Senate BEAD Hearing Addresses Questions About Future Performance

On February 10^th, the Senate Appropriation Committee’s Subcommittee on Commerce, Justice, Science, and Related Agencies held a hearing entitled “A Review of Broadband Deployment Funding at the Department of Commerce.” The sole witness was Secretary of Commerce Howard Lutnick. Although other topics arose, the majority of time was spent on an update of the Broadband Equity Access and Deployment Program (BEAD). The Free State Foundation has recently written about these same issues addressed at the hearing.

Senator Jerry Moran, Chairman of the Subcommittee, started the hearing with his opening remarks. While he acknowledged that the "Benefit of the Bargain" initiative imposed by the Trump administration had resulted in apparent savings of $21 billion, it still remains the case that no Internet connections have been made and no programs have been completed. States still face hurdles spending BEAD money. Senators also have questions about what will happen to unallocated funds. Senator Moran also alleged that the "Benefit of the Bargain" effort focused on getting the cheapest price rather than the best value.

In their individual questions many Senators expressed significant concern about what will happen to the Fund’s unallocated $21 billion. They clearly favor reallocating it to the states for purposes related to broadband expansion. They did not, however, express a clear preference about how the remaining money should be divided among the states or the purposes for which it should be used. Some worried that the existing allocation would not be enough to achieve the mission of universal coverage.

Secretary Lutnick’s replies addressed some of their concerns. He clearly stated that the funds would not be returned to the Treasury. Rather, the statute authorizing the BEAD program will govern the allocation of remaining funds. However, that statute gives the Department a great deal of freedom regarding their use so long as it is related to the general goal of achieving universal coverage. The Department is actively soliciting ideas and plans to kickoff a listening tour with a town hall on February 11^th. As for the adequacy of the funds, Secretary Lutnick pointed out that, as a condition of getting its grant, each state broadband authority was required to achieve full coverage of its population. As a result, he said no state should run out of money. The Secretary would not commit to spending the money solely on further broadband expansion, however. He did promise that providers, including Starlink, would not be allowed to change their commitment after the fact.

Although some Senators stated their states were having trouble accessing the money, Secretary Lutnick indicated that access should have been granted once the states signed their approved plans. He also said that this process is almost completed and should move quickly from now on.

As for the unallocated money, several possible uses have been suggested. These include efforts to speed the permitting process, the purchase of additional poles to which equipment can be attached, using broadband to increase the use of precision agriculture, and furthering public safety. At the end of the hearing Chairman Moran asked whether the Administration might retroactively condition BEAD spending on states not passing AI laws. A recent Executive Order apparently tasks the Secretary with recommending whether such a condition could be imposed. Secretary Lutnick deferred answering.

Senators are clearly skeptical that the BEAD Program will accomplish extending broadband coverage to everyone. They are also very interested in how the remaining $21 billion will be spent. The Secretary is likely to face more questions unless significant new broadband deployment starts to occur soon or Senators generally approve of how remaining funds are allocated.

FCC Rules on the Comcast/Appalachian Power Dispute: Speeding Decisions, Reducing Costs and Expanding Broadband

Over the last year the FCC has prioritized regulatory reform to speed decision-making and reduce costs associated with broadband deployment. Its February 5^th decision in a private dispute between Comcast Cable Communications and Appalachian Power Company (APCO) furthers these goals by promising to resolve legal issues faster. Specifically, its decision in the Comcast dispute indicates that, where possible, the Commission will use its adjudicatory powers to resolve disputes as early as possible, allowing deployment to proceed. Even parties that lose a particular case should welcome this reform as it saves them time and money from a pursuing a losing cause.

The dispute centered around Comcast’s use of utility poles owned by APCO. Existing laws generally allow broadband providers to place their equipment on poles owned by others. In return, pole owners have a right to be compensated for any necessary costs. Agreement on how to apply this general rule to specific cases can be contentious, however. In this case APCO argued that Comcast should pay the full cost of replacing poles that would have needed replacement anyway. Apparently, third parties had damaged some of the poles. Even though these poles would have to be replaced anyway, APCO insisted Comcast pay the full cost. Comcast argued it should only have to pay for costs that benefited it.

The Commission’s order was significant because it used new powers, proposed by the Free State Foundation, to reach its decision. Specifically, the FCC used an "accelerated docket" process meant to speed up broadband expansion. It also used a Rapid Broadband Assessment Team (RBAT) of FCC personnel which was formed in 2023 to “expedite the resolution of pole attachment disputes.” The RBAT determined the facts upon which the Commission made its judgement. In brief, the Commission unanimously ruled that Comcast was not responsible for bearing the burden of paying the costs that were caused by a third-party. Comcast was only responsible to the extent that it benefited from any pole replacement.

I applaud this for two reasons. The first concerns the substance of the Commission’s decision. Comcast should not bear responsibility beyond the marginal cost of its installations. To require more would unnecessarily increase the cost of broadband deployment which the Commission is supposed to further. In fact, since Comcast is undertaking this project as part of the federal Broadband Equity Access and Deployment Program, the additional costs would be partially funded by taxpayers. The decision also increases the ability of market forces to influence the final cost borne by each party.

The second reason is the use of an expedited process to resolve the dispute. The Commission was able to render its decision within 60 days of Comcast’s complaint. The presence of an experienced and neutral decision-maker promises to significantly reduce the cost of resolving future FCC pole attachment disputes. Finally, by providing parties with greater certainty about how it will rule, the FCC can encourage settlements. That should benefit everyone.

Environmental Regulations Delay Telecommunication Deployments and Impose Additional Costs

A new NERA study commissioned by CTIA finds that “[t]he current permitting process adds significant costs for wireless infrastructure and service providers and delays the deployment of higher-capacity networks and innovative services in the United States.” In August of this year, the FCC requested information on modernizing National Environment Policy Act rules. The report estimates that the rules cost $7.5 billion over 10 years, supporting the FCC’s current efforts to streamline its regulations and reduce unnecessary delays in state and local deployment efforts. Overall, regulatory reform can deliver large benefits for consumers and industry.

The study concentrates on the costs to outdoor wireless providers imposed by the National Environmental Policy Act (NEPA) and the National Historical Preservation Act (NHPA). It found a general lack of data on the costs of complying with these Acts and therefore used surveys and working sessions with major wireless providers to generate data. NEPA requires agencies to assess reasonably foreseeable environmental impacts of major federal action. Section 106 of NHPA requires them to identify historical properties that may be affected by a proposed “undertaking” such as a wireless infrastructure deployment. If either of these identifies significant environmental effects a more detailed environmental assessment may be required. 

The study estimated a total cost of $7.5 billion in reduced welfare and lower economic activity over ten years. Specific costs include outdated requirements that raise prices and reduce plan features, the deterrence of new mobile wireless network investments, especially in rural areas, delays in service deployment in rural areas, and an inefficient allocation of services away from deployment and toward environmental concerns. 

This cost consisted of four sources. Regulatory compliance cost $2.2 billion. These costs were projected to rise significantly over the next decade. This encompassed NEPA assessments costs, NHPA Section 106 evaluations, and environmental assessments costs. Out-of-pocket expenses added another $4.0 billion. These requirements also added an average of five months to new deployments of technology and upgrades, adding another $1.3 billion to the total cost. The study did not estimate the opportunity costs of investing resources into less valuable projects. These costs varied significantly between projects. For example, NEPA assessments varied from $500 to $5,500.

The results are in line with other studies. A 2018 study by Accenture estimated that costs related to required NEPA and NHPA reviews accounted for 29 percent of deployment costs or $2.43 billon from 2018 to 2026. A 2019 study found that the effect on U.S. GDP of a six-month delay in 5G deployment would be roughly $104 billion and cost 25,200 jobs. Finally, a 2023 study estimated a six-month delay would affect 77 million subscribers and reduce consumer welfare by $1.3 billion.

Regulators need to understand that regulatory compliance imposes significant costs in the form of out-of-pocket expenditures, project delays, and a reduction in general welfare. They need to ensure that these costs are necessary to obtain important consumer benefits and that better alternatives are not available.

Internet Prices for Highest Speeds May Be Up, But So Is Quality for All Plans

Is the price of Internet service rising or falling? Benton Senior Fellow John Horrigan recently tried to answer this question in a recent analysis for the Benton Institute using the FCC’s Urban Rate Survey (URS). His analysis builds on a prior piece by USTelecom. The answer is important because significant real increases in the cost of broadband may delay its benefits and serve as an argument for greater federal involvement. In brief, the price of most connections has fallen significantly since 2020. However, subscribers are choosing to spend more on faster plans.

 

Horrigan concluded that “[b]roadband service offerings at the highest speeds are expensive, growing in prevalence, and driving up average broadband prices.” Average price across all broadband plan offerings grew 4.8 percent in real terms. However, he also found that the rise is mainly due to increased demand for high-speed connections (2 Gbps or higher), not general inflation. The portion of high-speed plans in the URS sample rose from 9% to 16%. As the number of high-speed plans increases, they form a larger percentage of the URS survey. This in turn raises the average price for all plans, even if the price of every specific plan remains the same.

The chart below gives the average change in the price of different plans between 2020 and 2025 for different equipment and speeds. Higher than 2 Gbps is measured from 2021.

 Change in Real Broadband Prices from 2020 to 2025

Speed or Technology	% Change
Technology
Cable	-13.8
Fiber	+40.1
DSL	-9.3
Fixed Wireless	-50.7
Speed
Below 100 Mbps	-15.0
100-1000 Mbps	-28.9
1000-2000 Mbps	-15.3
Greater than 2000 Mbps	-25.3

Consumer demand has likely driven most of the increase in fiber. Horrigan also found that the quality of Internet plans is increasing. The most obvious improvement has been in data speeds. However, increases in the variety of content and reliability also matter. As the quality of broadband increases, consumers are willing to pay more.

The survey does point to a possible price ceiling in which low-income users are unable to pay higher prices even when better quality is considered. The decline in offerings of the lowest-cost plans may hurt low-income households. However, many Internet providers have special offerings for qualified low-income households that offer discounted prices. For example, Xfinity Essentials provides affordable home Internet for qualifying households ($14.95 per month for up to 75 Mbps, or $29.95 per month for up to 100 Mbps) — as well as low-cost computers, free WiFi hotspots, and free Internet training. CTIA points out that the industry has participated in programs like Lifeline, the Emergency Broadband Benefit and Emergency Connectivity Fund, and the Affordable Connectivity Program.