Only Massive ISPs Like Comcast Will Benefit From the $42 Billion Broadband Subsidy Program, Critics Warn





President Joe Biden’s $42 billion broadband program is supposed to supercharge the build out of internet infrastructure and finally close the digital divide. But some critics believe language in the fine print of the plan will prevent smaller internet service providers and community programs — who are instrumental in addressing unserved areas — from getting their fair share of the money.

That’s the opinion of a coalition of more than 300 small ISPs, policy experts and consumer advocates, from San Miguel County to the El Paso Community Foundation, who collectively sent a letter to Secretary of Commerce Gina Raimondo, Alan Davidson, assistant secretary of commerce for communications and the U.S. Commerce Department, expressing their concerns about the program, which will be run by the National Telecommunications and Information Administration.

TechDirt previously spotted the letter.

The NTIA’s Broadband Equity Access and Deployment program will be responsible for doling out the $42 billion over the next two years, with each state receiving at least $107 million, and 19 states receiving over $1 billion.

The crux of the coalition’s concern stems from a financial requirement that applicants for the grant that represents an unfair barrier for smaller ISPs that larger broadband players can easily clear. The rules could lead to the larger ISPs, which historically haven’t done as good a job connecting underserved communities, getting most of the money, the critics say. The requirements exist to verify that an applicant is serious about the project and can realistically build out a network.

“While we support the NTIA’s intention of ensuring providers are accountable for delivering on grants, far from safeguarding taxpayer dollars, the LOC requirement will prevent the internet service providers best positioned to connect unserved and underserved Americans from participating,” the letter said.

The BEAD program requires anyone applying for an award to obtain a Letter of Credit for 25% of the award amount. But as the letter notes, these borrowers need to sock away cash or cash equivalent as collateral, undermining their ability to actually spend capital on any network buildout. “We estimate a provider seeking a $7.5 million grant for a $10 million project will need at least $4.6 million of their own capital up-front,” the letter said.

“While large incumbents may be able to bear this financial burden, most others can not.” 

Letter to the Commerce Department

The letter goes on to note that this requirement potentially excludes the vast majority of broadband programs that seek to connect the communities that the program is supposed to prioritize, including small and community-centered ISPs, or ISPs run by women or minorities, nonprofit organizations and municipal broadband programs.

“Rather than demonstrating a provider’s ability to construct a broadband network and provide high-speed broadband services to unserved and underserved Americans, the LOC is a measure of whether they can lock up valuable working capital over multiple years,” it said. “While large incumbents may be able to bear this financial burden, most others can not.” 

In response, the NTIA said it would continue to work with these smaller programs and states to make sure the funding was equitably doled out.

“We have received the letter and appreciate these advocates raising their concerns and suggestions,” the agency said in an emailed statement. “Our goal is to connect everyone in America with affordable, reliable high-speed Internet service while being good stewards of taxpayer dollars. We want to encourage robust participation from service providers of all types, and we require states to ensure that grant recipients can build a high-quality network and operate it for years to come. We will continue to monitor and, as our program rules suggest, we will work with states and territories to help them meet both objectives.”

The letter also proposed a few solutions, including the use of performance bonds as an alternative to a LOC and delayed reimbursement to ensure progress on network buildouts.

“BEAD has the potential to be one of the most transformative investments in our history,” the letter said. “Like the Rural Electrification Act of the 1930s, it can unleash the power of marginalized communities nationwide, but only if we create a level playing field where all providers have an equal opportunity to participate. A course-correction is therefore needed.” 

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