Broadband Experts Raise Concerns About BEAD Affordability Requirements

Broadband experts raised concerns about the affordability requirements for middle-income households through NTIA's broadband, equity, access and deployment program, speaking during an American Enterprise Institute event Monday. Some said imposing pricing requirements and the FCC's efforts to reclassify broadband as a Title II service could hurt the BEAD program's deployment goals (see 2309280084).

The agency's low-income requirement mirrors the FCC's affordable connectivity program "to a large extent," said Benton Institute for Broadband & Society Senior Fellow John Horrigan. The requirement that BEAD recipients offer middle-income households a $30 monthly service is "a little bit vague" and there's "probably not much of a problem" for those households, Horrigan noted.

"Pricing is important, but it's not the top thing" consumers factor into whether they will subscribe to a service, said Duke University economics professor Michelle Connolly, saying age drives adoption "more than anything else." Connolly raised concerns about whether ACP is more a tool to increase adoption, a method of subsidizing broadband for households that already have service, or introducing rate regulation. "I think there's a real risk that if you're establishing a price, it's going to be very hard to get rid of that regulation," she said.

The BEAD program's deployment goals could be at risk with the implementation of the low-income affordability requirement, said John Mayo, Georgetown University's McDonough Chair of Business Administration. If a low-cost service is too low, "then you're going to wind up with implicit subsidies" that "dilute the effectiveness of the program," Mayo said: "We need to be very clear about the goal of these programs over time."

The program's low-income requirement can be effective if it's "thoughtfully and narrowly defined" to target households that wouldn't have access because of affordability, said New Street lead analyst Jonathan Chaplin, but stakeholders shouldn't "do anything that will deplete the returns on private capital such that we don't get private capital coming in to solve the access problem." Chaplin noted NTIA's affordability requirement for middle-class households was "vaguely worded" and "has a real danger of negatively impacting private capital coming in to fix this problem."

With the FCC set to consider reclassifying broadband as a Title II service, the prospect of any regulations that come from it may affect how much capital a company is willing to bid for in a given area through the BEAD program, Mayo said, "and not in a healthy way." Private capital is "not going to come in to back these subsidies and drive the investments required" if there's a prospect of rate regulation "at any point in the next 20 years," Chaplin said, but "if it's clear that the FCC is really forbearing their ability to regulate rates, then we can stop talking about Title II and net neutrality."

"You want people to come to the table" and reach "truly unserved areas," Connolly said. There's more chance of unserved communities being provided affordable access to broadband if funding is awarded to providers that serve households on a nationwide basis, Chaplin said. "They're not going to engage in price gouging because the consequences across their entire business is way too large for them to take on that risk," he said. Mayo agreed, saying reverse auctions could be part of the answer to ensuring providers are able to deliver services at the lowest possible cost.