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Funding & Universal Service Are Key; What Comes Next Also Covered at NTCA’s Telecom Executive Policy Summit

Funding & Universal Service Are Key; What Comes Next Also Covered at NTCA’s Telecom Executive Policy Summit #

Roughly 100 rural broadband provider executives heard from key government officials during the first day of the Telecom Executive Policy Summit (TEPS) in Washington, DC, produced by NTCA – The Rural Broadband Association. Prior to meeting with their Congressional delegations on Capitol Hill and other policymakers, rural broadband providers from across the country had a full day of sessions with various government and industry leaders on November 6th to discuss funding, the future of Universal Service, cybersecurity, and supply chain issues, among others. Net neutrality and digital discrimination proposals were also addressed.

“Broadband Built to Last” – Beyond Infrastructure Deployment, A Sustainable Universal Service Fund Is Key #

NTCA’s CEO Shirley Bloomfield kicked off the event by emphasizing the need to ensure that networks built today will be financially sustainable in the long term. She announced the launch of an advertising campaign, “Broadband Built to Last,” as part of the effort to achieve this goal. The campaign will run in the Axios Tech section, Axios Pro Tech Policy newsletter, Communications Daily, and Politico Tech throughout November.

Infrastructure deployment funding, Bloomfield indicated, is critical, but the job is not done once a network is built. There are loans to repay, networks to maintain, transit, and many other costs to defray – all while keeping service affordable, which is especially challenging in high-cost areas. Therefore, Bloomfield said, ensuring that the high-cost Universal Service Fund remains viable is more important than ever.

Furthermore, consumer rates for 100 Mbps service would have to be raised by over $100 per month to make up for losses in USF support.

Shirley Bloomfield at NTCA’s 2023 TEPS

However, she continued, just as historically high levels of broadband funding make a sustainable USF system even more critical, USF continues to be attacked in court by those seeking to have the entire program eliminated. In the event universal service funding was not available, NTCA members have reported that they would have to cancel approximately 85 percent of their planned broadband construction over the next two years. Furthermore, consumer rates for 100 Mbps service would have to be raised by over $100 per month to make up for losses in USF support. This would run counter to the stipulation in the 1996 Telecommunications Act that rates in rural locations should be reasonable and comparable to those in urban areas.

In addition to filing in the USF court cases, Bloomfield discussed NTCA’s ongoing efforts on Capitol Hill and participation in proceedings at the Federal Communications Commission regarding how support for the USF should be structured in order to keep the program sustainable.

The Capital Project Fund – Inning Three of a Nine-Inning Game #

Conference participants next heard from Joseph Wender, the Director of the Capital Projects Fund (CPF) at the Treasury Department.

Wender remarked that while at $10 billion, CPF is smaller than NTIA’s $42.5 billion Broadband Equity, Access, and Deployment (BEAD) fund, CPF was launched earlier and funding is flowing today. Nine of CPF’s ten billion dollars has been greenlit, Wender said, and every state has been approved for part or all of its CPF allocation. Even with this progress, he noted that roughly $4.5 to $5 billion has yet to be awarded by state broadband offices, so a lot of opportunity remains.

The biggest lesson from CPF, Wender said, is that “D.C. does not know best.” Every state is different. Some had existing broadband programs that could plug into CPF relatively effortlessly, while others had to make adjustments to state law. He pointed out four states in particular (Virginia, West Virginia, New Hampshire, and Louisiana) that are ahead of most, submitting their CPF applications months before the deadline.

Wender also expressed that another component of CPF helped pave the way for the separate Broadband Equity, Access, and Deployment (BEAD) program. He said that CPF struck a balance regarding the Uniform Administrative Requirements for federal awards found in Part 200 of the Code of Federal Regulations. He also credited NTCA for helping craft solutions for procurement rules.

Even with the progress CPF has seen thus far, Wender described the program as being “in the third inning of a nine-inning game.” Just because a state wins an award, he noted, that does not mean they receive the money. Rather, states only receive the funds based on reaching project milestones, at which point the states will reimburse the service providers. Of the program’s $10 billion, only about $250 million has been outlaid thus far. This mechanism, along with quarterly reports and monthly outreach, gives Treasury tremendous leverage to ensure compliance, according to Wender.

…the current funding availability as a “once in a lifetime” opportunity. So networks need to be built to last for decades…

Joseph Wender at NTCA’s 2023 TEPS

He emphasized that the money would not be there later. Citing his years of experience on Capital Hill, he characterized the current funding availability as a “once in a lifetime” opportunity. So networks need to be built to last for decades – which he characterized as meaning fiber “in the vast majority of cases.” Therefore, he said that some states may be reserving the hardest locations to serve for BEAD.

Wender also stressed affordability. As it stands, he noted that the current Affordable Connectivity Program, which helps qualified low-income consumers obtain steep discounts for broadband service, is expected to run out of funding this coming spring. Should that occur, he said, there will be a “cascading effect” for both households and providers.

Many households rely on ACP for connectivity, while providers must make projections about revenue streams. Wender commended conference participants for taking their message to Capitol Hill, observing that requesting funding year after year is not a desirable approach, as “both providers and households need certainty.”

BEAD: Designed for Flexibility #

Flexibility was a recurring theme that provider executives heard with regard to the $42.5 billion BEAD program from Doug Kinkoph, Associate Administrator of the Office of Internet Connectivity and Growth at the Department of Commerce’s National Telecommunications and Information Administration (NTIA). He cited the recent BEAD Letter of Credit (LoC) waiver, which allows for the use of performance bonds or other alternatives to the Letter of Credit requirement, as an example of NTIA’s use of a flexible approach. Kinkoph stated that after receiving significant feedback from stakeholders about the LoC requirement, the waiver provided for other approaches while retaining accountability.

While NTIA’s process allows for flexibility, Kinkoph encouraged providers to stay engaged.

Doug Kinkoph at NTCA’s 2023 TEPS

He also noted that states have flexibility regarding how they determine service areas for the program. These areas can be political subdivisions, census blocks, or other definitions. States are also permitted to allow providers to define their own service areas. Flexibility is also built into the Extremely High-Cost Service Area Threshold provision in BEAD, which affects how the most remote, difficult, and expensive locations to serve might be treated. “We require a definition, not necessarily a dollar figure,” Kinkoph explained. “We don’t have all the answers.” He did remark that the rule remains that state plans need to require 100 percent coverage. How they get there will vary.

Similarly, Kinkoph noted that states have a lot of discretion regarding how they address low-cost and middle-class affordability requirements. States, he emphasized, are not required to set specific rates to meet low-cost or middle-income affordability definitions. They can do so if they wish, or they can establish a range of rates, Kinkoph said, explaining that a formula based on costs or other variables might also be acceptable. The key, he said, is to provide a plan that provides an idea of what eligible subscribers would pay; or to establish competition to incent lower rates. Again, states have flexibility.

While NTIA’s process allows for flexibility, Kinkoph encouraged providers to stay engaged. He observed that the deadline for states to file their BEAD plans for NTIA approval remains December 27. Therefore, any state that has not yet put its plan out for public comment must do so soon. Great feedback comes for those who already serve more challenging areas, Kinkoph said, so he expressed his hope that service providers would continue to raise issues with states and NTIA as they arise.

Author Steve Pastorkovich

By Steve Pastorkovich

Steve Pastorkovich is a Washington, D.C.-based consultant specializing in telecommunications, trade association operations, and public policy. Reach him at https://www.linkedin.com/in/steve-pastorkovich-4a94412/

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