Some States Expect Reduced Bidding for Federal Digital Divide Projects

ACA Connects President Grant Spellmeyer told us it wouldn't be surprising if some states had very low participation rates. For instance, "there's a lot of angst" in Pennsylvania over program provisions, such as prevailing wage terms, he said in an interview. As such, Spellmeyer is less optimistic that ACA members will participate in BEAD as robustly as they did previously. Moreover, uncertainty about BEAD's future under the next administration and incoming Congress "isn't helping, either," Spellmeyer said.

State-level rules can be a determining factor in whether ISPs participate in BEAD, officials at state broadband groups told us. In Pennsylvania, state rules regulating how workers are paid will likely lead to much less BEAD participation than expected, said Todd Eachus, president of the Broadband Communications Association of Pennsylvania. “It just shortens the spending power of BEAD dollars,” Eachus said. “I think there is a misunderstanding at the policy level in the state.” BEAD workers fall under a Pennsylvania wage statute, and the state’s Department of Labor and Industry has determined they must be paid at the same rate as electricians, averaging more than $90 an hour, Eachus said. BCAP has 15 member ISPs, and, though they haven’t set their plans in stone, he said, many “are absolutely not going to participate, largely because of the rules as they’ve been written ... and approved in Pennsylvania.”

The state also has a rigid view of the definition of middle-class affordability, making it harder for ISPs to charge rates that justify the expense of building out isolated areas, Eachus said. “It’s going to be a struggle to operate a system in the black when we take into account pole attachment costs and continuing maintenance and service of a network.” The Pennsylvania Broadband Development Authority didn't comment.

In Wyoming, local rules will likely facilitate BEAD participation, said Adria Trembly, president of the Wyoming Telecommunications Association Board and regional manager at Range Telephone Cooperative. Trembly expects many WTA members will participate because the state’s broadband office opted not to use census blocks to portion out eligible locations, but smaller project area units (PAU). “Wyoming is the least populated state in the nation. So, our population density is pretty spread out,” said Trembly. “In almost every census block group, there are a few locations that are, say, 20 miles” from more dense population centers. “To plow fiber to someone who's 20 miles out of more centrally located areas -- that's nearly impossible” to make financially viable. The PAUs chop up census blocks, separating the more remote locations, and make it possible for ISPs to apply for BEAD service areas that make economic sense, Trembly said. “Breaking out those PAUs makes applying much more attractive.”

Kansas' application process, which closed earlier this month, was "pretty arduous" for Communications Coalition of Kansas members, Executive Director Erik Sartorius told us. He said about a third of CCK members are likely too small and lack the staff and resources to participate in BEAD; another third considered BEAD projects but ultimately opted out because of cost or other issues. Of the third bidding in BEAD, it's unlikely any CCK members are "going big and applying for a lot" of unserved or underserved areas.

Sartorius said BEAD requirements, and compliance and related costs, have chilled the interest of some CCK members. That BEAD grant funding is taxable income also led some members to pass on particular projects. It's probable that the initial round of bids cover only some of the state's unserved and underserved areas. Subsequent state broadband office negotiations to try to get providers to cover additional areas may not move the needle much. Many providers "are not interested in taking in a lot of stuff beyond” what they are applying for, he said.

While Kentucky Rural Broadband Association members are still waiting for the final notification of BEAD-eligible locations, as that will determine participation, a handful will likely participate, Executive Director Tyler Campbell said. Some of BEAD's mandatory requirements may dissuade greater participation, but so too could the fact that some members have deployed fiber already and now lack areas adjacent to their footprints that are unserved as other carriers or cable providers surround them, he said. Numerous state broadband and telecom organizations didn't comment, or said they lacked a good sense of participation.

“With BEAD, since each state has its own set of rules, that instantly introduces a 50x compliance cost multiplier for a national broadband company,” said Tech Freedom Senior Counsel Jim Dunstan. “They have to set up 50 different compliance programs, one for each state.” The FCC’s digital discrimination rules are likely also an obstacle, Dunstan said. When “every new deployment decision can be fly-specked as to whether it might somehow disparately impact one of the protected classes,” it shouldn’t be surprising “that the companies best suited to trying to close the digital divide are skittish about jumping face-first into this regulatory buzzsaw.”

Dunstan and state broadband groups are uncertain whether the incoming administration will mean changes for BEAD. “The entire BEAD program is up in the air,” Dunstan said. “There are several congressmen who want to take a hard look at it in the next Congress, and they should.” Said Eachus, “We understand that there is potential for the new, post-election alignment in Washington to take a look and perhaps make some adjustments there that are favorable,” but “it's really tough to tell right now how that might work." States like Pennsylvania face an additional concern in that they have a time crunch due to an ongoing application process, Eachus said. “What happens to those applications if there are material changes, and we have to go back to the drawing board with the new NTIA?”

Nineteen providers have provisionally been awarded BEAD money under Nevada's final proposal, announced last week. The single-biggest recipient was SkyFiber Internet, with an $180.6 million award for 12,043 locations. Stimulus Technologies of Nevada received $142.6 million for 17,073, while Commnet received $50.6 million for 5,136. The state said fiber would reach more than 80% of unserved locations.

A survey of state broadband directors found that 36% expect that if the new Trump administration makes BEAD changes, they will improve the program, while 11% expect the changes will make it worse or much worse, Broadband Marketers' Doug Adams wrote last week. Asked about possible challenges to BEAD deployment, 64% of state directors cited permitting woes, new administration program changes (55%) and labor availability (52%), he said. Asked when they expected BEAD construction to start in their states, 21% said sometime in the first three quarters of 2025, 19% said in Q4, 26% in Q1 2026 and 23% in Q2 2026.