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Broadband Providers Can Overcome Infrastructure Law Risks

Jan. 18, 2022, 9:00 AM

Today, our nation’s nervous system runs on a vast network of fiber, cable, spectrum, towers, and equipment that provide fast, stable broadband connections. This information network is essential to all aspects of our democracy, economy and society, so the recently-passed Infrastructure Investment and Jobs Act (IIJA) sets a national goal of universal broadband connectivity.

The broadband providers that step up to connect the remaining unserved parts of our country will face considerable risks due to low population density and/or limited economic resources in some areas. As with other physical infrastructure, population density is a major determinant of the economic viability of broadband networks because greater distances increase costs, and fewer customers decrease revenue.

The IIJA’s broadband provisions do much to mitigate these risks, but some remain; and the IIJA may actually increase risk in a few ways if it is not implemented carefully.

The following six recommendations can help overcome these remaining risks.

Develop a Future Support Mechanism to Cover Operating Expenses

The IIJA’s deployment programs provide one-time funding, but not ongoing support for operation and maintenance beyond the initial funding period. This investment may be sufficient for universal broadband availability, but it will be insufficient to ensure broadband remains in many high-cost areas over time.

The lack of revenue and high costs in low-density, unserved areas threaten the viability of a network even where the initial investment has been recovered. This risk could undermine progress in connecting the most challenging areas unless sustaining support is provided, for example through the FCC’s Universal Service Fund, as the agency asks in a recent notice of inquiry.

Subsidize the Low-Cost Service Option Across a Large Customer Base

Our shared broadband challenge will not be met if customers cannot afford the service in high-cost areas. The IIJA requires, therefore, that supported providers offer a low-cost service option. It is important to recognize that this will create risk for providers, particularly smaller ones, if the cost of this requirement is not shared widely.

A small provider in a high-cost area cannot make up for lost revenue by turning to its other customers. Hopefully, the various agencies implementing the IIJA will recognize the risks involved in a low-cost service option and allow providers to satisfy the obligation through participation in a nationwide affordability program, such as the $14.25 billion Affordable Connectivity Program in the IIJA, which will support a $30 monthly subsidy for low-income consumers.

Allow for Reasonable Extensions of the Construction Timeline

Broadband construction often cannot happen under a quick timetable, particularly in challenging terrain. The primary IIJA deployment program requires completion within four years, which is a good goal, but not a reasonable expectation for completing every project.

Providers will face the risk of not being able to complete their networks in the required time, particularly if current supply chain and labor scarcity issues continue to persist. Extensions of the deadline should be available for delays beyond their control.

The good news is that many jobs will be created, both from deployment and through economic development in rural areas that have been left behind.

Harmonize Oversight; Minimize Potentially Inconsistent Requirements

There already are many federal, state, and local agencies administering broadband programs for high-cost, unserved areas, and they frequently have different approaches to oversight. Broadband providers in these areas often participate in more than one program, and they often operate their network in more than one state. This can lead to administrative challenges, particularly where regulatory requirements are inconsistent.

The IIJA will add another layer to broadband oversight as it will be implemented federally, but be administered by state broadband offices. To the extent this creates greater administrative challenges, it will add risk for broadband providers that will need to be familiar with both federal and multiple state regulations.

Err on the Side of Granting Waivers of Funding Match Where Costs are High

Broadband providers will have to match at least 25% of grant funding with their own funds or funding from another source. Frequently, this will not be a problem, but it will make deployment uneconomic where costs are particularly high.

Although there is the possibility of a waiver of the matching fund requirement for the most difficult-to-reach areas, the risk that a waiver won’t be granted could deter providers from serving some remote areas.

Do Not Fund Multiple Networks in High-Cost Areas

Finally, despite IIJA provisions calling for coordination among funding agencies, there remains some risk of uneconomic overbuilding—duplication of networks in high-cost areas that cannot support even a single network without additional funding.

Providers taking IIJA support and obligations must remain aware of the risk of sharing the small customer base with another funded provider, which would threaten both providers’ ability to remain in service. The risk of duplicate funding should be alleviated once the FCC completes its initial mapping process and continues to keep mapping updated as broadband projects are completed.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owner.

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Author Information

Carri Bennet is a partner in the Washington, D.C., office of Womble Bond Dickinson (US) LLP. She has represented wireless and broadband carriers before the Federal Communications Commission, state regulatory agencies, the courts, and Congress, and advises on a wide range of regulatory, legal, and strategic business issues.

Jeff Lanning is counsel in the Washington, D.C., office of Womble Bond Dickinson (US) LLP. He has worked as both an in-house attorney and for the Federal Communications Commission, and advises telecom clients on regulatory advocacy and compliance matters.