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'Edge-Out' Deployment

Del. Broadband Grants to Big ISPs Raise Concerns

Competitors raised concerns with Delaware limiting eligibility for $56 million in American Rescue Plan Act (ARPA) funding to big ISPs with existing cable franchises. Competitive telecom groups said they hoped for open and technology-neutral bidding processes there and in other states. A Delaware official defended the state program’s eligibility restriction, which excluded a Rural Digital Opportunity Fund (RDOF) winner, as an “edge-out” strategy to extend broadband more quickly.

Delaware awarded $33.1 million to Comcast last month, $11.8 million to Verizon and $11.1 million to Mediacom. The state said construction would begin in weeks and over 36 months will extend 100 Mbps download and 20 Mbps upload speeds to 11,600 homes (see 2203170053). Competitors weren’t eligible for the funding under the state’s request for proposals. The RFP said: “Current State of Delaware cable television service provider franchisees with existing broadband infrastructure are eligible to apply for these Award Funds.”

Maryland-based fiber ISP Talkie would have bid for Delaware money to supplement RDOF support it received for parts of the state bordering Maryland, if there hadn’t been a restriction, said Talkie co-CEO Andre DeMattia in an interview. Talkie got final FCC approval Feb. 14 for $13.3 million to cover 7,749 Delaware locations over 10 years.

Delaware wasted money by paying incumbents to expand into places where Talkie is obligated to build out fiber under RDOF, said DeMattia: The state could have spent less by augmenting Talkie’s RDOF support, he said. “Now there’s going to be two providers in the exact same spot.” In the fiber business, “the first provider there wins, so whoever’s there second is going to get very low return on investment,” said DeMattia. “The race now is on.”

States shouldn’t be allowed to discriminate, said Talkie lawyer Philip Macres of Klein Law Group. Delaware's eligibility limit violates the Treasury Department's ARPA guidance to require competitive bidding processes and to avoid waste, said Macres: Using ARPA money for areas funded by RDOF is effectively overbuilding. “There might have been other smaller providers that wanted to be part of this” and could have built out areas for less money, said Macres. “They didn’t even have a chance to compete.”

Areas where Delaware awarded ARPA money overlap 100% with places where Talkie won RDOF support, said Macres. Delaware failed to widely publicize the RFP on its website and there was no way to challenge incumbents’ bids, he said. On possible legal next steps, Macres said Talkie will evaluate its options. It’s unclear if Delaware would impose similar restrictions in future RFPs, he said: “I’m not optimistic.”

‘Gap-Fill’ Strategy

Delaware’s “overarching interest was in deploying future-proof, high-speed infrastructure as quickly as possible -- both to satisfy urgent demands of currently unserved and underserved households and to avoid exceeding grant-required deadlines,” emailed Chris Cohan, Delaware Department of Technology and Information chief-policy and communications. “Based on these priorities, we adopted an edge-out and gap-fill strategy to provide broadband to unserved areas … by utilizing existing providers that have significant investments and resources in the state’s current infrastructure.”

Delaware received proposals from three of its four franchise ISPs, said Cohan. “The planning and procurement process was conducted in accordance with state procurement laws” and “within the parameters of the ARPA requirements,” he said. “ARPA and RDOF are two separate funding programs that are not connected. They do not have the same requirements.”

Mediacom has “always maintained that the most efficient and effective way to bridge America’s digital divide is to ... leverage the existing fiber infrastructure that runs through or near the targeted unserved/underserved areas,” said a spokesperson: Such programs “will be able to stretch their dollars further, reach more homes and businesses, and create more sustainable projects.” Comcast and Verizon declined to comment.

Delaware consulted with CTC Energy and Technologies as it developed its RFP. CTC’s May 2021 report, which the state referenced in a Sept. 22 press release, didn’t specifically recommend limiting eligibility, though it noted incumbent ISPs “could use an edge-out approach” to reach nearly 90% of unserved residents if they expanded footprints by one-half mile into unserved areas. Talkie got RDOF support for Delaware, but “questions remain about execution,” the CTC report said. “We do not know whether Talkie can deliver.” CTC didn’t comment now.

ARPA doesn’t specifically direct states as to whom they must make funds available, unlike the Infrastructure Investment and Jobs Act, said Ken Fellman, a telecom attorney for local governments. "I can challenge the wisdom of that policy ... but I don't know that there's anything in ARPA that would keep the state from doing that." Delaware or other states probably could be refused federal funding if they tried to impose such limits on IIJA broadband equity, access and deployment support, the lawyer said.

Competitive Concerns

The Fiber Broadband Association asked Delaware to reconsider the restriction. “We are concerned that by restricting eligible entities to incumbent cable television service providers, the program is neither maximizing use of its limited funding -- stranding many ‘unserved’ households that could be served -- nor necessarily selecting the best provider to deploy future-proof infrastructure,” wrote FBA President Gary Bolton in a Nov. 4 letter to the Delaware Department of Technology and Information. “Expanding the eligibility pool and using a competitive bidding process would address both flaws.”

We had concerns about the process being more targeted,” Bolton told us now, but “my understanding is the result looks very fiber-friendly.” Verizon is an FBA member that will deploy fiber-to-the-home, and while Comcast and Mediacom aren’t members, Bolton believes they too will deploy fiber, he said. Bolton doesn’t want “any kind of thumb on the scales,” but “if people are getting fiber and you’re serving every member of the community … that’s great if an experienced provider can do that.”

Bolton didn’t receive a formal response to his Nov. 4 letter, but “we were heard,” said the FBA president, saying he had “discussions with folks that have influence on these things.”

Competitive wireline and wireless associations urged open processes. “It is imperative that all ISPs have a chance to compete to bring future proof broadband networks to unserved and underserved areas,” emailed Incompas General Counsel Angie Kronenberg. “Competition for broadband funding brings new networks and faster speeds to local communities. Favoring incumbents or excluding competitors altogether results in taxpayers paying more than they should for deployment. Entrenching monopolies by rewarding them for their failure to build is anticompetitive and squanders a real opportunity to inject competition into the marketplace.”

The Wireless ISP Association thinks the “process, in Delaware and elsewhere, should be open and tech-neutral to all comers who can make bids, and offer viable solutions to bring broadband to the unserved,” a WISPA spokesperson said. “This open process will bring more players to the table, and best serve the purposes of the variety of broadband funding programs out there now.”

Free State Foundation President Randolph May would “prefer that a state's grant process not limit eligible funding recipients only to fixed terrestrial broadband providers, while expressly excluding fixed wireless, mobile, and satellite, as the Delaware grant process appeared to do,” he said. But Delaware’s RFP stressed readiness as a priority, he said. “To the extent timeliness of deployment is a legitimate consideration, broadband providers with existing infrastructure are going to have an advantage.”