TMT update (rural broadband/BEAD)

Recent/upcoming developments… After President-elect Trump’s inauguration next Monday, it’s likely that significantly more detail will begin to emerge on his fiscal agenda, among which will be whether he intends to pause/eliminate certain Biden-era programs.  Over the last couple of years, Congressional Republicans have strongly criticized how the Biden administration has implemented the $42b BEAD rural broadband program, though they’ve generally supported its continuation.  There are some recent indications that the program could be scrutinized by Trump’s Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, which has been tasked with eliminating wasteful spending.

* Key Republican leaders on telecom policy (e.g., Sens. Cruz (R-TX), Thune (R-SD) and FCC Commissioner Carr, among others) have consistently criticized the Biden administration’s implementation of BEAD, particularly its emphasis on fiber, requirement for a low-cost option, and other onerous regulatory requirements.  They’ve not called for eliminating the program.  It’s also worth noting that Vice President-elect Vance, who it increasingly appears will have influence on policy, has been a strong supporter of rural broadband funding (e.g., he’s been a champion for continuing ACP funding).

* More recently, Elon Musk has been critical of the program, and Sen. Ernst (R-IA), who has made visible proposals to the DOGE, has called for the program to be cancelled.  In addition, Rep. Guthrie (R-KY), the new Chair of the Energy and Commerce Committee, which has jurisdiction over the program, recently said that he is “for pulling back the money.”  And, Cruz, who is now Chair of the Commerce Committee, which also has jurisdiction over the program, has called for a pause in spending BEAD funds.

* BEAD funding has been obligated to states, which creates a legal impediment to the White House being able to claw it back, as Musk and Ramaswamy have said they intend to do with programs deemed unnecessary/wasteful.  However, NTIA hasn’t yet fully signed off on state implementation plans, which potentially creates an opportunity for the Trump administration to pause the spending of the funds and influence how they are ultimately spent.

Our outlook… We expect the DOGE to begin articulating areas of spending that should be paused or eliminated within the coming weeks.  The DOGE is just an advisory body, so while it will play a role in catalyzing change, it will up to the White House and various cabinet department heads to determine how to handle the programs for which they are each responsible.  Given Congressional Republican support for BEAD (and potentially because of key voices such as Vance’s), we do not expect there to be an attempt to claw back BEAD funding (with the possible exception of minor non-deployment funds) and instead expect there to be a pause in the program’s implementation and eventually new guidance issued by NTIA that allows states to more readily use technologies other than fiber (e.g., satellite, fixed wireless), and eliminate the requirement for a low-cost option and other regulatory hurdles.  While elimination/significant constraints on BEAD funding are unlikely, the fact that this has been mentioned by some key players warrants close monitoring in the coming weeks.

* As we’ve previously noted, Musk’s influence, and advocacy by Carr and other key players suggests that there is likely to be significant emphasis put on making satellite eligible for BEAD funds.  This is likely to go well beyond the very modest guidance that NTIA recently issued on satellite eligibility for funding.

Watch for these developments… In addition to looking for additional comments from key players such as Musk, Cruz, and Guthrie, we’re looking for any signals regarding BEAD from Russ Vought, Trump’s incoming Budget Director, who will be responsible for addressing the recommendations made by DOGE.  In addition, we are looking for comments from Howard Lutnick, Trump’s nominee for Commerce Secretary.  He and his direct team will likely have responsibility for BEAD while NTIA waits for confirmation of its Director, something that didn’t take place for a full year after Biden’s inauguration.  This issue may arise at his confirmation hearing, which is likely to take place sometime in February.