NTIA’s Middle-Class Affordability Requirement Is Bad For Consumers

When Congress passed the Broadband Equity, Access, and Deployment (BEAD) program, the primary goal was to get more broadband to more households. Now, it appears that the Biden Administration wants to add another goal: “Middle-Class Affordability.” While this is a great slogan, it is counter to Congress’ goal of universal connectivity, forcing states to set aside funds that would otherwise be used for increasing broadband deployment and adoption just to attract participants to a heavily regulated program.

Established through the Infrastructure Investment and Jobs Act (IIJA), BEAD provides $42 billion to fund broadband infrastructure and adoption in every U.S. state. The National Telecommunications and Information Administration (NTIA) administers this program with broadband offices in each state to administer funds and enforce program requirements. Unfortunately, the NTIA has included a Middle-Class Affordability requirement for state plans which will undermine BEAD’s effectiveness by, (at best) creating redundancy and (at worst) regulating rates.

To be clear, Middle-Class Affordability is not an inherently bad idea, everyone wants more affordable internet. But, the central issue is that the NTIA does not properly define the affordability requirement. The NTIA guidelines only supply a vague condition that states must create “a middle-class affordability plan designed to ensure that a BEAD-funded network’s service area provides high-quality broadband service to all middle-class households at reasonable prices.” The NTIA does not articulate how this is to be done—not even defining Middle-Class—and only provides some suggested means of compliance, despite the requirement blocking billions in federal funds from states.

Two contrasting suggestions, described in Initial Proposal Guidance documents published by the NTIA demonstrate the danger of this requirement. While the NTIA should reverse course to avoid such dangers, states should seek to follow less damaging compliance methods in the meantime.

The NTIA’s first suggestion requires state providers receiving BEAD funds to offer low-cost, high-speed plans to all middle-class households using the BEAD-funded network. This is an extreme proposal that amounts to rate regulation, the process by which regulatory bodies or governments set prices that can be charged to customers for services or products that would normally be determined by the market. This suggestion meets the definition because it envisions states setting a “low-cost” price for broadband.

This approach is counterproductive to BEAD’s objectives since charge rates below the market simply shifts the necessity of covering losses to the initial BEAD granting process. Internet service providers (ISPs) will either decline to participate in BEAD which will reduce competition, or they will request larger allotments of funds to carry out their BEAD projects, depleting the program’s funds more quickly and likely before its goals have been achieved. States can micromanage broadband rates or have universal deployment with steps towards adoption. They can’t have both.

Furthermore, the statute forbids rate regulation. Section 60102 of the IIJA provides that, the NTIA may not “regulate the rates charged for broadband service.” Following this first route for the Middle-Class Affordability requirement would, therefore violate the statute and be unlawful.

Suggestion 2 uses regulatory authority to promote structural competition such as eliminating barriers to entry, opening access to multi-dwelling units, or promoting alternative technologies. If pursued wisely, this would empower the market to deliver high-quality broadband at competitive prices rather than stifling its price signals. States looking to reap the benefits of affordable, high-speed Internet should be eager to streamline barriers to entry by cutting costly and time-consuming permitting regulations, thus lowering deployment costs, and allowing private competitors to serve customers and drive prices down.

Of the NTIA options, suggestion 2 is most likely to result in affordable, high-speed broadband at the largest scale. The Middle-Class Affordability requirement was a misguided addition to BEAD that could significantly hamper its effectiveness if it plays out as de facto rate regulation. Thus, even under this form of compliance, the Middle-Class Affordability requirement merely creates redundancy for states and the NTIA. Until the NTIA reverses course on this, states should pursue the least intrusive means of compliance possible, recognizing that removing barriers to a competitive market, not overriding it, is the best way to enhance broadband affordability for most Americans.