BEAD Interest Could Vary State by State, Depending on Program Details
Different states could see varying levels of interest from ISPs in bidding on broadband equity, access and deployment (BEAD) program projects due to how they craft project requirements, cable industry experts say. Among these are prevailing wages for subcontractors and middle-class affordability offerings. Unclear is how many BEAD eligible areas end up with just one bidder, or none, we're told.
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While prevailing wages and market wages are about the same in the Pacific Northwest, the gap between the two can be sizable in the South, CCG Consulting President Doug Dawson told us. He said the requirement of a low-cost offering for a particularly long time might also dissuade broadband providers from participation. Dawson said Virginia's draft BEAD program rules make cost and pricing huge factors in determining who gets awarded bids. He said other states may come up with different scoring methods that vary widely.
Charter Communications "will apply for stuff all over the place," Dawson said, pointing to the cabler's aggressive pursuit of Rural Development Opportunity Fund projects. BEAD would represent a notable opportunity for Charter to fill holes in its footprint still unplugged after RDOF, he said. He said that in some states small ILECs are indicating they likely won't participate. Dawson said big companies will have particular advantages as they are used to having union labor, don't have to worry about letters of credit and can get guaranteed contractors to do the work. At the same time, if there are areas that even with BEAD financing opportunities don't make financial sense for a big cable company, they won't receive bids, he said.
Factors like prevailing wage will significantly increase project budgets in certain states compared with others but wouldn't keep Mediacom from applying, emailed Senior Vice President-Government and Public Relations Tom Larsen. "We would just need to adjust our budgets to reflect the contract labor rate differences by county/state," he said. Still needed is clarity on how each state is going to handle the middle-class affordability requirements before Mediacom knows if it would be a factor in whether it applies, he said.
"The biggest factor will be whether we can make a project work from a financial sense," Larsen said. "There is a laundry list of issues that will need to be reviewed before we can make that determination. How close is our existing fiber network? Will the pole owner let us build aerial? Would there be challenges to building underground like rock or easement issues? Is there local support for the project? Do we have local staff that can support operating the system once it is constructed?" He said the hope is that state-run BEAD programs "will be extensions of their already established and successful state broadband grant programs."
Small, regional cable operators are positioned as established fixed providers in rural areas and thus in good positions to participate in BEAD, ACA Connects Chief Regulatory Counsel Brian Hurley said. An eligible location's position relative to a provider's network will be first and foremost in considering whether to bid, he said. The size of bidding areas could incentivize or disincentivize bidding, with smaller areas like census blocks more likely to attract bidding participation from smaller providers, he said.
It remains to be seen how individual states craft requirements like prevailing wage and middle-class affordability offerings, and participation could vary from state to state, Hurley said. Small providers also will be challenged to participate due to the costs involved in taking part in government programs, such as sometimes onerous record keeping, he said.
When building in a rural area, issues related to pole attachments are one of the biggest cost variables, said Mike Giobbi, senior adviser at Broadband Success Partners. BSP Principal David Strauss said the broadband consultancy is advising states that unless service providers have done thorough pole inspections, they could face significant, unanticipated needs to replace old, rotting poles. "This pole situation cannot be underestimated," Strauss said. Giobbi said smaller operators also could face challenges in the time constraints for how quickly networks need to be installed.
Whether states in their BEAD programs generally focus on the cheapest option foremost remains to be seen, Hurley said. Cost has to carry substantial weight, as states will want to stretch their money as far as possible, he said.
If areas don't receive a bid, the state will likely twist providers' arms to get a provider there, Dawson said.