A growing consensus that everyone who wants access to the internet should be connected has led to an explosion of expenditures by the federal government along with record investments by the private sector.  In 2022, the broadband industry spent a record $102.4 billion, 19 percent more than in 2021.  According to Federal Communications Commissioner Brendan Carr, there is up to $800 billion available for broadband infrastructure from the federal government.  Those funds include $42.45 billion in the Broadband Equity Access and Deployment (BEAD) program, which was provided to the National Telecommunications and Information Agency (NTIA) in the Infrastructure Investment and Jobs Act (IIJA).  But the implementation of the program by the NTIA is more likely to impede broadband deployment and potentially waste billions of dollars.

Providing broadband across the country, which includes densely populated cities and difficult to reach rural and mountainous areas, requires funding to be vendor and technology neutral.  While some federal programs restrict how these funds can be provided, the IIJA promisingly included a technology neutral approach for BEAD funding.  It also stated, “Nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service.”  However, the NTIA’s Notice of Funding Opportunity (NOFO) ignored the statutory language and issued guidance that establish requirements for spending BEAD money that were not included in the IIJA.  One of the most harmful provisions is requiring states to set a specific rate for broadband service. 

Regulating the price of broadband service by setting an arbitrary rate that is unrelated to the cost of providing that service will make it far more difficult to deploy broadband to unserved areas across the country.  In NTIA Administrator Alan Davidson’s June 9, 2022, response to questions for the record following his Senate Commerce, Science, and Transportation Committee June 9, 2022, confirmation hearing, he said twice that the IIJA does not allow NTIA to engage in rate regulation for BEAD funding.  On October 3, 2023, Commerce Secretary Gina Raimondo told the committee, “I want to be clear.  We are not rate-regulating.  We are not rate-setting.  We are not requiring states to do that.”

They may have meant what they said, but that is not what the NTIA is doing in its approval of state and territory plans for BEAD funding.   For example, Virginia, like seven other states, decided to tie the affordability of proposals by providers to the FCC’s Urban Rate Survey benchmark amount for a service area, meaning that the rate will be based on the marketplace.  This funding proposal was rejected by NTIA.

A February 15, 2024, Free State Foundation article noted that in response to NTIA’s refusal to approve Virginia’s applications, the state contended that “states are preempted by federal law from regulating the rates of broadband services generally.” 

The Virginia Office of Broadband noted that it had, “reviewed both the Bipartisan Infrastructure Law and the BEAD NOFO.  The requirement described in NTIA’s latest feedback does not appear in either of them.”  VOB further noted that its solution of tying the low-cost broadband service option to market conditions is like an approach that “has produced positive outcomes under Virginia’s last-mile broadband deployment grant programs.”  Yet, the NTIA insists that it knows best and that this proven concept cannot be permitted in Virginia or any other state.

Former FCC Commissioner Michael O’Rielly said that the one size fits all approach to regulating rates means that, “If you love what Obamacare is doing to America’s health care system, just imagine what the same approach will do for broadband.” 

Members of Congress have expressed their own concerns over provisions of the NOFO that do not comply with the IIJA.  An April 23, 2023, letter from 11 Republican members of the Senate Commerce, Science, and Transportation Committee noted that NOFO not only defies the IIJA prohibition against rate regulation, but also “falsely suggests that states and the NTIA have the authority to regulate rates for broadband service and should be removed from BEAD rules.”  The senators requested that the NTIA should make it clear that the states do not have rate regulation authority and that no new rules related to such authority should be introduced that are not consistent with congressional intent. 

The consequences of NTIA’s continued refusal to approve the BEAD applications from states like Virginia that are following the statute rather than the NOFO guidance will impede the deployment of broadband to unserved locations and lead to the waste of billions of dollars.  Congress should again make it clear that the agency should approve applications that follow the law and stop forcing states to include rate regulation.