Recent/upcoming developments… Last Friday, the Commerce Department/NTIA announced a new process for determining how the $42.5b in funding from the BEAD rural broadband program will be distributed. The new rubric for distributing funds eliminates the Biden administration’s emphasis on fiber, as well as various other requirements (e.g., labor, availability of a low-cost plan, other). Instead, awards will go to sub-grantees who can provide broadband service at BEAD’s required speed/latency levels at the lowest cost for the location in question. States have 90 days to modify their process for selecting sub-grantees and re-bidding. NTIA has committed to approving the resulting plans within an additional 90 days. All prior awards have been rescinded. In the last few days, we’ve seen some initial reaction from Congress, with Democrats (e.g., Sen. Rosen (D-NV)) highly critical of the new approach, and leading Republicans on telecom policy (e.g., Senate Commerce Committee Chair Cruz (R-TX)) praising the administration.
Our outlook… The new BEAD process is consistent with what Republicans have been calling for over the last couple of years – i.e., technology neutrality (and thus more opportunity for participation from satellites/fixed wireless at the expense of fiber), no affordability requirement, and no restrictive labor requirements. So, Cruz’s praise is to be expected. It’s possible that the disruption to state plans, particularly in states represented by Republicans, could create some friction. To the degree this was to occur, we would not expect Congressional Republicans to lobby the administration for changes to NTIA’s new guidance/process. But, we may see some effort by states to seek waivers in order to get more time to reconfigure their processes and conduct a re-bidding with sub-grantees. This would put pressure on the timeline outlined by the administration. Republicans have long been critical of the Biden administration’s slow process for distributing funds, so the Trump team is under pressure to have a visible/notable amount of funding awarded by the end of this year and to be able to point to deployment getting underway. We think they’ll be successful, at least a level that’s politically sufficient (i.e., a substantial number of states, but not necessarily all, approved).
* NTIA has not provided for a clear waiver process, but we do not think that will dissuade them from providing states with flexibility on timing should they seek it, particularly Republican states. The administration will be able to deflect criticism about any delay in funding to states that seek waivers.
* It’s also possible that some set of stakeholders (e.g., ISPs/providers that are disadvantaged under the new guidance) sues the administration to try to inhibit implementation of the new guidance, but the probability of success will be limited, given that the program is exempt from having to follow typical processes required by the Administrative Procedures Act (APA).
* There has been some speculation that the falling out between Elon Musk and President Trump will lead to NTIA being less inclined to support BEAD funding going to satellite providers. This is unlikely to be a material factor. Musk and Trump appear to already be repairing their relationship, and even if they do not get fully re-aligned, satellite is likely to be a major beneficiary of NTIA’s new guidance, given its emphasis on achieving the program’s goals at the lowest cost per location.
Watch for these developments… We are watching for additional reaction to the administration’s new process/guidance from Republican states and in Congress. To the degree that Republican governors or Congressional Republicans, particularly those with influence on telecom policy (e.g., House Energy and Commerce Committee Chair Guthrie (R-KY), House Communications Subcommittee Chair Hudson (R-NC), others) call for giving states more time, NTIA is likely to be accommodating.
