March 9, 2022
The Infrastructure Act includes $65 billion for broadband deployment. It is a massive opportunity to finally and fully connect ALL Americans and is a critical step forward toward meeting the President’s 100 percent connectivity objective. But it was not an action taken in a vacuum. The Infrastructure Act builds on the $80 billion in annual private broadband industry investment and billions more from existing federal programs, such as the FCC’s Rural Digital Opportunity Fund (RDOF).
Since the Infrastructure Act was passed, some entities have been aggressively pushing Congress, NTIA, and states to allow new federal funds to subsidize the same areas they have already committed to serve through programs like the RDOF. Regulatory arbitrage, double dipping? Call it what you will, but this is a terrible idea. Infrastructure Act dollars are meant to connect those homes and businesses that are not on the path to connectivity, not to double pay companies that have already signed up to provide service via a separate pot of federal money.
Let me explain: In December 2020, the FCC announced the winners of the RDOF, a reverse auction in which companies bid to serve homes lacking broadband access. Bottom line: the Commission introduced competition for broadband subsidy dollars and whoever could meet the minimum performance standards at the lowest subsidy amount in an area won. In announcing the winners, the FCC stated, “We aimed for maximum leverage of taxpayer dollars and for networks that would meet consumers’ increasing broadband needs…”
Some bidders won a lot of federal support to serve numerous homes by significantly underbidding the competition, elbowing out competitors in rural markets across the country. Some pointed to the unexpectedly low bids as an example of a successful auction, saving taxpayer dollars. For others, the ultra-low bids raised a bunch of eyebrows (will the math actually add up?).
To get the FCC to approve the winning RDOF bids and award the funds, the Commission’s rules clearly stipulate that a winning bidder must provide a “description of how the required construction will be funded” and certify that it “will have available funds for all project costs.” In other words, before the FCC can approve funding, it must be convinced that the bidder has finances in place to meet its service obligations.
Here’s the catch. Some entities are now actively lobbying Congress, the Department of Commerce and states to use federal Infrastructure Act money to pay for their RDOF deployment costs. Specifically, they want to use Infrastructure Act funds destined for unserved homes to pay for one of their major deployment costs – access to pole attachments. Thus, some RDOF winners are asking the government to pay for the pole attachment costs that they either didn’t factor into their bids, or to double recover those costs to the extent they were included. So much for the FCC’s goal of “maximum leverage of taxpayer dollars.”
As one provider recently suggested, “in areas where a broadband provider has an existing commitment to offer service [i.e. RDOF], states should be permitted and encouraged to use [Infrastructure Act] funding to complement the success of those efforts where circumstances so warrant.” Translation – we’d like to have another agency pay for our pole attachment costs that we incur to meet our RDOF commitments.
This double dipping is wrong. Building and operating broadband networks is expensive and it involves a lot of different costs – fiber, equipment, access to poles and rights of way, labor. These are all costs that everyone who bid in the RDOF auction knew about before placing their bids. Allowing Infrastructure Act funds to pay for RDOF builds is unfair to taxpayers and companies who rationally bid in the RDOF auction. It would harm the integrity of the auction system. And it will lead to fewer American homes receiving broadband.
There are a lot of really productive things state and federal agencies can do to get more Americans broadband access. This is not one of them.
Exploring all possible avenues to reduce their costs, the cable industry is also pushing the FCC to change its longstanding rules that govern payment for new poles and pole replacements. The current rules are clear, the cost causer (that is, the entity that modifies or attaches to the pole) pays for the upgrade, modification…or the replacement of a pole if need be. Cable wants the pole owners to absorb some or all of the costs of a new pole, even when the pole owner otherwise had no intention of putting a new one in the ground. Cable calls it reducing a barrier to investment.
Reality check – a new pole is a fixed cost. Making the pole owner pay for a pole replacement caused by a competitor’s attachment is not removing a barrier or reducing costs; it is just shifting costs from one company to another. Another potential issue – forcing pole owners to pay for new poles needed to accommodate a competitor’s attachments could lead to increased pole attachment rates for all attachers. One other thing – the rules governing pole replacements have been in place for many years without much fanfare at all. One has to wonder why all of the sudden there is a pole replacement crisis. See above for one theory.
Rather than try to shift expenses from one competitor to another, we do strongly agree with the cable industry, and others, that all companies should provide reasonable and timely access to poles, including to their competitors, when broadband deployment depends on pole access. And that must include poles owned by electric cooperatives and municipalities, particularly as they increasingly compete in the broadband business. Congress should update the statute governing pole attachments so that all pole owners must provide reasonable and non-discriminatory access. Where states have the authority, they should do the same. That is a true barrier to deployment that should be removed.
Jonathan Spalter is President and CEO of USTelecom – The Broadband Association