Calix : How To Navigate Rural Broadband Funding Under the Biden Administration

For the Democrats to take full control of the Federal Communications Commission (FCC), the president needs to nominate-and the Senate needs to confirm-a third Democratic commissioner. When will that occur?

The Biden administration has many more important positions to fill throughout the executive branch than the third Democratic FCC commissioner. That said, the new administration appears to be focused on getting its team in place, so there's a good chance Biden will nominate a new FCC commissioner by the second quarter, and that person should be confirmed a month or so later.

As the Democrats gain control of the FCC, what's their agenda?

The Democrats have already shown a great interest in providing support for broadband connectivity for in-need individuals and students during the COVID emergency. With assistance from Congress, over $10B of support could be provided to address these concerns, with the first funds flowing shortly for the Emergency Broadband Benefit Program. Later this year, I expect the Democrats will initiate a proceeding to overturn the 2017 Restoring Internet Freedom order by making broadband internet access service an interstate telecommunications service, subject to Title II of the Communications Act.

Would Title II regulation of broadband internet access service lead to rate regulation?

Let me explain why that's unlikely. Traditional rate regulation worked to keep rates for voice service somewhat reasonable, because voice service was simple and homogenous, and there were a limited number of monopoly providers to oversee. However, those conditions do not exist for broadband internet access service. So, any upside from regulating broadband rates is dubious, and rate regulation has real potential to harm investment, innovation, and competition. That said, some politicians and policymakers are proposing to require that all broadband providers offer a rate regulated (inexpensive), low-performance tier product to low-income or in-need consumers. New York Governor Cuomo earlier this year proposed something like this. While this may seem easy to administer, regulators will constantly need to determine whether service performance is adequate and the price is reasonable. That concern, however, may not be sufficient to prevent the governor and other politicians from adopting such a requirement.

The COVID stimulus law enacted at the end of 2020 contains funding for a number of new broadband programs. How soon will these programs get implemented?

The FCC is moving quickly to implement the $3.2 billion Emergency Broadband Benefit Program, which will reimburse broadband providers when they provide broadband service to low-income or in-need customers at reduced rates-a much better alternative than rate regulation. With the FCC adopting rules for the program, it will go into effect shortly, and I expect that the current mobile providers already offering Lifeline service to millions of customers will jump on the program right away because they are familiar with the requirements and can participate at scale, sharing regulatory overhead costs over a large base. Wireline providers also are eligible to participate in the program, but they will likely need to have many customers to justify the administrative cost. And, because the amount allocated for the program may get used up in a matter of months as providers quickly sign up large numbers of customers, Congress will need to 'top up' the funding if the program is going to last for the duration of the pandemic.

There also are new broadband connectivity programs that NTIA will administer-one for tribal lands ($1 billion for grants for adoption and deployment) and one for public-private partnerships ($300 million for grants for deployment). NTIA should issue by February 25 a notice of the application procedures and requirements, and applications will be due 90 days later. NTIA then has 90 days to issue the grants.

Are states adopting programs that will provide grants for broadband deployments?

Yes. Hardly a day goes by that I don't see a state adopting a program to spend tens of millions, if not more, to accelerate broadband deployments-not only in rural areas but to urban areas with insufficient connectivity. States view broadband as essential infrastructure that all Americans must be able to access.

Will Congress adopt a major broadband infrastructure program this year?

With the Democrats taking control of Congress, the odds that a major broadband infrastructure program will be enacted have increased. But, Democratic control is by only a slim margin, and many issues first need to be addressed. How would the program fit with existing federal and state programs? What infrastructure should be preferred, and what performance should be required? What areas should be deemed unserved? How will the program be funded? What agency-federal or state-will run the program? There are answers to each of these questions, but so far there's not a consensus on them. Given all of these questions-and given that others issues are going to take precedence-Congress is more likely to consider broadband infrastructure legislation in the second half of this year.

Will the FCC or Congress reform the universal service contribution mechanism?

The FCC might, but when and how? The current mechanism is increasingly unsustainable, although-even with the assessment rate increasing-the burden on a residential/individual consumer is not that great. Many fixes have been offered, ranging from assessing broadband internet access service to having Congress take over the responsibility and appropriate funding. To me, the threshold question is how much should each customer segment contribute? For instance, would it be reasonable to split equally the total cost of the universal service program contribution requirement among fixed line and mobile consumers, retail business customers, and over-the-top customers? Each then would be responsible for approximately $3 billion annually. This may be a reasonable obligation, and then we could decide what assessment methodology (e.g., telephone numbers or connections) would work best for each of the three groups. As you can see, it will take time to answer these questions, but there is a solution to this problem.

Will the Biden administration be concerned about supply chain issues?

Yes. It will be as much a priority as it was in the previous administration. Equipment vendors and communications providers should proceed accordingly.

Find more expert resources from Calix on rural broadband funding.