband Availability
https://www.newstreetresearch.com/download-page/bidens-choice-infrastructure-investment-or-lower-pric- – State Broadband Report: Texas. February 2, 2023. https://acaconnects.org/index.php?checkfileaccess=/
es-pick-one/ wp-content/uploads/2023/02/Texas_BEAD_Funding_Cartesian_ACA_02_02_23_v2.0.pdf
2. Christopher Yoo, Jesse Lambert, and Timothy Pfenninger. University of Pennsylvania Carey Law School Legal 18. City of Boston. Boston Digital Equity Assessment. October 2, 2022. https://www.boston.gov/sites/default/files/
Scholarship Repository. “Municipal Fiber in the United States: A Financial Assessment.” January 15, 2022. file/2022/10/Boston-Digital%20Equity-Assessment-20221002.pdf
https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=3448&context=faculty_scholarship
19. For a closer look at the poverty in the city of Detroit, see: https://poverty.umich.edu/projects/detroit-survey/
3. Nielsen. “Streaming claims largest piece of TV viewing pie in July.” August 2022. https://www.nielsen.com/
20. Columbia Telecommunications Corporation. “Boston Digital Equity Assessment.” September 2022. https://
insights/2022/streaming-claims-largest-piece-of-tv-viewing-pie-in-july/
www.boston.gov/sites/default/files/file/2022/10/Boston-Digital%20Equity-Assessment-20221002.pdf
4. Emily Bary. MarketWatch. “Comcast, Charter stocks are downgraded as Barclays says companies are ‘likely
21. The city released a number of documents online, but subsequently removed them. The framework of the plan
past peak growth.’” August 1, 2022. https://www.marketwatch.com/story/comcast-charter-stocks-downgraded-
is still available at: https://detroitmi.gov/sites/detroitmi.localhost/files/2022-03/DETROIT%2C%20MI%20-%20
as-barclays-says-companies-are-likely-past-peak-growth-11659361451
DIGITAL%20ACCESS%20POLICY%20AND%20STRATEGIC%20INFRASTRUCTURE%20PLAN%20-%2003%20
5. Sherman, Alex. “Outgoing Charter CEO Tom Rutledge says in an exclusive CNBC interview that there’s ‘pain 01%202022%20%281%29.pdf
to come’ as linear TV gives way to streaming.” November 3, 2022. https://www.cnbc.com/2022/11/03/charter-
ceo-tom-rutlege-says-pain-to-come-as-tv-gives-way-to-streaming.html
6. Christopher Yoo, Jesse Lambert, and Timothy Pfenninger. University of Pennsylvania Carey Law School Legal
Scholarship Repository. “Municipal Fiber in the United States: A Financial Assessment.” January 15, 2022.
https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=3448&context=faculty_scholarship
7. Taxpayers Protection Alliance. “GON with the Wind: The Failed promises of Government Owned Networks
Across America.” May 2020. https://www.protectingtaxpayers.org/wp-content/uploads/Broadband-Re-
port-May-2020-1.pdf
8. Christopher Yoo, Jesse Lambert, and Timothy Pfenninger. University of Pennsylvania Carey Law School Legal
Scholarship Repository. “Municipal Fiber in the United States: A Financial Assessment.” January 15, 2022.
https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=3448&context=faculty_scholarship
9. Goovaerts, Diana. “ISPs: Inflation has doubled RDOF build costs.” October 24, 2022. https://www.fierce-
telecom.com/broadband/isps-inflation-has-doubled-rdof-build-costs
10. For the most up-to-date information on RDOF auctions, see: https://www.fcc.gov/auction/904/releases
11. Taxpayers Protection Alliance. “GON with the Wind: The Failed promises of Government Owned Networks
Across America.” May 2020. https://www.protectingtaxpayers.org/wp-content/uploads/Broadband-Re-
port-May-2020-1.pdf
12. The Biden-Harris Administration. Fact Sheet: The American Jobs Plan. March 31, 2021. https://www.whitehouse.
gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/
13. U.S. Department of Agriculture, Office of Inspector General, Southwest Region. Audit Report: Rural Utilities
Service Broadband Grant and Loan Programs, Audit Report 09601-4-Te. September 2005. http://www.usda.
gov/oig/webdocs/09601-04-TE.pdf
14. USDA Inspector General Report. Rural Utilities Service: Broadband Loan and Loan Guarantee Program. March
31, 2009. https://www.usda.gov/sites/default/files/09601-8-TE.pdf
15. Government Accountability Office. Telecommunications: USDA Should Evaluate the Performance of the Rural
Broadband Loan Program. May 2014. https://www.gao.gov/assets/gao-14-471.pdf
16. For a general discussion of fraud and abuse of RUS’ broadband programs, see: https://www.politico.com/
story/2015/07/broadband-coverage-rural-area-fund-mishandled-120601
12
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