EchoStar: Chutzpah in Communications Land

 A classic example used to explain the meaning of the Yiddish term "chutzpah" is the joke about a boy who murders his parents and then begs the judge for mercy because he is an orphan.

 

EchoStar hasn't killed anyone. But its ploy to claim payments from the trust fund the FCC required EchoStar to establish as a condition of its approval of the transfer of EchoStar's spectrum licenses to AT&T and SpaceX certainly qualifies as one of the most egregious acts of chutzpah in Communications Land.

 

The background facts are well-known. When the FCC's Wireless Telecommunications Bureau (WTB) approved EchoStar’s sale of its licenses on May 12, 2026, for tens of billions of dollars, it required EchoStar to set up a trust fund to help pay tower companies and others that helped construct EchoStar's 5G network. While EchoStar was required to build the network as a condition on its licenses, it refused to pay the vendor companies that actually did so.

 

EchoStar has now told a federal bankruptcy court that this fund can be used to pay a loan one EchoStar subsidiary supposedly made to another, a claim so large, according to the WTB, it threatens to "swallow the fund."

 

In a July 30, 2026, order, the WTB firmly rejected EchoStar's act of chutzpah: "We disagree, and clarify what should be obvious – that the fund cannot be used to pay companies that did not build the network. And to ensure that that the purpose of the fund is not perverted, we also modify the fund’s terms to explicitly exclude from payment any claims of EchoStar or its subsidiaries."

 

Never one to give up on a far-fetched gambit – especially one trying to "swallow a fund" meant for the benefit of others – EchoStar has now asked the full Commission, in an August 30 Application for Review, to reverse the Bureau's order. EchoStar contends that, because the agency's order establishing the trust does not explicitly limit the payouts to claims of third parties, it's entitled to take funds from the trust with one hand that it supplied with the other.

 

The Wireless Telecommunications Bureau's July 30 order, to ensure its intent in creating the trust fund is carried out, modifies the definition of a fund claim to exclude any claims on behalf of EchoStar or its subsidiaries or affiliates, or any assignee thereof. The Bureau's July 30 order explains what almost certainly was evident to all when the FCC required that the trust fund be established as a condition of its approval of the transfer of EchoStar's spectrum licenses:

 

"The purpose of requiring EchoStar to create the Fund was to ensure that some of the tens of billions of dollars EchoStar is receiving for its wireless licenses be used to pay those who built the 5G network that EchoStar promised and was required to build as a condition on holding those licenses. That purpose is not realized if EchoStar pays the money to itself (directly or indirectly), or uses it to pay other of its debts or those of its subsidiaries or affiliates."

 

In essence, EchoStar's main argument seems to be that the Administrative Procedure Act prevents the Bureau from clarifying its July 30 order to make crystal-clear, if need be, that the lack of an explicit limitation in the agency's original order creating the trust fund did not mean that EchoStar itself would be able to claim payments from the very trust it funded. I don't think the APA does any such thing.

 

If EchoStar's gambit succeeds, not only would the specific tower and other 5G infrastructure builders for whose benefit the trust fund was established be injured, but, as importantly, the prospect for future network build-outs will be diminished as a result of the lack of confidence that contracts will be honored and that the rule of law will prevail.  

 

I forget what happened to the orphan who, in a show of chutzpah, pleaded with the judge for mercy after killing his parents. But you don't need to be an expert in administrative law or in Yiddish to suspect that, in this instance, EchoStar's exercise of chutzpah in Communications Land will be to no avail.

Draft Bill Would Reclaim BEAD Program Nondeployment Funds

Senator Joni Ernst (R-IA) reportedly has drafted legislation that would direct the states to return funds from the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program not specifically used for broadband deployment – a savings estimated to be as high as $20 billion.

The "Recovering Excess Communications Appropriations while Protecting Telecommunications Upgrades, Reinvestment, and Expansion Act" (the RECAPTURE Act), which as of this writing has not yet been introduced, would amend the statute that created the BEAD Program – the Infrastructure Investment and Jobs Act (IIJA) – to clarify that each state shall "deposit in the general fund of the Treasury, for the sole purpose of deficit reduction," funds beyond those "designated for a specific purpose in the final proposal" approved by NTIA – that is to say, in the wake of the "Benefit of the Bargain" revisions, nondeployment funds.

In "How to 'Spend' Unused BEAD Funding," an October Perspectives from FSF Scholars, former FCC Commissioner and current Free State Foundation Adjunct Senior Fellow Michael O'Rielly – while acknowledging that some state use of BEAD Program funds for non-deployment purposes is "contemplated in the infrastructure law" – recommended two alternative approaches:

• One, given that the national debt is massive and growing rapidly, nondeployment funds should be returned to the U.S. Treasury: "[w]ith the nation facing such widely acknowledged financial difficulties, the thinking by many experts is that this money needs to be reclaimed."

• Two, in light of past grant-recipient performance, at least some of that money should be set aside "to account for the simple fact that not all broadband builds will happen as planned…. [E]xperience suggests that a reserve funding stream could be useful to handle this inevitability."

It is worth noting that others, including Senator Roger Wicker (R-MS), have argued that the IIJA allows states to retain any such remaining money. As Senator Wicker wrote in September:

[T]he Trump administration has changed the way these broadband funds will be spent. Because of this, many states' proposals will come in under budget. These states could actually end up with leftover funds from the 2021 broadband legislation. In that law, Congress was clear: States can use this remaining grant money. That policy rewards those who wisely stewarded their deployment funds.

Senator Ernst's draft legislation, should it ultimately become law, would provide a definitive response to this potentially open question.

Relatedly, Senator Ernst announced on November 7 that she is introducing the "Returning Unspent COVID Funds Act," a bill that would "claw back more than $65 billion in unspent COVID funds and return the money to taxpayers." That legislation would target subsidy programs created by the American Rescue Plan Act of 2021, among others.

USTelecom Report: Broadband Investment Continues to Rise Rapidly

USTelecom – The Broadband Association is out with its annual report on investment in communications infrastructure by U.S. broadband providers. For 2024, the report documents that America's broadband providers invested $89.6 billion in new infrastructure. This brings the total capital expenditure investment in broadband facilities since 1996 to more than $2.2 trillion.

That's a huge amount of capex for 2024 and since 1996. As far as I know, no one has seriously questioned the validity of USTelecom's annual investment reports.

It's not news that it is very expensive – very capital intensive – to meet America's expanding need for fast, reliable, and secure broadband networks. That's what the USTelecom reports have documented over the last three decades. Certainly, America's broadband networks will be essential to enabling and facilitating the burgeoning use of AI. America's economic security will depend on it.

Of course, there is an important policy context that undergirds any discussion of the role of broadband – and continued broadband investment – in America's economy. Given the competitive environment that exist today, there certainly is no need for adoption of any heavy-handed regulatory mandates such as the now eliminated "Net Neutrality" regulations. They stifle investment and innovation, rather than promoting it.

And there is a need to remove permitting and other impediments, especially at the state and local level, that unduly delay infrastructure projects and render their costs unreasonable.

Senators Reintroduce Bill for Faster Broadband Permitting on Federal Land

According to reports, on March 5, Senators John Thune, Ben Ray Luján, and John Barrasso reintroduced the Accelerating Broadband Permits Act. The bill's purpose is to improve executive agencies' processing of permit applications to construct communications facilities on federal land. 

As explained in my blog post from August 7, 2024, executive agencies with supervision over federal lands have been found by have problems processing permit applications within the MOBILE NOW Act's 270-day deadline. The Accelerating Broadband Permits Act is intended to help identify instances where the agencies are at risk of missing deadlines deadline and ensure they meet them.

 

The Accelerating Broadband Permits Act isn't a big, wasteful spending bill. It is an agency accountability bill that could help accelerate broadband network on land held in trust or owned by the federal government. Senators Thune, Luján, and Barrasso deserve credit for bringing this bill back. Hopefully, the Act fares better in the 119th Congress and receives timely consideration.

 

(At the time of this blog post, no bill number or link to the bill are available on the Senate's website.) 

House Passes Bills to Improve Broadband Infrastructure Siting on Federal Property

On December 16, the U.S. House of Representatives, by voice votes, passed the Expediting Federal Broadband Deployment Act (H.R. 3293) and the Federal Broadband Deployment Tracking Act (H.R. 3343). Both bills are now in the Senate. Although there do not appear to be any companion bills in the House, perhaps the unanimous passage in the House will prompt the final passage of both measures by the end of the 118th Congress or early in the 119th Congress.  

My May 30, 2023, blog post noted the unanimous passage of both bills by the House Energy and Commerce Committee. That post summarized H.R. 3293 and H.R. 3343:

The Expediting Federal Broadband Deployment Reviews Act [H.R. 3293] would authorize the NTIA to establish an interagency "strike force" to ensure that each Federal land management agency "prioritizes the review of requests for communications use authorizations." The strike force would conduct periodic calls among those agencies and monitor their progress. And within 270 days after the Act becomes law, the NTIA would be required to submit to Congress a report on "the effectiveness of the strike force in ensuring that Federal land management agencies prioritize reviews of requests for communications use authorizations. 

 

The Federal Broadband Deployment Tracking Act [H.R. 3343] would require the NTIA to submit to Congress a plan for the agency to track requests for communications use authorizations on federal property and provide transparency to applications regarding the status of their applications. 

The FCC has long recognized that slow and cumbersome permitting processes can be a major impediment to market entry for communications services, and broadband Internet service providers frequently identify delays and costs associated with obtaining approvals to construct infrastructure on rights-of-way and government property as an impediment to timely and efficient network deployment. If passed into law, H.R. 3293 and H.R. 3343 could help streamline permit approvals and help prevent avoidable delays for infrastructure construction and major upgrades on federal property. Credit is due to the House for passing the bills. Hopefully, the Senate will give H.R. 3293 and H.R. 3343 prompt consideration.

Senate Bill Would Ensure Timely Broadband Infrastructure Builds on Federal Land

On July 29, Senators John Thune, Ben Ray Luján, and John Barrasso introduced the Accelerating Broadband Permits Act. The purpose of the bill is to improve executive agencies’ processing of permit applications for the construction of communications facility installations on federal land. Under the MOBILE NOW Act of 2018, executive agencies with supervision over federal lands have 270 days to make decisions on applications for permits to build towers, antennas, cables, or any other infrastructure associated with wireless or wireline services. An April 2024 Government Accountability Office Report found problems with agencies processing those applications within the deadline. The Accelerating Broadband Permits Act is intended to address those problems and help identify instances where the agencies are likely to fail to meet the deadline and ensure timely processing.

The FCC has long recognized that local permitting processes are often a major impediment to timely broadband access. The Accelerating Broadband Permits Act would help alleviate that impediment on federal lands. The Act appears to be worthwhile legislation that could help accelerate network infrastructure deployment to underserved and unserved Americans. Much land in western states is held in trust or owned by the federal government, and federal agencies must fulfill the responsibilities that come with being a trustee or property owner, not to mention comply with the MOBILE NOW Act. 

 

Senators Thune, Luján, and Barrasso deserve credit for bringing forward this bill. Several billion dollars in subsidies are going to be distributed by NTIA to the states under the Broadband Equity, Access, and Deployment (BEAD) Program to fund new buildouts. The effectiveness of BEAD Program subsidy dollars will depend, to a significant extent, on having workable federal siting policies in place. The 118th Congress should give the Accelerating Broadband Permits Act timely consideration.  

Senate Bill Would Improve Permitting for Broadband Projects on Federal Land

On September 21, Senators John Barrasso and Kyrsten Sinema introduced the Closing Long Overdue Streamlining Encumbrances to Help Expeditiously Generate Approved Permits (CLOSE THE GAP) Act. The purpose of the bill is to make permitting processing faster and more efficient for broadband infrastructure projects on federal lands.

Among other things, the CLOSE THE GAP Act would require federal land management agencies – namely, National Park Service, Bureau of Land Management, Bureau of Reclamation, U.S. Fish and Wildlife Service, Bureau of Indian Affairs, and Forest Service  – to adopt new rules for streamlining the process for considering and approving broadband project applications on federal lands. Within a year of the Act becoming law, the Secretary of the Interior would be required to adopt regulations that, the maximum practical extent, require federal land management agency permitting processes be "uniform and standardized." Also, the regulations must require that applications to locate or modify broadband facilities must be granted on a "competitively neutral, technologically neutral, and nondiscriminatory basis." And agency cost recovery fees for locating or modifying facilities must be cost-based. 

 

Additionally, the CLOSE THE GAP Act would make it easier to monitor the status of broadband infrastructure projects by making those projects trackable under the Permitting Dashboard that was established pursuant to the Fixing America's Surface Transportation (FAST) Act of 2015. The Permitting Dashboard is "an online tool for Federal agencies, project developers, and interested members of the public to track" federal environmental reviews and authorization processes for "large or complex infrastructure projects." Additionally, the bill would establish online portals for submissions of Standard Form-299 Applications (SF-299s), which are standard forms required by federal land management agencies in applying for access to rights-of-way, leases, licenses, or permits involving federal lands. 

 

Furthermore, the CLOSE THE GAP Act includes exemptions from the National Environmental Policy Act for broadband infrastructure on federal lands that previously received permit approval as well as exemptions from NEPA and the NHPA for collocations of radio towers on existing towers as well as for removal or replacement of radios on existing towers. These exemptions and others included in the bill would reduce likely unnecessary permitting expenses and delays in building out broadband infrastructure.

 

The permitting process reforms included in the CLOSE THE GAP Act are particularly important in western states like Wyoming and Arizona, where large geographic areas are designated as federal lands. In the past few years, Congress has dedicated over $100 billion to expanding access to broadband services, including about $65 billion in the Infrastructure Investment and Jobs Act of 2021. In order to help ensure that those substantial sums are spent timely and efficiently to bring broadband access to unserved and underserved areas, improved permitting processes should be a priority of Congress. Senators Barrasso and Sinema are to be applauded for introducing the bill. The Senate should give the legislation timely consideration. 

 

The House of Representatives has pending legislation that would streamline permitting processes for broadband deployments on federal lands. For more, see my FSF Blog post from April 23 of this year, "Subcommittee Looks at Legislation Promoting Broadband Infrastructure Buildout," and my May 2023 post, "House Committee Passes Reforms for Broadband Infrastructure Siting on Federal Property." 

 

(Note: A Senate bill number for the CLOSE THE GAP Act has yet been provided. This post will be updated with the number and link to the filed bill when it is made available.) 

Court Adopts Pro-Competition, Pro-Innovation Standard on Cell Siting

On July 14, the U.S. Court of Appeals for the Third Circuit issued its decision in Cellco Partnership v. White Deer Township Zoning Hearing Board. The court held that the Zoning Board's denial of Verizon's application to build a cell tower had "the effect of prohibiting the provision of personal wireless services" contrary to the Telecommunications Act of 1996. The Third Circuit's decision is significant because the court applied a pro-competition and pro-innovation interpretation of the "effective prohibition" requirement that the FCC made in a 2018 order. 

At issue in the case was a local zoning board's decision that denied Verizon's application for a zoning variance for purposes of constructing a cell tower. Verizon alleged that the denial of its application was contrary to Section 332(c)(7)(B)(i)(II) of the Telecommunications Act, which states that a local government's actions "shall not prohibit or have the effect of prohibiting the provision of personal wireless services." Verizon prevailed at the District Court, and the zoning board appealed.

 

The Third Circuit concluded that the local zoning board's decision was unlawful under the court's pre-existing APT Pittsburg test for claims that a local government's action violated the "effective prohibition" requirement. Under the APT Pittsburg test: "First, the provider must prove there is a significant gap in wireless service and, second, the provider must show it is filling that gap in the least intrusive manner." 

 

But that did not end the court's analysis. The Third Circuit observed: 

In a declaratory ruling, the Federal Communications Commission (FCC) criticized the APT Pittsburgh test and others like it for being too narrowly focused on coverage gaps and reflecting "an outdated view of the marketplace." Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Inv., 33 FCC Rcd. 9088, 9106-07 [paragraph 40] (2018). Instead, it interpreted the statute to prohibit government action that "materially limits or inhibits the ability of any competitor or potential competitor to compete in a fair and balanced legal and regulatory environment." Id. at 9102 [paragraph 35].

The court expressly adopted the FCC's "materially inhibit" standard, concluding that the agency's interpretation is entitled to Chevron deference. In doing so, court noted that the FCC has applied the "materially inhibit" standard to Section 253(a) since its 1997 California Payphone Association Order. Section 253(a) applies to effective prohibitions of "telecommunications services." Based on the canon of statutory construction that identical words in neighboring provisions of the same statute should have the same meaning, the court determined that the "materially inhibit" standard also should apply to the "effect of prohibiting" language found in Section 332(c)(7)(B)(i)(II). 

 

Moreover, upon reviewing the FCC's 2018 order and various court decisions that the order referred to, the Third Circuit derived a few key points: (1) "a prohibition does not need to be complete or 'insurmountable' to run afoul of' § 332"; (2) "local government action which either imposes unreasonable fees or requires a provider to accept unreasonable costs materially inhibits wireless services"; and (3) the "materially inhibit" standard requires us to consider the totality of the circumstances" – meaning that "[a] legal requirement that imposes a reasonable cost on one tower in one jurisdiction may constitute an effective prohibition when aggregated across many towers, or many wireless facilities, in several jurisdictions." 

 

The Third Circuit also recognized the implications of the FCC's "materially inhibit" for wireless competition policy: 

The "materially inhibit" standard is more consistent than the APT Pittsburgh test with the TCA's goals of "promoting competition, securing higher quality services for American telecommunications consumers and encouraging the rapid deployment of new telecommunications technologies." 33 FCC Rcd. at 9105 (quoting Preamble to the Telecommunications Act of 1996, Pub. Law No. 104-104, § 202, 110 Stat. 56 (1996)) (ellipses and brackets omitted). Coverage-gap-based tests are "incompatible with a world where the vast majority of new wireless builds are going to be designed to add network capacity and take advantage of new technologies, rather than plug gaps in network coverage." Id. at 9107-08 (quotation marks and citation omitted). 

Additionally, the Third Circuit acknowledged that the FCC's "materially inhibit" standard constitutes an improvement over the court's pre-existing test for claims that a local government action constitutes an "effective prohibition" on wireless services: 

This case reveals the inadequacy of the APT Pittsburgh test. The Zoning Board plausibly argued that requiring Verizon to remove the property's existing structures or to purchase the property might be less intrusive on the values that the township's set-back requirements sought to serve. But it would be unreasonable for the Zoning Board to require such extreme measures. The APT Pittsburgh test does not clarify how much a local government can reasonably require a provider do to avoid intruding. We think that the "materially inhibit" better answers this question.

The Third Circuit also set forth the implications of the FCC's "materially inhibit" standard for network upgrades to next-generation technologies: 

In light of our decision to adopt the "materially inhibit" standard, not only does "insufficiency in coverage" ordinarily entitle a provider to a variance but so does insufficiency in network capacity, 5G services, or new technology. In the TCA, Congress recognized that "[t]he telecommunications interests of constitutions are . . . statewide, national and international." 33 FCC Rcd. at 9110. Local zoning boards, like White Deer Zoning Board, are prohibited from preventing providers from meeting those broader interests.

The decision in Cellco Partnership v. White Deer Zoning Hearing Board constitutes binding precedent in the Third Circuit. And its reasoning ought to be persuasive to courts in other jurisdictions that face legal challenges to local government denials of wireless infrastructure citing permits.  

 

For additional background on the FCC's 2018 order at issue in Cellco Partnership v. White Deer Zoning Hearing Board, see my September 2020 blog post "Court Decision Will Advance 5G Network Deployment" as well as a June 2022 Perspectives from FSF Scholars, co-authored with Andrew MagLoughlin, "The FCC Should Preserve and Expand Its Broadband Infrastructure Reforms." 

BEAD Program State-by-State Funding Allocations Announced

On June 26, 2023, the National Telecommunications and Information Administration (NTIA) announced the amount of funding each state and territory would receive from the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program. The focus now shifts to state broadband offices, which have 180 days to submit their Initial Proposals.

The Infrastructure Investment and Jobs Act (IIJA), which established the BEAD Program, specified that every state would receive a minimum of $100 million in broadband infrastructure construction subsidies. Additional allocation decisions reflect the number of "unserved" locations – that is, those that lack access to a high-speed Internet connection at speeds of at least 25 Megabits per second (Mbps) downstream and 3 Mbps upstream (25/3 Mbps) – and "underserved" locations: those where speeds of at least 100/20 Mbps are not yet available.

Congress in the IIJA specified that the FCC's National Broadband Map, unveiled in November 2022 and updated in May, would serve as the definitive source for current service availability information. NTIA's BEAD Program funding allocations, therefore, in part are based on the number of "unserved" and "underserved" locations in a given state as indicated by the National Broadband Map.

As I have noted repeatedly, however, most recently in "Wasteful Duplication by Design: A Case Study on Overlapping Federal Broadband Subsidies," a May 2023 Perspectives from FSF Scholars, the BEAD Program's eligibility requirements, set forth in a Notice of Funding Opportunity (NOFO), treat locations with access to "broadband" provided via satellite or unlicensed spectrum as "unserved."

Accordingly, there is a real danger that BEAD Program money will be used to overbuild existing, privately funded networks. In the above-referenced Perspectives, I focused on a nearby neighborhood here in Colorado where, despite the existence of six competitors, four of which offer speeds that exceed 25/3 Mbps, BEAD Program subsidies might be awarded to yet another provider – simply because of the most-cost-effective technologies selected by those already serving consumers.

The BEAD Program allocation announcement reveals that Colorado is eligible to receive $827 million. Going forward I will keep a close eye on the areas to which that money is made available.

In addition, it is important to keep in mind that the National Broadband Map reveals only where service is available at the time of the data collection – for the updated version released in May, that would be the end of 2022. It does not reflect where federal money has been awarded but construction has not been completed (or even commenced, in many cases).

That responsibility falls to the FCC's other map: the Broadband Funding Map, the release of which I highlighted in a May 2023 post to the Free State Foundation's blog. Intended to facilitate critical interagency coordination efforts – as the Government Accountability Office (GAO) reiterated recently, the existence of over 130 different subsidy programs run by 15 different federal agencies amounts to a "patchwork of programs [that] could lead to wasteful duplication of funding and effort" – Congress required the creation of the Broadband Funding Map to illustrate those areas to which money from other sources (Treasury, Agriculture, and so on) has been committed.

At present, however, the bulk of those hundreds of billions in federal dollars are in process, thereby further complicating oversight efforts. For example, the Colorado Broadband Office, tasked with distributing $162 million just from Treasury's Capital Projects Fund, only began to accept applications on June 20, 2023.

GAO Reiterates Broadband Funding Coordination Concerns

On May 10, 2023, the Government Accountability Office (GAO) released "Broadband: A National Strategy Needed to Coordinate Fragmented, Overlapping Federal Programs," a Statement addressing the status of federal broadband subsidy efforts. It echoes the findings set forth in a May 2022 GAO Report that I summarized in a post to the FSF Blog – and that Senator John Thune (R-SD) underscored in prerecorded remarks delivered to the Free State Foundation's Fifteenth Annual Policy Conference on March 28, 2023.

Troublingly, it also indicates that little has changed over the past twelve months.

As Senator Thune noted, the May 2022 GAO Report concluded that "there are more than 130 federal broadband programs that are administered by 15 federal agencies" – a scenario he characterized as a "spiderweb of bureaucracy." The Statement, meanwhile, focuses on a subset of that total: the 25 programs whose "main purpose" is broadband, 13 of which "overlap because they can each be used for the purpose of broadband deployment," as illustrated in the chart reproduced below.

The Mosaic of 25 Federal Programs with Broadband as a Main Purpose,
as of November 2021, by Purpose Category

Continuing, the Report expressed concern that "[t]his patchwork of programs could lead to wasteful duplication of funding and effort." It therefore made the following recommendations:

• That the National Telecommunications and Information Administration (NTIA), in consultation with other relevant agencies, "present to Congress a report that identifies the key statutory provisions that limit the beneficial alignment of broadband programs and offers legislative proposals to address the limitations, as appropriate."
• That the "Executive Office of the President … develop and implement a national broadband strategy with clear roles, goals, objectives, and performance measures to support better management of fragmented, overlapping federal broadband programs and synchronize coordination efforts."

The publication of the Statement coincided with the appearance of Andrew Von Ah, GAO's Director, Physical Infrastructure, at a hearing held the same day by the House Energy and Commerce Committee's Oversight and Investigations Subcommittee entitled "Closing the Digital Divide: Overseeing Federal Funds for Broadband Deployment." (Indeed, it served as his official witness testimony.)

In terms of updates, the Statement reveals that little concrete progress on those recommendations has been made over the last year:

• NTIA's report to Congress remains in the planning stage – and is not expected until May 31, 2026.
• In May 2022, "the Executive Office of the President was considering if a national strategy was needed. As of this testimony, it has not developed a national strategy for broadband."

As I illustrated in "Wasteful Duplication by Design: A Case Study on Overlapping Federal Broadband Subsidies," a recent Perspectives from FSF Scholars, the status quo unacceptably – and seemingly intentionally – opens the door to redundant grants from multiple sources and the overbuilding of privately funded networks.

GAO once again has raised the alarm and proposed solutions. It is high time that the Biden Administration and Congress respond with meaningful coordinating measures.

House Committee Passes Reforms for Broadband Infrastructure Siting on Federal Property

At its May 24 markup hearing, the House Energy and Commerce Committee passed, with unanimous votes, five bills intended to streamline permit processing for constructing infrastructure for broadband use on federal land and property: 

The Standard Fees to Expedite Evaluation and Streamlining Act (Standard FEES Act), if passed by Congress, would direct the General Services Administration (GSA) to establish a common fee schedule for applications to build communications sites on federal property. The Act would require each executive agency to adopt regulations that align with the common fee schedule. 

 

The Expediting Federal Broadband Deployment Reviews Act would authorize the NTIA to establish an interagency "strike force" to ensure that each Federal land management agency "prioritizes the review of requests for communications use authorizations." The strike force would conduct periodic calls among those agencies and monitor their progress. And within 270 days after the Act becomes law, the NTIA would be required to submit to Congress a report on "the effectiveness of the strike force in ensuring that Federal land management agencies prioritize reviews of requests for communications use authorizations. 

The Federal Broadband Deployment Tracking Act would require the NTIA to submit to Congress a plan for the agency to track requests for communications use authorizations on federal property and provide transparency to applications regarding the status of their applications.

 

The Deploying Infrastructure with Greater Internet Transactions and Legacy Applications (DIGITAL Applications Act) would require the Interior and Agriculture Departments to set up online portals to accept, process, and dispose of common form applications to deploy communications facilities on federal property. 

 

The Facilitating DIGITAL Applications Act would require the NTIA to provide Congress with reports on whether the Interior and Agriculture Departments have, in fact, established online portals for accepting form applications.  

 

Taken together, these bills have the potential to streamline application processes for construction of broadband facilities and to improve broadband coverage across America. Although many reforms to broadband infrastructure siting processes have focused on state and local regulatory barriers to building and significantly upgrading facilities, the foregoing reform bills passed by the House Energy and Commerce Committee direct efforts to deployments on federal property. This is a needed area of attention. And reforms targeting infrastructure siting on federal property do not present the structural federalism and local control issues that frequently are posed by federal preemption of state laws. The House Energy and Commerce Committee deserves credit for addressing communications infrastructure siting on federal property, and the House of Representatives should now do its part to advance these bills. 

FCC Releases Broadband Funding Map

As required by the Infrastructure Investment and Jobs Act, yesterday the FCC released the Broadband Funding Map, a companion to the National Broadband Map intended to "to provide a locations overview of the overall geographic footprint of each broadband infrastructure deployment project funded by the Federal Government."

However, and as I highlighted in "Wasteful Duplication by Design: A Case Study on Overlapping Federal Broadband Subsidies," a recent Perspectives from FSF Scholars, the Broadband Funding Map's ability to prevent overbuilding and redundant funding is curtailed significantly by conflicting eligibility requirements across subsidy programs – including inconsistent minimum speed thresholds and exclusionary lists of approved distribution technologies – that open the door to duplication.

For the record, the Broadband Funding Map describes the neighborhood in the foothills west of Denver that was the focus of my case study as "Not Funded." Given that many federal funding sources, including the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program, have not yet begun doling out dollars, this perhaps is not surprising.

I intend to revisit the Broadband Funding Map periodically as more funding decisions are made. Stay tuned.

Subcommittee Looks at Legislation Promoting Broadband Infrastructure Buildout

On April 19, the U.S. House Communications & Technology Subcommittee held a hearing titled "Breaking Barriers: Streamlining Permitting To Expedite Broadband Deployment." On the legislative agenda for the hearing was some 30 Republican discussion draft bills and two Democratic bills. The subcommittee's attention to the importance of policies that promote the construction and upgrade of broadband infrastructure – and that eliminate unreasonable barriers to building new facilities and upgrading existing ones – is welcome.

No doubt there are geographic, population, and other economic conditions that play into timely broadband deployment. But careful attention to permitting and other regulatory policies regarding wireline and wireless broadband infrastructure buildout should be a component of a pro-market, pro-innovation, pro-investment federal policy for encouraging broadband access for all Americans.

Information about those legislative measures is contained in the hearing memo that available on the subcommittee's webpage. The high number of draft bills and bills precludes specific discussions particular each one, but several such bills previously have been introduced in Congress, at least in substantially similar form. The legislation under review at the hearing included streamlining the approval process for deploying infrastructure on federal lands, imposing shot clocks for decisionmaking on infrastructure permit applications by local permitting authorities, and legislative codification of specific infrastructure citing reforms adopted by FCC. 

 

Hopefully, the House Communications & Technology Subcommittee's hearing will be the prelude to a near-future advancement of legislation that will boost enable more timely deployment and reduce unnecessary harmful obstacles to next-gen broadband buildout. 

 

The Chairman of the House Communications & Technology Subcommittee is Rep. Bob Latta, who delivered a keynote address at the Free State Foundation's Fifteenth Annual Policy Conference – #FSFConf15 – held on March 28. Video of his keynote is available online. 

 

For publications by Free State Foundation scholars on infrastructure siting reforms, see the June 2022 Perspectives from FSF Scholars, "The FCC Should Preserve and Expand Its Broadband Infrastructure Reforms" by former FSF colleague Andrew K. Magloughlin and I. Also still very relevant today is the July 2021 Perspectives from FSF Scholars, "Real Infrastructure Opportunity for Congress: Speed Deployments of 5G Network," co-authored by FSF President Randolph May and I. Additionally, in a June 2021 Perspectives from FSF Scholars, FSF President May and I address fundamental legal issues connected to this topic in "Wireless Infrastructure Reforms Rest on Solid Constitutional Foundations: Congress Should Preempt Local Obstacles to 5G Deployment."

Senate Broadband Oversight Focuses on Department of Agriculture

With the Department of Agriculture's ReConnect Program poised to distribute this fiscal year an additional $1.5 billion in broadband infrastructure subsidies and amid reports that the 2023 farm bill could provide that agency with even more construction funding, I am encouraged by the news that a bipartisan group of Senators is taking action to prevent (1) waste, fraud, and abuse, and (2) the use of federal dollars to overbuild existing, privately financed networks.

On January 30, 2023, Senators John Thune (R-SD), Ben Ray Luján (D-NM), Amy Klobuchar (D-MN), and Deb Fischer (R-NE), all members of the Senate Committee on Agriculture, Nutrition, and Forestry, reintroduced legislation designed to "streamline and bolster U.S. Department of Agriculture (USDA) Rural Development broadband programs and ensure that their funding is being targeted to rural areas that need it the most."

Seth L. Cooper, Free State Foundation Director of Policy Studies and Senior Fellow, detailed the specific provisions of the Rural Internet Improvement Act of 2022 in a December 2022 post to the FSF Blog. The Rural Internet Improvement Act of 2023, like the 2022 version, would combine Rural Utility Service (RUS) broadband loan and grant programs, specify that no more than 10 percent of locations targeted by a funded project already have access to broadband, encourage greater broadband provider participation, improve the challenge process, and promote greater interagency coordination with the FCC and NTIA.

The RUS manages multiple broadband subsidy programs, the largest being the ReConnect Loan and Grant Program, which to date has distributed more than $3 billion. In a recent interview, RUS administrator Andrew Berke stated his expectation that the ReConnect Program will dole out an additional $1.5 billion in 2023.

In addition, news reports indicate that the next farm bill could appropriate still more money to RUS – Representative David Scott (D-GA), ranking member of the House Committee on Agriculture, identified as his top priority that "[w]e must ensure that appropriate funding is given to USDA to help us bridge the digital divide between rural and urban America" (emphasis added) and argued that "USDA knows what works for our rural communities better than many other Federal agencies."

Considering that (1) tens of billions in taxpayers dollars have been appropriated for the expansion of broadband infrastructure but not yet put to use, and (2) the vast majority of those subsidies will flow to rural areas – after all, at this point in the rollout of broadband "unserved" and "rural" are virtually synonymous – regardless of the distributing agency, it is not at all clear that any additional funding is "appropriate" at this time.

In "Absent Oversight, the Broadband Funding Faucet Likely Will Overflow," a November 2022 Perspectives from FSF Scholars, I drew attention to the concerning potential that, given the large amount of money involved and absent better interagency coordination and oversight, the number of different agencies sharing responsibility for government-led efforts to extend broadband connectivity to those areas that remain unserved could lead to substantial waste and inefficiencies.

But as Mr. Cooper wrote, it is equally true that "intra-agency coordination of broadband deployment subsidy programs through streamlined processes or merging of disparate programs is no doubt essential to ensure that precious tax dollars are spent wisely and that duplicative efforts and other forms of fraud, waste, or abuse are avoided" (emphasis added).

As you may recall, Free State Foundation President Randolph May received a letter from Senator Thune on December 6, 2022, soliciting input on, among other things, the potential for waste, fraud, and abuse as a result of the sheer number of federal broadband subsidy programs, including those administered by the Department of Agriculture.

In his response, Mr. May wrote that "[g]iven the large number of separate programs, it seems self-evident that some of them should be combined and/or eliminated so that there are many fewer programs and fewer agencies disbursing subsidies. This would increase manageability and facilitate accountability and meaningful congressional oversight." He therefore referenced with approval the introduction the Rural Internet Improvement Act of 2022.

In addition, Mr. May drew attention to the fact that the ReConnect Program (1) opens the door to rate regulation via a preference for applicants that provide "at least one low-cost option"; (2) inappropriately encourages applicants to "commit to net neutrality"; and (3) permits grant and loan recipients to apply that assistance in areas where up to 50 percent of locations already are served, in many instances by privately funded networks, "thus disincentivizing further private investment." As noted above, the Rural Internet Improvement Act of 2023 would decrease that threshold to 10 percent.

Broadband Subsidy Tax Companion Bill Introduced in the House

On Wednesday, a version of the Broadband Grant Tax Treatment Act (BGTTA), a Senate bill that would shield federal broadband infrastructure subsidies from taxation, was introduced in the House of Representatives.

As I described in a November 17, 2022, post to the FSF Blog, Senators Mark Warner (D-VA) and Shelly Moore Capito (R-WV) authored the BGTTA in response to the 2017 Tax Cuts and Jobs Act, which directs the Internal Revenue Service to treat federal grants as taxable income beginning in 2023.

The BGTTA would exempt from taxation federal broadband funding appropriated by the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, including the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program.

The House version, which mirrors the Senate draft, is sponsored by Representatives Jimmy Panetta (D-CA) and Mike Kelly (R-PA) and cosponsored by Terri Sewell (D-AL) and Drew Ferguson (R-GA).

Responding to the news, USTelecom President Jonathan Spalter described the bill as "right on the money." And Kelly Cole, CTIA Senior Vice President, Government Affairs, stated that it "maximizes grants, which is vital in the deployment of broadband and closing the digital divide."

Draft Bill Would Treat Broadband Subsidies as Nontaxable

Yesterday Senator Angus King (I-ME) became the latest cosponsor of the Broadband Grant Tax Treatment Act (BGTTA), joining a bipartisan group that includes Tim Kaine (D-VA), Roger Wicker (R-MS), Rev. Raphael Warnock (D-GA), and Shelley Moore Capito (R-WV). Introduced by Senators Mark Warner (D-VA) and Jerry Moran (R-KS), the BGTTA would exempt certain federal broadband grants from taxation – and thereby maximize the utility of that funding.

Currently, the IRS can shield from taxation certain broadband subsidies, as it did in 2010. Beginning next year, however, the 2017 Tax Cuts and Jobs Act will require that the Internal Revenue Service (IRS) treat all federal grants as taxable income.

The BGTTA would exclude from the definition of "taxable income" broadband infrastructure funding derived from the Infrastructure Investment and Jobs Act (most notably, the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program) and the American Rescue Plan Act (in particular, the $350 billion State and Local Fiscal Recovery Funds Program and the $10 billion Coronavirus Capital Projects Fund).

In a letter dated November 2, 2022, to leadership of the Senate Finance Committee and the House Committee on Ways and Means, a group of trade associations (the Competitive Carriers Association, CTIA – The Wireless Association, NTCA – the Rural Broadband Association, TIA – The Telecommunications Industry Association, USTelecom – The Broadband Association, and WIA – Wireless Infrastructure Association) urged passage of the BGTTA.

Specifically, they wrote that "if Congress fails to act, grant recipients will be required to return as much as 21 percent of the broadband grants to the federal government in the form of taxes" and "it is … incumbent upon Congress to act to free the ARPA and IIJA broadband grants from taxation and ensure all of the broadband grants awarded will be used to reach Americans with connectivity needs."

Also on Wednesday, Senator Warner stated at the 2022 USTelecom Broadband Investment Forum that he is "engaged [in] real-time conversations with the finance committee and others to see if we could get this included (in) the end-of-the-year package."

At that same event, his fellow sponsor of the BGTTA Senator Moran reportedly "advocated robust congressional oversight," argued that "Congress should use its power of the purse to promote executive agency accountability," and "called for close coordination between the FCC, the National Telecommunications and Information Administration, and the [Department of Agriculture's] Rural Utilities Service."

In "Absent Oversight, the Broadband Funding Faucet Likely Will Overflow," a Perspectives from FSF Scholars published last week, I warned that, without improved interagency coordination, more federal dollars than are required to connect locations as yet unserved could be disbursed.

Whether taxed or not, the need to ensure the efficient and responsible allocation of broadband subsidies remains paramount.

A True Assessment of the USF's Future Relevance Demands a Full Accounting of Broadband Subsidies

In a Perspectives from FSF Scholars published last Friday, Free State Foundation President Randolph May expressed his disappointment that the FCC's Report on the Future of the Universal Service Fund (Report) did not "go further than it did … in articulating a likely 'end state' for the USF's High Cost Fund."

As the Report does acknowledge, Congress has earmarked "billions" for broadband, an "unprecedented amount." However, it does not follow that money to its logical and inevitable conclusion: a near-term reality in which every location in America has access to a broadband connection – and in which the High Cost Fund therefore is no longer needed. And it exacerbates that lapse by failing to acknowledge nearly $9 billion in Department of Treasury subsidy grants publicized prior to the Report's adoption. The Report's failure to account for all of the known sources of federal funds necessarily casts doubt on its conclusions as to the future relevance and need for the agency's existing universal service programs, especially the High Cost Fund.

Over the last several years, Congress has passed multiple pieces of legislation allocating to multiple federal agencies historic amounts of government subsidies for the construction of high-speed Internet networks. Some of those appropriations provide specific dollar amounts. The most obvious example of this is the Infrastructure Investment and Jobs Act (IIJA), which included $65 billion, $46.45 billion of which targets broadband infrastructure construction via NTIA's Broadband Equity, Access, and Deployment (BEAD) Program and Enabling Middle Mile Broadband Infrastructure Program.

As I noted in a March 2022 Perspectives, however, the American Rescue Plan Act (ARPA) created two separate grant programs administered by the Department of Treasury, the State and Local Fiscal Recovery Funds (SLFRF) and the Coronavirus Capital Projects Fund (CPF), that combined make available a whopping $360 billion – some of which will be used for broadband. That uncertainty demands real-time accounting and close interagency coordination, a point that Mr. May and I emphasized in comments recently submitted to the FCC.

Arguably the best way to define the "end state" for the High Cost Fund, which subsidizes the construction and maintenance of broadband infrastructure in rural areas, is in terms of dollars. That is, the actual amount of money needed to extend broadband infrastructure to every location in the U.S. currently unserved. Generally speaking, the moment when federal subsidies reach that specific financial target is the moment when the goal of the High Cost Fund has been achieved.

Regrettably, the Report does not include such a number. However, the Biden White House, after first asking for $100 billion, in May 2021 did concede that with $65 billion – that is, the very amount that Congress included in the IIJA – "we can still achieve universal access to affordable high-speed internet."

Whatever that total – and, given inflation, it is conceivable that the final price tag may be higher than $65 billion – the other side of the equation is the cumulative amount of federal money allocated. Given the fact that Treasury has at its disposal far more ARPA money than required to supplement NTIA's BEAD and middle-mile coffers (to say nothing of the countless other federal broadband subsidy programs), it is essential that the FCC coordinate with Treasury, in addition to NTIA and the Department of Agriculture, on a running tally.

To its credit, the Report does reference some non-IIJA sources of federal broadband subsidies. Two examples: the ReConnect Program administered by the Department of Agriculture's Rural Utilities Service ($4.8 billion to date) and NTIA's Broadband Infrastructure Program ($288 million).

However, it effectively ignores ARPA's $360 billion – concluding that "we agree with the majority of commenters who caution that the Infrastructure Act will not achieve all of the universal service goals for broadband, and as such, the Commission should not abandon its universal service programs" (emphasis added).

Keep in mind, the relevant statutory language in the IIJA directs the Commission to "submit to Congress a report on the options of the Commission for improving its effectiveness in achieving the universal service goals for broadband in light of this Act and the amendments made by this Act, and other legislation that addresses those goals" (emphasis added). As such, the Report's narrow focus on the IIJA not only paints an incomplete picture of progress, it also runs afoul of congressional intent.

To be sure, the Report does point out that "there are billions of dollars more that are available for broadband programs now being implemented by … the Department of Treasury" and that "other recent legislation delivered unprecedented broadband funding to … Treasury." The Commission also commits, appropriately, to "extensive" and "continued close coordination with other agencies" and highlights the interagency agreement among the Commission, USDA, NTIA, and Treasury announced on May 12, 2022.

But prior to the Report's release, the White House and Department of Treasury publicized nearly $9 billion in disbursements from the $350 billion SLFRF Program and the $10 billion CPF – money that the FCC does not even mention in its report. Moreover, that number certainly will increase over time: As Treasury noted in a July 14, 2022, Press Release:

A key priority of the [CPF] is to make funding available for reliable, affordable broadband infrastructure and other digital connectivity technology projects. In addition to the $10 billion provided by the CPF, many governments are using a portion of their State and Local Fiscal Recovery Funds (SLFRF) toward meeting the Biden-Harris Administration's goal of connecting every American household to affordable, reliable high-speed internet.

A June 2022 Fact Sheet released by the White House proclaims that "[t]he American Rescue Plan has already spent or committed more than $25 billion to invest in affordable high-speed internet and connectivity" – a statement that assumes 100 percent of the CPF's $10 billion will be used for broadband.

Limiting the discussion to those grants in fact made prior to the Report's adoption, however, results in the following list of Administration announcements:

• Per the White House Fact Sheet referenced above, "[e]ven without full reporting in, state and local governments have committed more than $8 billion in investments [from the SLFRF] toward expanding affordable digital connectivity, through construction of affordable and high-speed broadband infrastructure and providing assistance to households for Internet access and digital literacy."
• In a June 2022 Press Release, Treasury announced grants from the CPF to four states to the tune of $582.8 million: Louisiana ($176.7 million), New Hampshire ($50 million), Virginia ($219.8 million), and West Virginia ($136.3 million).
• In addition, that Press Release revealed that, as of July 21, 2022, Treasury had made 72 separate grants from the CPF to 76 different Tribal governments, with each receiving $167,504, for a total of over $12.73 million.
• In a July 14, 2022, Press Release, Treasury announced an additional $356.9 million in awards from the CPF to four states: Kansas ($83.5 million), Maine ($110 million), Maryland ($95 million), and Minnesota ($68.4 million).

All told, Treasury announced $952.43 million in grants from the CPF prior to the Report's adoption. Combining that amount with the "more than $8 billion in investments" out of the SLFRF heralded by the White House results in nearly $9 billion, a substantial step toward the High Cost Fund's "end state" not even mentioned in the Report.

In sum, the Report's failure to account for these receipts inevitably casts doubt on its conclusions as to the future relevance of the USF, especially the High Cost Fund.