In the third installment of ITIF’s Access America series, Jess talks to Jake Varn, an associate manager with Pew’s broadband access initiative, about the “low-cost option” in BEAD, how states can implement it, and how it interacts with federal low-income broadband programs.

Mentioned in This Episode

▪ Jake Varn, “Reviewing State (Draft) Low-Cost Options” (Benton Institute for Broadband & Society, December 2023).

▪ National Telecommunications and Information Administration (NTIA), Broadband Equity, Access, and Deployment (BEAD) Program Notice of Funding Opportunity (NOFO) (Washington, DC: U.S. Department of Commerce, May 2022).

▪ Federal Communications Commission (FCC), “Affordable Connectivity Program” (Washington, DC: Federal Communications Commission, June 2024).

Auto-Transcript

Jessica Dine:

Hi, thanks for joining. I’m Jessica Dine, a policy analyst at the Information Technology and Innovation Foundation, which is a think tank focused on the intersection of technology and public policy. This is Access America, a webinar series where we break down some aspects of one of the most relevant pieces of broadband policy today, the BEAD program.

Now some brief background. The BEAD or Broadband Equity Access and Deployment program is a $42.45 billion program led by the National Telecommunications and Information Administration or NTIA, whose goal it is to expand digital access to everybody in all US states and territories. Right now, BEAD is in the early stages of implementation. States and territories are submitting written plans, detailing how they intend to spend the funds, and once those plans are approved by NTIA, they can start actually selecting internet service providers or ISPs, the ones who will be doing the deployment as sub-grantees.

These plans that states are submitting their initial proposals must address specific criteria laid out by NTIA as requirements for receiving the BEAD funds. These criteria run the gamut from types of networks that states are going to fund to their process for selecting sub-grantees to the speeds that they’re prioritizing. Today we’re going to talk about one particular requirement, which is that states ensure a low-cost option in their BEAD projects. This is an important part of BEAD because affordability is one of the single biggest reasons that people don’t adopt a broadband connection, even if that network is physically available to their home.

So building networks without ensuring that that barrier is met is only going to do so much. It’s also very worth talking about right now because of our current policy environment and some uncertainty surrounding a very relevant program. I’m sure we’re going to get to this in the conversation, but the program is called the Affordable Connectivity program and how it plays out could play a big role in the implementation of this low-cost requirement.

So the guest we have with us today has done a lot of research into this specific aspect of BEAD, and I’m really excited to hear what he has to say. This is Jake Varn who is associate manager at the Broadband Access Initiative at the Pew Charitable Trusts, and they’ve been doing a lot of great work researching BEAD. So Jake, thank you for being here.

Jake Varn:

Thank you, Jessica. Glad to join.

Jessica Dine:

Yeah, of course. With that, let’s jump right in if everybody’s ready. I guess first, Jake, I already sort of touched on this, but could you please explain what is the low-cost requirement for state BEAD plans? And what specifically are states being asked to do? What does it look like?

Jake Varn:

Yeah, you covered it perfectly, but just to reiterate, every single state and territory has received their initial allocation for this BEAD program. They’ve put their initial proposals out for public comments and to NTIA for approval. So far, four states have received essentially final approval of that initial proposal where they detail this low-cost option. Every state has to include a definition of a low-cost service option that the providers that they eventually award for these networks that are serving unserved and underserved areas will have to be the plans that they’ll have to make available to households that are currently eligible for ACP. So that’s those that have a federal poverty income of 200%, they may be eligible for SNAP, Medicaid and the list of other eligible ACP criteria.

Jessica Dine:

Okay. Okay. That’s really helpful. Thank you. So now can you speak to where it came from? Is there legislation or some statutory texts that supports this?

Jake Varn:

Yeah, so in IJA or in the Infrastructure Investment and Jobs Act or IJA that created this program through NTIA, it does have stipulations that these funds go to networks that provide an affordable service, and NTIA added additional language on this low-cost service option requirement specifically. They proposed a model suggestion to try to mirror as much of the ACP eligibility as possible so that the ... suggesting that states set a $30 price point so that the ACP subsidy of $30 wouldn’t neatly fit into it. Now, states are proposing their own price points, their own plan criteria, or how they will evaluate if these plans are affordable. But essentially NTIA did have a mandate to make sure that these networks are not only built to provide high speed internet access, but that the service that they are funding will actually be affordable to the consumers available.

Jessica Dine:

Got it. And so the model, NTIA’s model that you referenced, that puts a specific price point on these affordable networks, right? Now, do states even if they choose not to adopt the model, do they have to come up with a price point or can there sort of be other approaches that they take to figure out what’s affordable?

Jake Varn:

So at a bare minimum, they have to demonstrate how they are defining what is affordable and how it is matched up, what is available to those households that are now eligible to receive this discount. So if you are not setting a specific price point, you have to include criteria for how you would evaluate those plans to ensure that that affordability standard is being met. And this is just as a contingency of receiving this grant that’s providing up to 75% of the build-out costs for these networks. The contingency is that you’re providing a plan that is affordable to these low income and otherwise eligible households. What we have seen already though is in the four states that have received approval of their full initial proposals, we see both flat number as well as a range where Louisiana, the first state that was approved, started with that $30 model that NTIA suggested, but then detailed how a provider could demonstrate to them to increase that low-cost option up to $65 if their business case to serve that area justified it.

As Louisiana is approaching it, and as I believe every state is approaching it, they not only want these networks to be built to provide high-speed affordable internet access, but they also want these networks to be able to sustain themselves. So it is a delicate balance to make sure that the business case is able to bear out.

Jessica Dine:

No, that makes a lot of sense. A range is interesting. So I think I’ve also are states sometimes looking at it in terms of percentage of income rather than just a flat number, or is everybody offering up some form of a number or range?

Jake Varn:

Yeah, some states in trying to figure out what that starting point is, did work with the kind of rough benchmark that the FCC has started using in the last few years of a 2% of disposable household income to try to determine what is generally seen as affordable. But it’s very challenging to do that at a statewide level because income varies so drastically and what is considered affordable for one family can be wildly different from community to community. Yeah, I would say that there are few interesting other provisions that we can get into, but yeah, most have started with either a single price point or a range of price points that they’ll be evaluating.

Jessica Dine:

Okay, got it. Thank you. Yeah, I mean I know that you’ve done research into basically all or most, I don’t want to say all of that, but many states different approaches to the low-cost requirement, and I do know that ... When I looked at this at least, and most of the states have not yet had their volume two approved, which is the volume that contains their low-cost requirement, the way they address that. So I know that we both know that this might not necessarily pass through NTIA, it’s only these four states that we’ve already addressed that are actually going to definitely use their type of approach. But are there any interesting other approaches that you’ve seen from again, states that may or may not actually end up taking this approach?

Jake Varn:

Yeah, like you said, the ink is not dry on 51 of these or 52 of these 56 state and territory initial proposals. But what we’ve seen over the four that I’ve approved, so we already touched on Louisiana, but West Virginia, Kansas and Nevada are the other three states that just recently received approval outside of the price points that they’ve identified, which range from $30 in Kansas to I think $55 in West Virginia of what that standard low-cost option will be. There are also looking at some other interesting components like how can a provider change that price over time to keep up with inflation or if other additional fees are being imposed on them at a state, local or federal level, how can they make sure that that price is being incorporated and how can the state serve as the facilitator of that, how can it provide or justify or provide evidence to them that low-cost option needs to just be incrementally changed over time.

They’re also including specific years of service or years of availability that that plan has to be open to customers. So starting after deployment is completed or construction is finished. At a bare minimum, it has to be available for what NTIA defines as the useful life of the network, which I believe is at eight years in statute. But some states are including a little bit longer provision saying it has to be available for at least 10 years.

There’s also conditions on installation costs that’s being incorporated into this low-cost service option definition, and then two other states that I think have taken an interesting approach, again, to try to get at this balance of understanding that these BEAD projects are trying to serve the fundamentally highest-cost areas in the country that have historically not been served by competitive providers, there is a reason why they’re currently unserved and underserved and why we’re trying to attract high-speed internet providers to provide high-quality service to them and trying to balance that business case that those providers will need to sustain themselves with while still meeting the true basic needs of their constituents, which is having an affordable option available.

We’ve seen two states take an interesting approach. Wisconsin and Utah have both set up, at least in their drafts, again, pending approval and pending any changes. They’ve set up different standards for if you are in an urban area or rural area in the case of Utah or in the case of Wisconsin, if you’re a larger provider or a smaller provider, if you’re serving over a hundred thousand or less that you can justify a different low-cost service option.

Jessica Dine:

Okay, interesting. So as you’ve explained really well, there are a lot of things to ... There are a lot of different approaches states can take. There are a lot of things that states have to juggle and things that they could potentially take into account or not take into account depending on their priorities. I would like to switch gears a little bit to what I sort of floated in the beginning. What is maybe the most relevant program related to all of this right now, and that’s called the ... It’s the subsidy program called the Affordable Connectivity Program, and it’s sort of the elephant in the room.

For listeners who might not be as familiar, could you please briefly explain what that is and how it’s related to these low-cost options?

Jake Varn:

Yeah, absolutely. So the Affordable Connectivity Program initially grew out of the initial response to the pandemic. There was an Emergency Broadband Benefit program that was stood up under the FCC to try to immediately respond to what was clear as day that everyone needed access to the internet, and affordability was proving to be a fundamental barrier to getting people online. So the Emergency Broadband Benefit was stood up in very short order and was then solidified as the Affordable Connectivity Program. So it’s providing a monthly benefit of $30 on non-tribal lands and $75 on tribal lands. And currently, 23 million households are enrolled in it, but funding is running out as we speak. This is the final month that an ACP subsidy will be applied to households bills, and it’s actually only going to be a partial subsidy. It’s only going to cover half of the month of May.

Some providers have stepped up and said that they will cover the full costs of that subsidy to maintain it for this current month, but that’s no guarantee. And then after May, the affordable Connectivity program will go away without congressional intervention. A, that fundamentally is devastating to the households that are currently relying on it, but it also has several ramifications for the BEAD program. As you were outlining, the low-cost option was designed to fit hand-in-glove with ACP. These defined households were the exact same. The defined types of plans that ACP has to meet were the same in terms of not imposing data caps and having low latency and a few similar to the other technical requirements.

The real challenge is not only that this low-cost option that states defined the price point will now be fully borne by the customer, whereas a $30 discount would have otherwise been applied to it. So a $50 low-cost service option, which the state may have been able to justify because the household would only end up paying $20 per month, is now that household is now ... that bare minimum is $50 per month. So that’s one immediate barrier that it has increased or is decreased the affordability for the end user. It also provides a really fundamental technical challenge, which is the infrastructure that the ACP, for lack of a better word, pardon my pun, but the infrastructure of ACP that’s been set up at the federal government to enroll people into the program to prove that they’re eligible based off of their income or their participation in another federal program would also go away.

So this is what’s referred to as the national verifier, and there’s a few other mechanisms of the alternative verifier for those people that really want to get into the weeds of it. But essentially without that national unified system that has currently been operating with ACP, states and providers will be left scrambling to demonstrate that they are making those low-cost service options that they’re building or that they’ll be providing after they finish building a BEAD network is available to those otherwise ACP-eligible households. If ACP is going to continue and stay available, it’s a much easier process that you can say they are participating in ACP, they are signed up, they will receive a low-cost service option. Without ACP, it’s going to be a much more challenging prospect.

Jessica Dine:

Okay. Linking their low-cost requirement to ACP itself isn’t really necessary for states, but being able to piggyback off an existing program like this does a lot of the political work for the states and does a lot of just the logistical work for them and ISPs and gives everyone also some very needed certainty, especially right now when everything’s still up in the air and the BEAD timeline is moving very quickly.

Jake Varn:

Actually, I would say it is at least both in statute and in NTIA’s guidance, participating in ACP was a fundamental requirement.

Jessica Dine:

Yes, it was.

Jake Varn:

A BEAD provider had to participate in ACP and then a state had to match the low-cost service option eligibility criteria to ACP’s eligibility criteria. So though the price points were not exactly the same and the service commitments, ACP didn’t have a minimum speed tier, for example, the low-cost service option does. There were some differences between that, but a lot of it was really interdependent on one another.

Jessica Dine:

I want to talk more especially about what states are going to be doing with ACP’s future up in the years, and so much of this is entwined around that, but I think we have to stop here. We’re a little bit over time. Thank you, Jake, so much. This has been really interesting. This is an absolutely critical topic and I know I’m going to be following ACP’s future and sort of hoping that it all works itself out, as I’m sure will many of our listeners.

To our listeners, if you liked what you heard today, please feel free to check back on ITIF’s Access America page, where we’ll be regularly putting out episodes, honing in on specific elements of BEAD. Thank you, and have a nice day.