Broadband Funding FAQs

Outstanding Issues and Questions to be Answered for the Broadband Equity, Access, and Deployment Program (BEAD)

With the passage of the Infrastructure Investment and Jobs Act, Congress established the Broadband, Equity, Access, and Deployment Program (BEAD).  To be administered by the National Telecommunications and Information Administration (NTIA), BEAD is the single largest broadband investment in United States history and provides $42.5 billion to expand high-speed internet access by funding planning, infrastructure deployment and adoption programs in all 50 states and U.S. territories.  On May 13, 2022, NTIA released the Notice of Funding Opportunity (NOFO) for the BEAD program.  While the NOFO lays out the parameters of the program, a number of questions remain, including those discussed below.

Key questions still to be answered by NTIA

What is a high-cost area?

Why it matters:  
In non-high-cost areas, the BEAD program will provide up to 75% of funding, meaning a grant applicant must contribute at least 25% of the cost of the grant program.  However, there is no matching requirement for areas that fall under the definition of “high-cost.”  Additionally, while each state, the District of Columbia and Puerto Rico is entitled to a minimum grant of $100 million, an additional $4.245 billion (10% of the total BEAD funds) will be allocated among each state according to its proportion of unserved location in high-cost locations.

What the NOFO says:
The term “high-cost area” means an unserved area in which the cost of building out broadband service is higher, as compared with the average cost of building out broadband service in unserved areas in the United States (as determined by the Assistant Secretary, in consultation with the Commission), incorporating factors that include— (I) the remote location of the area; (II) the lack of population density of the area; (III) the unique topography of the area; (IV) a high rate of poverty in the area; or (V) any other factor identified by the Assistant Secretary, in consultation with the Commission, that contributes to the higher cost of deploying broadband service in the area. For purposes of defining “high-cost area,” the term “unserved area” means an area in which not less than 80 percent of broadband-serviceable locations are unserved locations. NTIA will release further information regarding the identification of high-cost areas for purposes of BEAD funding allocations at a later date. (NOFO, p. 13)

When are the maps complete for purposes of allocating BEAD funds?

Why it matters:
The Federal Communications Commission’s (FCC’s) broadband coverage maps will determine how much funding each State receives for broadband deployment efforts.  Each state, DC and Puerto Rico is entitled to a minimum grant of $100 million.  An additional $4.25 billion will be allocated among each State according to its proportion of unserved locations in high-cost areas, compared to the nationwide total of unserved high-cost locations, as determined by the FCC’s broadband coverage maps.  The remaining $37.1 billion in funds will be divided among the states in a manner similar to the allocation of high-cost funds.  Each State will receive an amount determined by its total number of unserved locations relative to the national total, as determined by the maps.  

The States will also use the FCC’s maps as a starting point to determine funding to subgrantees who commit to serve unserved and underserved locations.

The initial data collection for the FCC broadband maps ends in September 2022.  Once the initial maps are developed, the FCC must conduct reviews and challenge processes intended to improve both the underlying “fabric” of serviceable locations and the data that providers report claiming the ability to serve locations.  While NTIA is under pressure to allocate funds to States as soon as possible, it is still unclear if NTIA will use the initial or final maps for this purpose given the likely concerns that will be raised about the FCC’s maps as initially produced.

What the NOFO says:
The term “unserved location” means a broadband-serviceable location that the Broadband DATA Maps show as (a) having no access to broadband service, or (b) lacking access to Reliable Broadband Service offered with—(i) a speed of not less than 25 Mbps for downloads; and (ii) a speed of not less than 3 Mbps for uploads; and (iii) latency less than or equal to 100 milliseconds. (NOFO, p. 17)

The Assistant Secretary will, in coordination with the Commission, choose a date certain upon which the Broadband DATA Maps will be utilized to identify unserved locations (the “Allocation Date”). Each Eligible Entity’s Total Allocation will be the sum of the Eligible Entity’s (i) Minimum Initial Allocation; (ii) High-Cost Allocation; and (iii) Remaining Funds Allocation. (NOFO, p. 29)

How do companies seek a waiver of the Buy American Requirement?  

Why it matters:
All funds made available through the BEAD Program for broadband infrastructure must comply with the Build America, Buy America Act. The Act requires that all of the iron, steel, manufactured products (including but not limited to fiber-optic communications facilities), and construction materials in the project are produced in the United States, unless a waiver is granted.   This Act specifically requires:  

1. All iron and steel used in the project are produced in the United States. This means all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States. 
2. All manufactured products used in the project are produced in the United States. This means the manufactured product was manufactured in the United States, and the cost of the components of the manufactured product that are mined, produced, or manufactured in the United States is greater than 55 percent of the total cost of all components of the manufactured product, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation. 

Waivers can only be granted by the Secretary of Commerce and the agency has indicated that it will not grant blanket waivers.  Instead, waivers will require project-by-project showings. Given supply chain shortages, guidance on how and when to apply for a waiver is necessary.

What the NOFO says:
The Secretary of Commerce (Secretary) may waive the application of this preference when (1) applying the domestic content procurement preference would be inconsistent with the public interest; (2) types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory  quality; or (3) the inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project or other eligible activities by more than 25 percent. Consistent with the waiver principles detailed in Sec. 70921(b)(1) of the Build America, Buy America Act and the Buy America Guidance, the Secretary will seek to minimize waivers, and any waivers will be limited in duration and scope.  (NOFO, pp 87-88)

Waivers of the ban on Chinese-made fiber will be based on a demonstration from the Eligible Entity that application of this prohibition would unreasonably increase the cost of or delay the project or other eligible activities. Waiver applicants will need to provide concrete evidence of this circumstance and will be held to a high burden of proof. Waiver policy in this case will be guided by the same principles set out in Section 70921(b)(1) of the Build America, Buy America Act, meaning that the Assistant Secretary will be disposed against waivers. In addition, NTIA will consider any national security issues particular to Chinese-made fiber, and even where domestic production is not feasible, will be reluctant to waive the ban if another foreign supplier could meet the need at similar cost. (NOFO, p 88).

How do companies comply with the supply chain risk management requirements? 

Why it matters:
Prior to the allocation of funds, a subgrantee must have an operational, or ready to be operationalized supply chain risk management (SCRM) plan. The plan must be based upon the supply chain risk management guidance from NIST and to the extent a subgrantee relies on network facilities owned or operated by a third party, it must obtain attestations from its network providers. It may be difficult for subgrantees to secure these commitments from all transit providers and other vendors.

What the NOFO says:
With respect to supply chain risk management (SCRM), prior to allocating any funds to a subgrantee, an Eligible Entity shall, at a minimum, require a prospective subgrantee to attest that: 

1. The prospective subgrantee has a SCRM plan in place that is either:
   • operational, if the prospective subgrantee is already providing service at the time of the grant; or 
   • ready to be operationalized, if the prospective subgrantee is not yet providing service at the time of grant award;
2. The plan is based upon the key practices discussed in the National Institute of Standards and Technology (NIST) NIST publication NISTIR 8276, Key Practices in Cyber Supply Chain Risk Management: Observations from Industry and related SCRM guidance from NIST, including NIST 800-161, Cybersecurity Supply Chain Risk Management Practices for Systems and Organizations and specifies the supply chain risk management controls being implemented; 
3. The plan will be reevaluated and updated on a periodic basis and as events warrant; and 
4. The plan will be submitted to the Eligible Entity prior to the allocation of funds. If the subgrantee makes any substantive changes to the plan, a new version will be submitted to the Eligible Entity within 30 days. The Eligible Entity must provide a subgrantee’s plan to NTIA upon NTIA’s request. 

An Eligible Entity also must ensure that, to the extent a BEAD subgrantee relies in whole or in part on network facilities owned or operated by a third party (e.g., purchases wholesale carriage on such facilities), obtain the above attestations from its network provider with respect to supply chain risk management practices.  (NOFO, pp 70-71)

How do companies comply with the cybersecurity requirements? 

Why it matters:
Prior to the allocation of any funds, a subgrantee must have an operational, or ready to be operationalized, cybersecurity risk management plan.  The plan must reflect the latest version of the NIST Cybersecurity Framework (currently, version 1.1) and specify the security and privacy controls being implemented.  and to the extent a subgrantee relies on network facilities owned or operated by a third party, it must obtain attestations from all of them.  It may be difficult for subgrantees to secure these commitments from every party upon which the subgrantee relies.

What the NOFO says:
With respect to cybersecurity, prior to allocating any funds to a subgrantee, an Eligible Entity shall, at a minimum, require a prospective subgrantee to attest that: 

1. 1. The prospective subgrantee has a cybersecurity risk management plan (the plan) in place that is either: 
   • operational, if the prospective subgrantee is providing service prior to the award of the grant; or
   • ready to be operationalized upon providing service, if the prospective subgrantee is not yet providing service prior to the grant award; 
2. The plan reflects the latest version of the National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity (currently Version 1.1) and the standards and controls set forth in Executive Order 14028 and specifies the security and privacy controls being implemented; 
3. The plan will be reevaluated and updated on a periodic basis and as events warrant; and 
4. The plan will be submitted to the Eligible Entity prior to the allocation of funds. If the subgrantee makes any substantive changes to the plan, a new version will be submitted to the Eligible Entity within 30 days. The Eligible Entity must provide a subgrantee’s plan to NTIA upon NTIA’s request. (NOFO, p. 70)

An Eligible Entity also must ensure that, to the extent a BEAD subgrantee relies in whole or in part on network facilities owned or operated by a third party (e.g., purchases wholesale carriage on such facilities), obtain the above attestations from its network provider with respect to both cybersecurity risk management practices. (NOFO, p. 71)

What requirements apply with respect to workforce management and labor issues?

Why it matters:
Eligible entities must give priority to project based, in part, on a demonstrated record of and plans to be compliance with federal labor and employment laws. Preferential weight must be given to projects based on the strength of the showing in the application. Some of the things to be considered include, wage scales and wage and overtime payment practices, using a directly employed workforce, as opposed to a subcontracted workforce, labor agreements, union neutrality, project labor agreements, and others.  If any subgrantee’s, contractor’s or subcontractor’s workforce is not unionized, the subgrantee must provide additional information in the application.

This is an issue that must be addressed at both the federal AND state level.  Additional guidance from NTIA is necessary to inform what states are expected to do in weighing these issues.  But the states will determine which items are mandatory, requiring binding commitments, and which will be factors to be considered in the scoring of applications.

What the NOFO says:
Eligible Entities must give priority to projects based on (among other things) a demonstrated record of and plans to be in compliance with federal labor and employment laws. Eligible Entities are required to give preferential weight to projects based on the strength of the showing in their application in this regard; a detailed list of specific requirements and factors is set forth over several pages of the NOFO.

If an Eligible Entity includes any of [the listed labor standards and protections] mandatory requirements for all subgrantees (including contractors and subcontractors), it should describe these requirements in detail its Initial and Final Proposal and explain how it will incorporate them as binding legal commitments in the subgrants it makes. An Eligible Entity taking this approach can reduce the showing that prospective subgrantees need to make in their applications regarding their plans to comply with federal labor and employment laws. (NOFO, pp. 55-61)

Key questions to be answered by the states/eligible entities

What is an extremely high-cost location?

Why it matters:
There is a priority for fiber deployment in most areas, but for locations that are considered “extremely high-cost,” the eligible entity may choose proposals to use an alternative, less expensive technology.  Setting the threshold for “extremely high-cost” too low could gut the preference for fiber in rural areas.

What the NOFO says:
An “Extremely High Cost Per Location Threshold” is a BEAD subsidy cost per location to be utilized during the subgrantee selection process described in Section IV.B.7 of this NOFO above which an Eligible Entity may decline to select a proposal if use of an alternative technology meeting the BEAD Program’s technical requirements would be less expensive. (NOFO, p. 13)

Each Eligible Entity must establish its Extremely High Cost Per Location Threshold in a manner that maximizes use of the best available technology while ensuring that the program can meet the prioritization and scoring requirements set forth in Section IV.B.6.b of this NOFO. NTIA expects Eligible Entities to set the Extremely High Cost Per Location Threshold as high as possible to help ensure that end-to-end fiber projects are deployed wherever feasible. NTIA looks forward to working with each Eligible Entity to help develop an appropriate Extremely High Cost Per Location Threshold. (NOFO, p. 13, FN 6)

How will matching be scored in high-cost areas?

Why it matters:
Each state will set its own scoring/weighting for projects (subject to NTIA approval).  One of the suggested criteria is that applications providing more matching dollars will score better.  But as discussed in the “Key questions still to be answered by NTIA,” matching is not required in high-cost areas.  Projects for high-cost, rural areas should receive the maximum points awarded for matching, or else rural bids will not be on the same footing as other bids.

What the NOFO says:
While the match may be provided by multiple sources, Eligible Entities are encouraged to require a match from the subgrantee rather than utilizing other sources where it deems the subgrantee capable of providing matching funds.

With regard to the subgrantee selection process for last-mile broadband deployment projects, Eligible Entities are also required to incentivize matches of greater than 25 percent from subgrantees wherever feasible (especially where expected operational costs and revenues are likely to justify greater investment by the subgrantee) by focusing on minimizing the BEAD funding outlay on a particular project, to the extent consistent with other programmatic goals described in this NOFO.  (NOFO, pp 20-21)

What is a low-cost option?

Why it matters:
Each subgrantee receiving BEAD funding must offer at least one low-cost broadband service option.  States must propose low-cost service option parameters. Costs are higher in rural areas, so solutions will need to be tailored.

What the NOFO says:
[T]he Infrastructure Act requires that each subgrantee receiving BEAD funding to deploy network infrastructure offer at least one low-cost broadband service option. Each Eligible Entity must consult with the Assistant Secretary and prospective subgrantees regarding a proposed definition of the term “low-cost broadband service option.” Eligible Entities must propose low-cost broadband service option parameters that best serve the needs of residents within their jurisdictions. Low-cost broadband service options must remain available for the useful life of the network assets.

A definition of low-cost broadband service option should address, at a minimum: (1) all recurring charges to the subscriber, as well as any non-recurring costs or fees to the subscriber (e.g., service initiation costs); (2) the plan’s basic service characteristics (download and upload speeds, latency, any limits on usage or availability, and any material network management practices, (3) whether a subscriber may use any Affordable Connectivity Benefit subsidy toward the plan’s rate; and (4) any provisions regarding the subscriber’s ability to upgrade to any new low-cost service plans offering more advantageous technical specifications.

NTIA recognizes, however, that different Eligible Entities face different circumstances. NTIA will review and consider any definition proposed by an Eligible Entity in accordance with the terms of the BEAD statute. In all cases, an Eligible Entity must explain in its Initial and Final Proposal why the selected definition best effectuates the purposes of the program. NTIA may provide additional guidance to Eligible Entities on the development of the low-cost broadband service option definition. (NOFO pp. 66-68)

How will the state define middle-class affordability?

Why it matters:
Each state must have as part of its Initial and Final Proposal, a “middle-class affordability plan” to ensure that all consumers have access to affordable high-speed internet.  The parameters of this are unclear and largely left to the States.

What the NOFO says:
Each Eligible Entity must include in its Initial and Final Proposals a middle-class affordability plan to ensure that all consumers have access to affordable high-speed internet. We expect that Eligible Entities will adopt diverse strategies to achieve this objective. For example, some Eligible Entities might require providers receiving BEAD funds to offer low-cost, high-speed plans to all middle-class households using the BEAD-funded network. Others might provide consumer subsidies to defray subscription costs for households not eligible for the Affordable Connectivity Benefit or other federal subsidies. Others may use their regulatory authority to promote structural competition. Some might assign especially high weights to selection criteria relating to affordability and/or open access in selecting BEAD subgrantees. And others might employ a combination of these methods, or other methods not mentioned here. Ultimately, however, each Eligible Entity must submit a plan to ensure that high-quality broadband services are available to all middle-class families in the BEAD-funded network’s service area at reasonable prices. Eligible Entities will be required to ensure that services offered over Funded Networks allow subscribers in the service area to utilize the ACP. (NOFO, p. 66)

What other policies will each State prioritize?

Why it matters:
The NOFO directs the states to design their own scoring criteria and policies subject to NTCA approval.  Within the parameters set by NTIA, each state will develop its own policy priorities and scoring system which will determine which projects are eligible for funding.

What the NOFO says:
An Eligible Entity that receives Initial Planning Funds must submit to the Assistant Secretary a Five-Year Action Plan that establishes the State or Territory’s broadband goals and priorities and serves as a comprehensive needs assessment that will inform the State or Territory’s Initial Proposal. The Five-Year Action Plan developed using Initial Planning Funds must (a) be informed by collaboration with local, regional, and Tribal (as applicable) entities, as well as unions and worker organizations, (b) detail the Eligible Entity’s investment priorities and associated costs, and (c) align the State or Territory’s planned spending with its economic development, community benefit, workforce, telehealth, digital equity, and other related efforts. (NOFO, p. 25)

 

NOTE: The material provided on this page is meant to inform NTCA members of recent legal and regulatory developments and should not be considered legal advice. It is not intended, not should it be used as a substitute for specific legal advice that would be provided by legal counsel in response to inquiries regarding particular situations. By virtue of providing this information, NTCA is neither providing you with legal advice nor acting as your counsel. Consultation with legal counsel is advised on all matters related to applications or request for broadband funding.