On July 21, 2022, AEI hosted a panel to discuss how the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access, and Deployment (BEAD) program could be hampered by misguided priorities and cumbersome regulatory requirements.

I opened the event with a fireside chat featuring Federal Communications Commission (FCC) Commissioner Brendan Carr, which was followed by an expert panel consisting of Duke University’s Michelle P. Connolly, AEI’s Mark Jamison, Vanderburgh County, Indiana’s Cheryl Musgrave, and the Technology Policy Institute’s Sarah Oh Lam.

Below is an edited and abridged transcript of key highlights from the panel. You can re-watch the full event on AEI.org and read the full transcript here.

Shane Tews: Commissioner Carr, we’ve dedicated more than enough funding to end the digital divide, but getting the money was only half of the battle. What are the obstacles that could still hinder our efforts to connect every American?

Brendan Carr: We’ve basically turned the money spigot on full blast but have now walked away from the hose. If we aren’t going to be coordinated and direct these dollars to where they’re needed most, we aren’t going to get the job done. I’m very worried about wasted funds, the potential for abuse and misuse, and missed opportunities. We can still prevent some of these issues; it’s not too late. But looking at the NTIA’s plans for distributing the $42 billion in BEAD funding, I can see several fundamental misses.

One is overbuilding. There’s this approach right now where they are simply overlooking pre-existing high-speed internet service. For example, in Evansville, Wyoming, there is a provider offering fixed wireless over unlicensed spectrum. They are providing high-speed internet in a rural and remote part of the country. But according to NTIA, they’re going to look at that area and treat it as unserved. So, we could take all this funding and dump it into places that already have good internet, albeit using unlicensed technology.

This is a statutory problem because the drafters of this enactment specifically said this funding does not favor one type of technology or one type of provider. Yet NTIA is favoring fiber optics, and even goes beyond that by ultimately picking winners and losers. The bipartisan infrastructure bill that authorized this funding was very clear that we wanted people served now without technological preferences.

A second issue is that NTIA is adding all sorts of unnecessary and problematic provisions. Congress was very clear that the Department of Commerce does not have rate-making or rate-setting authority regarding internet services, yet they are effectively trying to do this.

Despite this, a lot of great things are going to come from this money. I think the core component of what the Department of Commerce has done is good, but it strikes me that political appointees came in and just tweaked everything in a way that’s going to be counterproductive.

Shane Tews: Michelle, you’ve read the BEAD Notice of Funding Opportunity several times already. What are your thoughts on it?

Michelle P. Connolly: Honestly, we’re giving the states very poor guidance. Looking at the criteria for selection, three quarters of the selection process has nothing to do with either the speed or reliability of the technology. In fact, the selection process orients those as the least important factors in its eligibility criteria.

I recently reread the notice and picked out the top four objectives that are clearly listed, and they have nothing to do with broadband. The first is that the states must agree to buy American unless this stipulation increases the cost by more than 25 percent. Not even mentioning our current supply chain issues, it’s not clear that the US will have enough raw materials.

The second requirement is using union labor or a project labor agreement. No matter what, this is going to slow things down and make the whole process more difficult. The third thing is this affordability clause for middle-class families, not for low-income families. This is essentially an introduction to rate regulation for the average consumer that isn’t pertinent to closing the digital divide. The fourth item is that they’ve added language saying no data caps or unjust or unreasonable network management practices, and these regulations pertain to issues of net neutrality. Those sorts of questions are voted on at the FCC, not the NTIA.

These are four things that really distract from and constrain the primary objective. They’re going to make things more expensive, slower, and less effective.

Cheryl, as someone who actually manages broadband deployment in Vanderburgh County, Indiana, tell us: How will you navigate the entire process granted everything we’ve discussed?

Cheryl Musgrave: It’s extremely difficult. Everything is quite overwhelming. I feel like an entrant in the Hunger Games who has to traverse all of the problems that the panel and Commissioner Carr have raised. The hurdles when trying to figure out how to navigate all the aforementioned challenges are so high that I think local officials are not going to be able to jump them. You’re going to have to look to state officials, not local officials, to deploy this massive amount of money, but most individuals and counties are actually distant from their state capital.

Yet, I also want to reflect on what has been said so far. Currently, the emphasis is on connecting people and families to broadband. Yet, the reason we need to broadband availability is to enable industry success and, by extension, economic development. This crucial element seems to be missing from the conversation.

Honestly, I prefer fiber because it can give us an economic development boost that we can’t really get with other technologies. If you don’t have fiber in place, you cannot get manufacturing entities to come as they will not tolerate wireless. Wireless isn’t awful; it is a great overnight fix, but it has several setbacks. A big oak tree in the middle of that signal could disrupt the entire connection.

Sarah, you’ve expressed concerns about the BEAD program’s accountability and oversight measures. What are your thoughts on the program’s trajectory? Do you agree with Commissioner Carr that there’s room for abuse and misuse of this funding?

Sarah Oh Lam: I’m quite concerned about oversight and evaluation of where the money is going. With the Recovery Act of 2009, there was a website, recovery.gov, where you could see all the different proposals and projects. I haven’t seen much language anywhere as it pertains to broadband deployment efforts about having a website that displays all the proposals or facilitates accountability. For BEAD, there’s not much in the statute that requires transparency of what the states are doing.

I’m concerned that after the $42 billion funds are spent, we’re not going to even know how it was spent or how the projects are doing. Knowing these things is important because there might be another round of funding, and we should want to know how the last round went.

Another issue raised by Commissioner Carr was reporting, or the lack thereof. Congress needs to spell it out in plain letters. Ideally, the statute would have said “NTIA must collect standardized data from all the states.” I think Congress assumes the agencies will track the spending, but if Congress doesn’t say that an agency needs to do X, Y, and Z, agencies just might not do those things.

Another concern is evaluation. Before getting the money, the states need to know what’s expected of them. Five years from now, we’re going to need to be able to look back and answer these questions: Was the money spent effectively? How could things be improved? Where were the most successful projects? American taxpayers should know more about where the money is going and how it’s getting spent.

Dr. Jamison, can you explain what a “beauty contest” is, how it applies here, and why it’s a bad idea? There are concerns that this method is going to be used in the distribution of broadband deployment funds.

Mark Jamison: A beauty contest is when an entity has money to spend, and they determine how they are going to distribute the money based on how well they get flattered. Prospective grantees are asked to list off all the wonderful and marvelous things they can do with the money, regardless of genuine feasibility. Whoever is the most impressive wins the money. So, the marketing is done by lobbyists, consultants, attorneys, and friends of politicians.

That’s how we used to distribute radio spectrum back in the day, and that’s how grants tend to work today. Once the grant is received and evaluated, politics triumph from start to finish.

The other approach to awarding grants is old-fashioned price competition. To do this, you say: “Here’s exactly what we want, and these different providers must tell me how much they would charge me to do this.” It’s just like if you were building a house. You make them compete on price, and the amount saved by using price competition as opposed to the parade of consultants, lobbyists, and political appointees is, like, 50 percent.

If we opt for a political parade, we’ll go from getting $42 billion worth of broadband to $20 billion worth. If you don’t have the accountability that Sarah discussed, now we’re down to getting $10 billion worth of broadband out of $42 billion spent. That’s a significant loss. If we’re really serious about closing the digital divide, we need to focus on that objective and that objective alone.

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