Blueprints for BEAD: What We Can Learn From the Low-Cost Option That Was, Then Wasn’t, Then Was Again

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Blueprints for BEAD is a series of short notes and analysis on nuances of BEAD that might otherwise get lost in the volume of material published on this federal funding program. Click the “Blueprints for BEAD” tag at the bottom of this story for other posts.

Few people dispute the vital importance of affordability in closing the digital divide. A 2021 Pew Research Center survey found that nearly half of all people without broadband cited cost as a barrier, with 20 percent listing cost as the primary reason for not subscribing to broadband service.

Research from EducationSuperHighway pegged that number even higher, estimating that lack of affordability explained about two thirds of the remaining digital divide in the country.

As the Broadband Equity, Access, and Deployment (BEAD) program steams ahead, questions about affordability have come to the fore. After all, deploying tens of thousands of miles of new fiber is only half the equation. BEAD will help build the physical networks necessary to connect the millions of households that still lack access to high-speed Internet service, but will it make a difference if they still can’t afford a plan? This possibility is all the more likely in light of the Affordability Connectivity Program’s (ACP) untimely demise.

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BEAD’s low-cost plan requirement sought to ease such concerns about affordability. To ensure households with limited financial means would actually see the benefits of the program’s massive infrastructure investment, this requirement mandated that all networks built using BEAD funds offer a low-cost plan for eligible subscribers.

An unusually public disagreement between Virginia and the federal agency administering BEAD has made the low-cost requirement a hot topic. An already-limited affordability mechanism, the low-cost plan requirement has faced stiff resistance from the large Internet service providers, who have worked through state public comment processes to limit its power. Here we take a closer look at what communities can learn from the Virginia low-cost saga and the debates it spawned about BEAD and affordability.

In the end, communities will need to remain vigilant that each state’s BEAD rules are responsive to community needs, and that providers abide by them, but a long-term and sustainable solution to affordability will require more systemic thinking.

The Long Saga of Virginia’s Low-Cost Plan

Virginia was one of the first states to submit its BEAD Initial Proposal Volume 2 to the National Telecommunications and Information Administration (NTIA) for approval, in late September 2023. As the months ticked by without news, word began to spread of a brewing conflict between the state and NTIA. Slowly at first, then in a rush, industry outlets began covering the fate of Virginia’s plan and the apparent cause of the hang up, its low-cost broadband option. The story even made its way to mainstream media, entering the pages of Politico in early September.

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The Bipartisan Infrastructure Law that created BEAD required ISP subgrantees of each state “offer not less than 1 low-cost broadband service option for eligible subscribers,” and required states define the “‘low-cost broadband service option’ that shall apply to subgrantees.”

When NTIA issued the BEAD Notice of Funding Opportunity (NOFO) in 2022, it reiterated the importance of this requirement and noted that, in order to grant approval, the agency would consider “the expected cost (both monthly and non-recurring charges)” for the plan.

The NOFO also offered an “example” low-cost plan that later guidance would go on to “strongly encourage” states to adopt. That plan called for a plan of $30 or less to be made available to income-eligible subscribers.

Interestingly, Virginia originally adopted NTIA’s proposed plan wholecloth in its first iteration of Volume 2, a fact that has frequently been overlooked in the coverage of the scuffle (one exception being this excellent article in the Washington Post).

The plan went out for public comment in mid-August, with a comment deadline on September 19, 2023. By that point, Virginia had received fewer than two dozen comments, mostly from Internet service providers (ISPs), including massive cellular and telecom companies as well as several cooperatives. The vast majority of these ISPs raised the specter of rate regulation and protested the proposed low-cost plan in its specifics. Their comments were largely in keeping with other public statements from these and similarly situated companies and industry groups.

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Only a week after the public comment deadline, the state announced it had submitted its Volume 2 to NTIA, which now omitted any mention of a set price for the low-cost plan or a designated method for calculating one.

Instead, the state’s new Volume 2 stated that an ISP applying for BEAD funding was required to offer a plan “set at a price that is affordable to the eligible population” and “submit justification on why such an option is affordable.” (Virginia’s decision to change its approach to low-cost plans may not have arisen from the comments of ISPs. It may have been driven by state officials or any number of other considerations.) According to the NTIA, this new version of the plan did not meet its expectations.

The saga may not have burst into public view at all had Virginia not taken the unusual step of publishing red-lined copies of its Volume 2 during the curing process, whether as an act of transparency or a bit of gamesmanship. The second of these red-lined versions, especially, made no bones about the conflict, republishing a letter the state broadband office sent to NTIA criticizing its approach to the low-cost option. It was likely this transparency that set off the flurry of coverage on the issue.

For months, things appeared at a stalemate and the state’s plan languished, even as other states pressed ahead. Then, in August 2024, there was another development. Virginia’s Volume 2 was approved by NTIA, with new language: applicants must offer a low-cost service option “that is affordable to the eligible population…or within the range of $30.00 to $75.00.”

If this were a game of chicken, it might appear that Virginia blinked first – it set a price. But, looked at another way, this might yet be a hollow victory for NTIA and low-cost broadband advocates, as the figure Virginia settled on seems to stretch the meaning of a “low-cost” plan, higher even than the plans set by Wyoming and Montana.

A Question As Old As The Internet: How to Make Access Affordable

Though the media attention largely focused on Virginia, other states likewise declined to define a low-cost plan, garnering push back from NTIA. In an article on Linkedin, Jade Piros de Carvalho, former Director of the Kansas Broadband Office, shared the feedback that an unspecified state received from NTIA. The gist:

“A definition that establishes a specific dollar figure for subgrantees that elect to participate in the BEAD program is not required but is legally permissible…In all cases, the proposed definition must allow the Assistant Secretary to determine the expected cost to an Eligible Subscriber.”

Disputes over this low-cost provision likely resulted in delays to several states’ Volume 2 approval, as it appears to have done with Virginia. (Piros de Carvalho recently wrote a very illuminating piece on the process of “curing” in general.)

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The seeming resolution of the Virginia low-cost saga has not put an end to the broader political discourse it helped launch.

The low-cost plan has become a political flashpoint. As the debate unfolded, politicians and industry insiders critical of the BEAD program alleged that NTIA was illegally engaging in rate regulation.

As noted above, the ISPs that made public comments in Virginia protested not just the dollar figure of the state’s low-cost plan but the act of setting any specific cost at all.  “Rate regulation” was among the criticisms brought by a House Subcommittee on Communications and Technology hearing in September.

NTIA and supporters of the low-cost plan have hit back, defending the provision against charges of rate regulation. “Nobody’s requiring a service provider to follow these rates,” Assistant Secretary of Commerce Alan Davidson argues, “people do not have to participate in the program.” Other advocates have likewise summed up the position:

“Neither BEAD’s low-cost requirement nor NTIA’s insistence on knowing how a state intends to set it is rate regulation.[...]  expecting a low-income broadband option in return for an enormous federal subsidy is not an overreach.”

While the “rate regulation” debate has garnered considerable attention, others who are critical of some of the low-cost plans have raised more practical concerns about the impact on the financial health of mostly rural networks.

In his blog Pots and Pans, Doug Dawson argues that a $30 monthly plan would be near impossible to sustain for rural fiber networks. Dawson and others with this perspective cite the costs associated with extensive infrastructure to serve sparsely populated areas, the hours-long truck rolls that would necessarily accompany any reported outages, and the likelihood that, in higher-poverty areas, a large portion of the customer base would qualify for the low-cost option. A very low-cost plan, these folks say, could lead to “financial disaster” for a rural network.

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An extremely low ceiling might also inadvertently disadvantage smaller networks, including community-owned ISPs. While massive telecoms could, and have been known to, take a financial hit in the short-term to maintain a monopoly, smaller networks would find it particularly difficult to meet the operating costs in such circumstances. One should mention that there were other ways states or NTIA could have responded to the interests of “nontraditional” networks at various points in the BEAD process.

On the other hand, advocates of low-cost plans note that BEAD will essentially create local broadband monopolies in many places (see the comments here). As subscribers in many urban areas know all too well, without competition, monopoly broadband providers are able to charge whatever they can, whenever they can. Surely some protection against price gouging is warranted.

The question for many, then, is how to balance the need for affordability with the financial viability of rural networks.

A Mechanism to Ensure Affordability, But One With Limits

Apart from declining to set a price or define a method for determining a price, states had considerable leeway in designing the low-cost plan requirement. Many states that have had their Volume 2s approved went with the recommended $30 plan, while others chose alternative (usually higher) price points. Still others set the limit at 2 percent of the maximum eligible income.

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BEAD low cost option map

Some states are accepting different rates depending on whether the location is urban or rural, to attempt to account for the higher costs of operating a network in rural areas. While other states are permitting higher rates with a waiver, or allowing annual adjustments based on inflation.

Simply put, there was a great deal of flexibility, which allowed states to take the financial needs of rural networks into consideration.

 

Indeed, the flexibility was such that states could support some curiously loose definitions of low-cost. Montana, for instance, pegged its plan to the median cost of 100/20 plans in the Western United States, which is $70 a month as of 2024.

We already noted that Virginia’s final version allows a “low-cost” option as high as $75 a month, higher even than Montana’s, which matches the upper limit of the cheapest plans currently offered by state-funded networks. Given that affordability is a significant constraint on broadband adoption at current prices, it strains credulity to define “low-cost” as the median current price or base the cap on the upper end of existing lowest-price options.

The breadth of the plan - who the ISP is required to offer the plan to - is another detail that we haven’t seen discussed very widely. One point that Virginia made in their correspondence with NTIA is that their plan called for ISPs to make a low-cost plan available to all customers throughout their service territory, not just to BEAD-funded locations. This would have certainly had a significant impact, but that provision appears to have been removed in the final version.

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Other states have “strongly encouraged” BEAD winners to make the low-cost plans more broadly available, but all (that we have read) stop short of requiring it. Which is to say, only BEAD locations are guaranteed to have access to the low-cost plan, regardless of the cap set by each state. Large providers who offer variable rates across geographies may have no difficulty keeping this patchwork pricing scheme straight, but it is hard to imagine states being able to monitor and, where necessary, enforce this commitment in this context.

Given these parameters, BEAD’s low-cost plan requirement can hardly solve the affordability problem writ large. EducationSuperHighway’s research estimates that more than 18 million households currently have Internet access but still can’t afford to connect. Some of those locations might yet be eligible for BEAD and could fall under the guidance, but that number is likely to be small and BEAD will do nothing to close the affordability gap for the others.

In short, even if BEAD is wildly successful, our work will not be done. To solve the affordability crisis, we will need more than BEAD - we will need longer-term, structural solutions. A revival of the Affordable Connectivity Program (ACP) or a reform of the Universal Service Fund (USF) to initiate a permanent low-income broadband subsidy program could help, but this might still largely result in the funneling of large sums of money to giant corporations with little accountability.

Other models -  like non-profit community ISPs, municipal networks, and Tribal networks - are fundamentally structured to avoid these problems by being directly accountable to the communities they service.

But, of course, not every city, town, or region is ready for this step.  

Still, there is work around the margins that communities can do here. They should remain up to speed on the BEAD affordability rules for their state. They might be working most closely with BEAD-funded providers, whether through the rights-of-way process or in providing letters of support, and can try to ensure their residents have the best chance of accessing high-quality, affordable broadband - at the very least, what is required by BEAD.

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Virginia received very few public comments from local officials or community representatives, and those they did hear from chose not to weigh in on the question of affordability or the low-cost plan.

Large Internet companies have made clear where they stand on the question; theirs shouldn't be the only voices in the room.

If they are, we can be assured that their preferred policy will be continued: taking as much of our federal funding as possible while delivering as little as they can in return.

At the same time, communities should be thinking about how to tackle affordability more broadly. When all of this is over, BEAD is not going to have done it for them.

Header image of money sign computer button courtesy of QuoteInspector.com, Attribution-NoDerivatives 4.0 International

Inline image of empty wallet courtesy of Flickr user NoHoDamon, Attribution-NonCommercial-NoDerivs 2.0 Generic

Inline image of confusing stop sign courtesy of Flickr user Don Brubacher, Attribution-NonCommercial-NoDerivs 2.0 Generic

Inline image of main entrance to U.S. Department of Commerce building that houses NTIA courtesy of PICRYL, Public Domain Mark 1.0 Universal

Inline image of woman frustrated in front computer courtesy of Pexels, Public Domain

Inline map of BEAD low cost option of each state courtesy of Jake Varn Associate Manager of Broadband Access Initiative at The Pew Charitable Trusts LinkedIn post (2023)