ACP Spends More Money While Running Out of Money; BEAD Rules Run Amok

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Eric Fruits, ACP Spends More Money While Running Out of Money; BEAD Rules Run Amok, Truth on the Market (August 24, 2023),

If this is what a summer slowdown looks like in telecom policy world, then autumn is going to be a real humdinger. 

FCC Announces More Spending for ACP Outreach

Last week, the Federal Communications Commission (FCC) announced government agencies and nonprofits in 11 states and territories will receive an additional $4.3 million to promote the agency’s Affordable Connectivity Program.

A forthcoming issue brief to be published by the International Center for Law & Economics (ICLE) finds that the ACP has succeeded in helping low-income families who already have broadband to retain their vital internet access. The program, however, has had limited success connecting completely new homes to the internet. Studies find only one-in-four recent ACP enrollees were previously unconnected. Moreover, about half of ACP-eligible households are unaware of the program. 

The FCC’s announcement is in line with ICLE’s recommendation that the FCC partner with local organizations—such as libraries, schools, community centers and nonprofits—to inform and assist eligible households with applying for the ACP. The FCC should also leverage its existing Lifeline program—which provides discounts on phone service for low-income households—to promote the ACP and enroll eligible customers.

But there is still more to be done. While it’s relatively easy to qualify for the ACP, it remains fairly difficult to enroll in the program. 

The current enrollment process for the ACP is cumbersome and confusing for both consumers and providers. Consumers have to apply to enroll through a website or a mail-in application; verify their eligibility through various documents or databases; and contact a participating provider to select a service plan. Some providers may have an alternative application that they will ask consumers to complete. Providers have to verify customers’ eligibility through a national-verifier system, report data on their enrollments and reimbursements, and comply with various rules and requirements. These complexities create barriers and inefficiencies for both parties.

The FCC should streamline the enrollment process by creating a user-friendly online portal that allows consumers to apply for and manage their ACP benefits; verify their eligibility through a single source of data; and compare and choose among different broadband options. The FCC should also simplify the reporting and reimbursement process for providers by creating a standardized system that minimizes paperwork and delays. 

Indeed, there has long been criticism of the national-verifier program that the FCC uses to administer these programs. The process is error-prone and, according to Pew, more than two-thirds of Lifeline applicants who use the process abandon their application. 

Short of making their own process function better, the FCC should at least continue to allow private providers to engage in more efficient, alternative verification processes. Unfortunately, the commission has signaled reluctance about allowing providers to do that.

But the ACP Is Running Out of Money, Prompting Congressional Handwringing

Irrespective of the FCC’s decision to spend more on ACP outreach, the program is anticipated to run out of congressionally appropriated funding sometime early next year. This sparked a bipartisan group of 45 members of Congress, led by Rep. Josh Gottheimer (D-N.J.) , to write congressional leadership urging an extension of the ACP in the upcoming government appropriations bill.

ICLE’s forthcoming issue brief concludes that, despite its shortcomings, the ACP is a much better policy than many alternatives, such as direct rate regulation or municipal broadband. Rate regulation would discourage investment and innovation in the broadband market. Municipal broadband would create unfair competition and waste local taxpayer money.

In contrast, the ACP likely fosters investment by encouraging household internet adoption and retention. In addition, unlike municipal broadband, the ACP does not favor one provider over another and does not require any state or local funding. Congress should not let the perfect (or imperfect) be the enemy of the good enough.

BEAD Headaches Are Turning Into Migraines

Last week, we reported on the red tape and headaches plaguing the Broadband Equity Access and Deployment (BEAD) program. Turns out, those headaches are getting worse.

According to Broadband Breakfast, more than 50 internet providers, industry associations, and digital-equity advocates have jointly signed a letter urging alternatives to the BEAD program’s letter-of-credit requirement.

Connect Humanity, a nonprofit focused on advancing digital equity, explains the hurdles small providers face:

BEAD applications must come with a letter of credit issued by a qualified bank for 25% of the grant amount. This is a guarantee to the grant administrator (in this case, a state broadband office) that there is liquid cash in an account that it can claw back should the applicant not deliver on their grant requirements.

To receive a letter of credit, applicants will be required by the issuing bank to provide collateral. In most cases, this will be cash equal to the full value of the letter of credit. That means ISPs hoping to secure BEAD funds will have to lock away vast sums of capital that will be untouchable for the full duration of the build, likely several years.

Banks will also charge applicants a fee for this letter of credit — typically 2%-5% of the letter of credit amount annually — adding hundreds of thousands of dollars to the cost of a network build.

To be clear, this letter of credit is separate and in addition to BEAD’s match requirement, which demands that applicants contribute a minimum 25% of the total build cost. So, with a 25% letter of credit plus a minimum 25% match requirement, hopeful applicants for BEAD funds will need to front millions of dollars.

Fierce Telecom quotes Philip J. Macres, a telecom lawyer with Klein Law Group, as noting that the National Telecommunications and Information Administration (NTIA) “intends to strictly impose this requirement with limited exceptions.”

As if that weren’t enough, NTIA’s “Build America, Buy America” rules seem to be taking a sledgehammer to the already-splitting headaches. The rules require that states spend the majority of their federal BEAD dollars on American-made materials. As StateScoop reports, however, limited access to domestically produced fiber-broadband components has prompted broadband leaders to call on NTIA to make exceptions to the “Buy America” rules or face extensive delays on BEAD-funded projects.

Last week, the White House released guidance stating that fiber is classified as a “construction” material, and is therefore subject to “Buy America” rules. The administration will leave it to federal agencies to determine whether waivers are justified.

But there might be some relief. This week, the NTIA released a draft of limited waivers to the “Build America, Buy America” rules. The 30-day comment period is now open until Sept. 21. After the comment period, the agency will determine whether to modify or finalize the proposed waiver.

In the meantime, stock up on aspirin to take you through to the first day of fall.