Mike Romano: I think what we’re seeing and what we’re hearing now is a shift in that thinking about almost less of a presumption and more of essentially, “Let’s let every technology play at every step of the way and see how that shakes out.” Now the question will become, how does that square with the definition of a priority broadband project? I think that’s one of the things that probably NTIA is working through right now.
Jeff Johnston: That was Mike Romano, executive vice president, NTCA, about the new administration’s approach to network technology solutions for BEAD-related grants.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast, where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the digital infrastructure market. This podcast is brought to you by CoBank’s Knowledge Exchange group.
New leadership in the Commerce Department and NTIA are reviewing the BEAD program and expectations are that changes will be coming – specifically around accepted technologies and certain administrative elements. With the uncertainty around these changes and how BEAD interplays with other broadband programs, I asked Mike to come on the podcast to help make sense of this. As the executive vice president of NTCA and an expert in broadband rural policy, I couldn’t think of a better person to have on the show.
So, without any further ado, pitter patter let’s see what Mike has to say.
Mike Romano, welcome back to the podcast. It’s a pleasure to have you back on. How have you been?
Romano: Jeff, it is great to be here. I’m glad you invited me back. I’ve been about as well as can be right now in the current state of affairs and everything going on in Washington.
Johnston: Yes, certainly no shortages of things that are up in the air and things that you’re trying to manage through for your members. I know you’ve been real busy. I appreciate you carving out some time today to chat with us about what I think is pretty important right now. That’s the BEAD program, and where we are with the BEAD program, given the new administration and some of the things that we’ve heard on how this program might look a little bit different going forward.
Before we get into the specifics of it, just level-set for us a little bit and let listeners get a grasp of this program and how it was originally designed.
Romano: Yes. I think this program sits atop a number of other programs that came before it and was, at least in theory, an attempt to try to do those programs right, better, differently, and in particular, I think to fill in gaps that those programs left behind. Over the years you’ve had the FCC has had a series of universal service programs. Those are different. I want to talk a little bit more, maybe later on, about how those are a little bit different from the capital focus programs to the grant programs that have come around in more recent years.
You’ve had also the Rural Digital Opportunity Fund, or RDOF, as we all refer to it, was one of those. That was one of the earliest attempts, I think, to look at unserved areas and try and figure out what we could do there. Then you had ReConnect come under the first Trump administration, created, signed into law, a USDA-focused program aimed at serving rural areas, unserved rural areas. You had the US Treasury giving out a series of grants over the last several years.
All these programs were in the mix. The BEAD program discussions related to that started really even as those other programs were getting created as well. I think in many ways, the BEAD program was intended to be the end-all and be-all of that, at least the initial effort to close the digital divide, and really specific about that. It’s initial because it’s that initial act of getting people wired.
BEAD was really intended as the huge one-time infusion of capital to help connect all of those Americans who were still sitting unconnected after all of these other programs had been put into place, and hopefully, taking some of the lessons learned from those and applying them to how a grant program could operate going forward. As we’ll talk about, there were twists and turns even in that tale.
Johnston: Great. That’s super helpful. Before we get into what BEAD might look like down the road, it might be worthwhile just spending a moment on the interplay between what’s happening with USF funding right now and BEAD, and BEAD as it relates to some of the USDA and RUS programs because there’s a whole lot going on here as you talked about.
Romano: Sure. There’s an alphabet soup of programs out there and agencies overseeing them.
Many of the programs that often get cited as broadband funding, you can use them for broadband funding, but they’re not broadband funding programs. At the end of the day, there are really four agencies: the FCC, U.S. Department of Agriculture, USDA, U.S. Treasury, and the Department of Commerce through an agency called NTIA. They’re really the four big, 800-pound gorillas in the room when it comes to broadband funding.
USDA, U.S. Treasury, and Department of Commerce NTIA all fill a similar lane, which is providing grants to provide capital for the construction of networks in areas where nobody has found a business case to do so to date, and therefore they sit unserved, from a broadband connectivity perspective. Each of those looks very similar to one another. They have a similar purpose. They operate in different ways, given the agencies they’re under.
I think, by and large, there’s been a tremendous effort to coordinate those programs to make sure they’re not duplicatively funding areas, and then, especially in the case of BEAD, sweeping up anything that the other programs have left sitting out there. Those are all, again, capital-focused grant programs. The Universal Service Fund, at times, has been used to address unserved areas as well and does have deployment commitment service level commitments attached to it, but it is not a grant program.
It doesn’t provide upfront capital. It provides a series of capital as a subsidy, a support mechanism, if you will, that over a period of months/years, really, helps to make the business case for people who may be bringing their own capital to the table in the form of either loans they’ve gotten from USDA, loans from folks like you all, and/or their own private capital that they already got on hand in order to make the business case to use that capital to invest in a network knowing that universal service support will help keep rates affordable.
They can afford to get customers on the network, and therefore, the business case is made to make use of that capital. That’s the interplay of those two programs or the multiple kinds of programs. Again, the agencies coordinate very closely on those, but universal service, I guess what I would say, there’s a fundamentally different purpose, which is not the getting people connected of the grant programs, it’s the keeping people connected, consistent with a 100-year mission at universal service.
Johnston: Yes, and that’s such an important point, I think, right? Because it’s one thing to get government support to build these networks, which is great. We need it, but at the same time, if we don’t have ongoing mechanisms or infrastructure or programs to allow operators to just profitably or just manage these networks so they don’t burn cash every month, that’s critically important, right? I think that gets lost on some of these programs a little bit.
Romano: It does. It does. I think one way to look at this is, look, there are areas today where there’s no grant needed and no universal service report needed because the market makes the business case for itself. There are places where a grant’s going to be needed, maybe universal service isn’t needed because the grant helps to make the business case by itself, because you figure at that point, I can charge it at a reasonable rate and handle my own ongoing expenses and recover those appropriately.
There are places today, many places, that folks like you all have financed networks over many years that didn’t get grants, and ongoing universal service support is critical on those because they have to help repay the loans. They have to make sure that they keep rates affordable. The final thing I’ll just say is there are going to be places even where grants are won, where it’s still uneconomic to operate the network.
Johnston: Yes, the devil is definitely in the details with all of this stuff. Well, hey, let’s continue the conversation, Mike, and focus back on BEAD specifically. Look, I’m going to characterize things the way I’ve interpreted, but please correct me if I’m wrong here. It seemed like under the Biden administration, when the BEAD program was originally introduced as a part of the Infrastructure Investment and Jobs Act, that it was, I’ll call it, a fiber-first strategy
Then, where it doesn’t make sense, let’s look at alternative technologies that maybe don’t have as high of a capex element associated with it. These would be, obviously, more sparsely populated areas in rural America and if I’m interpreting the new administration’s view of the world, and we don’t know yet, how this is going to play out, but it seems like it’s more of a technology-agnostic approach, if you will, to deploying the BEAD money. I guess if we can start there, is that a fair characterization of where we were and maybe where we might be right now?
Romano: Yes, I think overall it’s right. I think what happened was, the Infrastructure Investment and Jobs Act, the IIJA, included a term called priority broadband project, and the priority broadband project was intended to be networks that were going to be scalable and achieve the highest levels of performance. Those were the networks that the law, not NTIA or the Department of Commerce interpreting law, but the law indicated needed to be funded.
Now, NTIA, in turn, read that to be fiber because it looked at the definition and said, “Well, these other networks are not scalable in the same way. You’re going to need to reinvest more frequently in them.” In many ways, I think Congress in designing the IIJA and this prioritization, and then NTIA, in turn, and implementing it, in many respects are trying to cure for the sins of RDOF, if you will, that program I mentioned earlier with the FCC, where there had been a feeling that unproven providers and unproven technologies perhaps had gotten ahead of things a bit and as a result had captured a significant amount of the funding in a way that was going to not yield positive outcomes.
Now not say those networks couldn’t have performed in certain cases, not to say they don’t have important use cases and hopefully we can come back to some of the technology choice discussions in a bit, too, but simply to say, they said, “Look, we’re going to try in the first instance to get, essentially, fiber as far as we can before we then turn to these other things.” I think that was the initial intent of the law, and certainly at least, if not fiber specifically, about priority broadband project, and then NTIA doing what it did.
Now, NTIA under the Biden administration did acknowledge that there were going to be other technologies needed, and the way they went about it, though, was almost like a presumption. They said basically like, “Look, up to a certain cost per location, we’re going to assume fiber can be done. State, you define what that is, you tell us, and after that, all bets are off, and use whatever technologies are available.”
I think what we’re seeing and what we’re hearing now is a shift in that thinking about almost less of a presumption and more of essentially, “Let’s let every technology play at every step of the way and see how that shakes out.” Now the question will become, how does that square with the definition of a priority broadband project? I think that’s one of the things that probably NTIA is working through right now.
The other aspect of this that I think will be, and that’s going to be interesting, is how do you do this when you’re already in the middle of bidding in so many states’ applications that have been submitted? Trying to unring that bell at this point is complicated. Trying to implement these kinds of changes to people’s assumptions when they were going in to bid or apply is not an easy task.
Johnston: Yes. It’s like herding cats? You’ve got the NTIA working with all the states, who have policies and procedures per their own state requirements. Then you’re well down the path of that, and all of a sudden, there’s a possibility the rules of engagement have changed. Could you envision a scenario where you got to go back to the drawing board to restart this whole thing again?
Romano: Yes. I hope it doesn’t end up there. I think everybody, including the NTIA Department of Commerce, is probably trying to avoid that as best they can, because you’re not only at that point making the states redo things and creating complications there. You’re losing time, right? After all the concerns about how long it has taken to stand up, and there are some really legitimate concerns about 19-point checklists that people were made, states were made to run through, and all of this.
Now you’re on the cusp of this. Starting over could be a concern there in terms of the broadband – Delayed is broadband denied. The other thing, though, is the expectation, regional expectations of those who participated in the program, the applicants. By way of example, we’ve got members who’ve invested significant sums of money up front their own money up front to pursue an application, to engineer it, to have it ready to go, and to be on the cusp of that, only to find that now the rug’s been pulled out from under them, and they have to go back into rebid or reapply or re-engineer is going to be difficult.
I think everybody is probably on the same page, not wanting that to happen. The trick now is, how do you have changes that don’t make that happen? I think that’s what Commerce is grappling with now as we await their guidance.
Johnston: Mike, when we’ve talked about this before, I remember you telling me about high-cost areas and ultra-high-cost areas that would qualify for alternative technologies, be it satellite, fixed wireless, primarily. Could we be facing a situation where the threshold for those ultra-high and high-cost areas comes down? I’m just going to use basic numbers here just for illustrative purposes.
If it used to be $5,000 per passing or if it was above that, then you can do fixed wireless or satellite, but now, could we be in a situation where we could say, “Well, if it’s $3,000 or more per passing, now you can open the door to alternative technologies?” Do you see something like that potentially playing out here?
Romano: Yes, there’s a couple of ways this could go. I think that’s right. I think the first is even before you get to the dollar figure, that threshold or that presumption of up to a certain point, we’re going to fund fiber and then after that it’s all bets are off and every technology competes on basically the same playing field for those remaining locations where it’s extremely high cost, that presumption could essentially convert into a cap.
For example, the NTIA Department of Commerce could say to a state, “Thou shalt not give out funding for more than X dollars per location, where it’s $5,000, $10,000, $25,000, whatever it is,” and that’s it. Then the thought becomes, “Well, maybe there’s the case that basically now every location, some applications that were too high cost, including fiber, now can’t even play. We’re going to have to retrofit their application in some way.”
The cap is an interesting concept and one that I suspect, at least, is being seriously considered. The interesting thing about cap is you can’t do one nationwide, right? Nationwide, what’s high-cost in South Carolina and Tennessee is going to be very different than high-cost in Montana or Alaska. You’ve got to think about the postalization of high cost that way. The other thing that I think could happen, too, Jeff, to your point, is they could change what that cap or that threshold, the dollar figure of it, right?
They may say, for example, “Yes, I don’t want to do $5,000 per location now; I want to do $3,500 in Florida.” They may say, “I don’t want to do $25,000 in Wyoming; I want to do $15,000.” That changes the mix of who’s been able to apply what technologies they proposed to do, and now the state will have to look at it through that prism.
Johnston: Got it. The other thing that I had heard from a number of our CoBank customers was just around some of the red tape, for lack of a better term, red tape different reporting requirements that I think some viewed as rather onerous, especially on some of the smaller operators that didn’t have the people or the infrastructure to be able to meet those requirements.
I think as a result, some of them decided not to participate in BEAD. Are you expecting to see any leeway there to make things just a little bit easier for the folks to participate in this program?
Romano: We just talked about all the technology choice questions and how that creates some degree of uncertainty and challenge. On the other side of the equation, though, I think there’s a lot of potential here for improvements in the program to be considered. One of the biggest frustrations with the BEAD program, some of this was driven a bit by statute, but I think pieces of it were really driven by politics is that a number of policy preferences and initiatives that are, I guess, deployment-adjacent were attached to the BEAD program in a way that made the cost of doing business through the program much higher, the burdens of doing so greater, and as a result, either scared people off in some cases or raised their cost of their participation if they chose to go in after all.
I mentioned earlier, the 19-point checklist that the NTIA made the states run through to get here. Some of the points in that checklist were an inch taken from the statute and a mile expressed to the state. I think that that was some of the frustration, and that was a reasonable criticism of some of the delay, as some of the states looked at it and said, “I don’t want these sorts of burdens imposed on those who would apply for funding in my state. Please don’t make me do this.”
The federal agency, in turn, would say, “No, no, no, you have to take this. We’re not telling you how to take it necessarily, but you have to do something along these lines.” It was this weird dance or navigation negotiation between the two of them. I do think now, where we are, is on the cusp of potential helpful changes in this regard. A number of the, again, deployment-adjacent provisions that got tagged onto this. Things like workforce obligations, things like climate provisions, the biggest one that’s often talked about is the low-cost option, which was a requirement to make sure that customers had an option that was relatively lower-cost available to them on these funded networks if they needed that if they were of certain income thresholds or the like.
This was extrapolated into a pretty significant and rather draconian rate prescription that made it incredibly hard for those operating in the highest cost areas to charge the lowest possible rate to so many of their customers that it became a deterrent to participation.
I think we could see that scale back as well. I think that that would help in both the sustainability of these networks as they get built because customers will be paying a more reasonable rate for the services, while still not terribly high-cost, and it will, ultimately further the goals of the program by getting more people online.
Johnston: When I think about the technology aspect of all of this, obviously, fiber is the golden standard, right? It’s a scalable network. It’s got a lot of operating leverage in it.
These fiber networks, I think, are well-positioned to be able to support significant increases in data traffic and speeds, and so forth. I get why that’s the gold standard. I get why that’s where the focus is. I guess this is how I think about it, and I’d love to get your thoughts, Mike. If I think about alternative wireless technology, satellite or fixed wireless, yes, look, I get that it’s more economically feasible in a lot of cases to do this in certain parts of the country.
I’m all about doing things efficiently and making sure that we deploy taxpayer dollars in the most efficient ways possible. But I also look at it and say, are we spending this money and giving folks, networks that are really truly future-proof? Could we be funding and supporting networks that ultimately may not be able to handle next-generation type of broadband applications, and then they’re back where we are today in a way? How do you think about that?
Romano: This is one of the lessons that I think was important to glean from prior broadband funding programs, and I mentioned earlier, curing for the sins of RDOF. The FCC’s universal service programs for years aimed for incremental improvements, which ultimately was probably less efficient than it could have been had they aimed, at the start, for better networks.
Back when the FCC first introduced the notion of universal service funding, helping to support broadband deployment operations and not just voice telephony operations, the target speed they aimed for was 4:1 in rural America. Then, through negotiation with some of the largest companies who some of them had left the greatest shortfalls in rural broadband, they got them to do 10:1.
Then 2011, 2012, we get to the 10:1. 2014, we get to 10:1. Then 2016, 2018 comes around, everything starts to talk about 25:3. I remember going to the FCC in 2016, urging them to adopt a broadband deployment standard of at least 100 megabits per second. Back in 2016, we were told we were crazy. “No, no, no, we’re going to do 25:3 because that’s the baseline.”
Every time we’ve paid for the baseline, we’ve come to regret that by the time the baseline gets built, and realize that the puck has moved. I think BEAD was an attempt to try to do that. The priority broadband project, the fiber preference, was an attempt to do that. Now, what we’ve seen with the BEAD program across the board, you mentioned all those other provisions that we want to see change, too, is in some attempts, in some ways, BEAD was almost an overcorrection, an overreach.
I think the technology choice has been caught up in that a little bit. I think everything that was done previously with BEAD is overreaching. It’s too far, so therefore, we need to bring it back in. This includes the technology choice, even if there’s still a debate about where that line will get drawn. That’s what BEAD always was: a line drawing exercise.
You tried to draw the line to get fiber as far as you reasonably could, recognizing you didn’t want to have to rebuild things again in five or seven years as technology changed, and that would be less efficient. But at the same time, you realize there were places where it was going to be incredibly uneconomic to build fiber. Therefore, if you wanted to get anybody connected, you really did need to turn to other technologies to have an important place to play in this game, too.
That’s the debate we should be having. But right now, it’s become politicized in such a way that the other guys just only wanted fiber everywhere, which wasn’t true. Now there’s a discussion of basically, and I don’t think this is where they’ll end up, but there was a Wall Street Journal report of certain technologies where 50% of the broadband funding just was sort of by fiat, and that doesn’t seem like the right answer either.
It seems like the right answer, again, is that devil in the details. Let’s look and see where the line should be drawn, state by state. Let the state make that call because they’re in the best position to do it. Hopefully, we can get a mix of technologies that answer the question for a generation for at least as many customers as possible while giving others the hope of connectivity, and maybe the technology evolves and it continues to satisfy their needs, or we’re going to have to solve for that 20% or whatever it is, 10%, in coming years again.
Johnston: That all sounds very logical, and it is a balancing act, right? Hopefully, we can strike that right balance. What advice, are you giving, or would you give, to broadband operators, that have either put the work in and are well down the path of deploying BEAD dollars in their state or maybe ones that decided that it just wasn’t the right program for them but maybe in the future it will be?
Romano: Yes, a few things. The first thing I would say is, stay in front of your state broadband office to the extent you can. Some state broadband offices, I think, are in some version of quiet periods at this point. You may not be able to stay in front of them, but stay in front of them to the extent you can, or your state association, a number of members are members of state broadband associations that we work with closely.
Those are great folks to keep in touch with, and make sure you are on the pulse of what’s happening in your state and how they’re responding to it. I think the states have shown, generally speaking, they have a pause on some of their deadlines with some of that, but they’re still working. They’re trying to get this moving as fast as they can still until they’re told to literally put pencils down. I think that’s an important place to stay.
Then I think a second thing would be contingency planning. If you already applied, think through, in particular, if the threshold for a project came down, if there was a cap imposed in your state, and think about what that might look like in a different state in different ways, what would that mean for your project? Would you want to still go forward? Would you want to drop off locations?
Start to contingency-plan now for what might come. I know that’s super hard because we don’t know what Commerce is going to tell the states, but I think if you can start to think through the potential for mutations and plan for that, game plan for that, I think that’d be very helpful. And then, for those who didn’t participate, I guess the value of staying in front of your broadband office is, you are on notice if you might have a chance to participate again.
We don’t know what Commerce is going to say. That’s probably the biggest difficulty here, but states could face the prospect of having to rebid, and maybe that makes something that was previously unattractive to you more attractive because they’ve taken off all of those obligations about low-cost options and climate provisions. Letters of credit, I should have mentioned earlier, too, could be relaxed considerably. All of these things, I think, could be helpful in turning the business case around for you, the incentive to invest in this program.
Johnston: Great advice. Thank you so much for that. Hey, Mike, We’ve covered a lot, super insightful. Hey, before we just wrap it up, I want to give you an opportunity to share any closing thoughts or things you want to talk about that I didn’t bring up. The stage is yours.
Romano: A couple of things I just want to mention. First, thank you for having me on. The two things I want to mention are, I also want to make sure to offer a special thanks to CoBank for their support in the Supreme Court case. What we’re talking about here is, there’s been a challenge at the U.S. Supreme Court, which is a podcast discussion unto itself, raising questions about the constitutionality of the federal universal service mechanisms, the contribution payment system to those that has been placed for years.
CoBank helped to lead a brief and really put a ton of work and resources to do a brief that I think was a compelling submission to the Supreme Court. I hope it’s influential and persuasive with the court, but I thought you did a great job of telling a story about what these programs mean for rural America and for all of the types of stakeholders you support throughout the Farm Credit System and other agricultural areas. Just kudos to you all for doing that and thank you for that.
The second thing I want to say related to that, I guess, a follow-on is just to emphasize again the importance of getting people connected and keeping them connected. That’s a dual-purpose mission. The worst thing in the world would be to end up building networks that don’t satisfy consumer needs or meet consumer demands down the line. That’s, I think, part of this exercise as well.
I would encourage people to continue to be thinking about it, and luckily for us, our members are closest to those communities, so they know what those consumers need. Maybe that’s a plea to these folks in Washington, more than my members and some of your borrowers, but I just wanted to throw that out there as well.
Johnston: Fantastic. Well, Mike, thanks again. I appreciate you coming on today. A special thanks goes out to Mike for being on the podcast today.
There are a lot policy balls in the air right now and navigating all of this uncertainty is a major challenge for broadband operators. I think it’s imperative to stay close and connected with local state broadband officials so you’re current on the latest developments-- and to the extent you can, map out different scenarios and have a plan for each potential outcome.
Hey thanks for joining me today and a special thanks to my fellow CoBank associates Christina Pope and Tyler Herron because without them there wouldn’t be an All Day Digital podcast. Watch out for our next episode.
