Broadband Funding
The Chinese government, particularly provincial and city governments in China, are maligned for providing what seems like unlimited funding for 5G projects, particularly infrastructure related funding that results in statistics that can show that China is competing in or leading global markets, and there are few countries that have a more positive attitude toward growth. However, this also leads to some bitterness given that smaller or less financially viable countries malign China as the funding removes some of the growth barriers that limit publicly or privately funded companies that have to prove themselves a bit before early funding or must live or die in the public markets without outside support.. We admit that our attitude toward China’s growth in the display space is colored a bit by the fact that the industry was, and still is, funded by state and local governments, so we poked around to see what the US has to offer in the way of subsidies for broadband and we were surprised at the number of broadband funding projects and their size.
Here are a few[1]:
Infrastructure Investment & Jobs Act – 11/2021 - $65b for Broadband – “Access to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States. The persistent ``digital divide'' in the United States is a barrier to the economic competitiveness of the United States and equitable distribution of essential public services, including health care and education. The digital divide disproportionately affects communities of color, lower-income areas, and rural areas, and the benefits of broadband should be broadly enjoyed by all. In many communities across the country, increased competition among broadband providers has the potential to offer consumers more affordable, high-quality options for broadband service”.
The plan funds projects that provide broadband service to locations that have no service or speeds less than 25MBs. $100m is allocated to each state, including the US Virgin Islands, Guam, Samoa, and the Mariana Islands, with the remainder allocated on an application basis. No more than 5% of the funds can go to planning and no more than 2% for grant administration. All project requests must show a 5 year plan for deployment to be considered.
Broadband Equity, Access & Deployment Program (BEAD) - $42.45b for new Broadband equity – Each of the 50 states receive an initial allocation of $100m with the remaining funding being distributed based on coverage maps to be provided by the FCC. Each state must submits a 5 year plan including prioritized locations. State grants require that the applicants offer at least 100MBs speeds and is open to cooperatives, non-profits, public/private partnerships, private entities, utilities and local governments. The program began in January of this year and by May 32 states had requested program participation.
Affordable Connectivity Program aka Emergency Broadband Benefit Program – Currently $14b – Allocates a $30 credit to qualifying families toward their internet service and $75 for those on tribal lands. Eligible households can also receive a one-time discount of $100 toward the purchase of a laptop, desktop computer, or tablet if they contribute between $10 and $50 toward the purchase. Eligible households must have an income at or below 200% of Federal Poverty Guidelines or participate in USDA breakfast/lunch program, SNAP, Medicaid, WIC, public housing, or are on a veteran pension. Under this program an additional $7.75b has been set aside for additional smaller projects for distance learning, telemedicine, and ‘middle-mile’ infrastructure. In June of this year there were over 12.2m participants in the program.
American Rescue Plan Act of 2021 - $350b for all projects – States decide how much goes to broadband. Virginia allocated $700m toward providing universal broadband access across the state, while California allocated $3 toward a $6b commitment to expand middle and last mile connections. Late last year the US Department of the Treasury issued guidance as to how states should use money from the $10b Capital Projects Fund that was created by the ARPA, emphasizing its use for investments in fiber technology, broadband networks owned or operated by local governments or non-profits. The awards for Louisiana, New Hampshire, Virginia and West Virginia total $582.8 million and will cover projects designed to deliver connectivity to 200,373 locations. Louisiana has qualifying broadband coverage across only 75% of the state and the new funding will serve 88,500 locations while the funding for West Virgina will cover 20,000 locations and New Hampshire’s allocation will cover 15,000 unserved locations. Virginia was approved to receive the entirety of its $219.8 million Capital Projects Fund allotment, which will allow it to deliver broadband to an estimated 76,873 locations.
Emergency Connectivity Fund - $7.2B – Administered by the FCC, this fund is to help schools and libraries purchase broadband devices such as routers, tablets, and hotspots or add connectivity if it is not currently available. By May of this year, about 9 months since the initial program funding, there was only $1.5b remaining as 7,369 schools or school districts, 628 libraries and 133 related groups had applied for grants.
Of course even the most abbreviated summary of broadband funding in the US would not be complete without the December 2020 Consolidated Appropriations Act (aka Huawei (pvt) ‘Rip & Replace’), a $5b program that was the original funding for the Emergency Broadband Benefits Program and allocated $1.9b to carry out the ‘Secure & Trusted Communication Networks Act of 2019 which required carriers to remove network equipment from Huawei and ZTE (000063.CH). By February of this year the FCC had received over $5.6b in reimbursement requests for the replacement program and the FCC indicated it will ‘prioritize’ the funding starting with service providers with 2m customers or less (Priority 1) and then move to public or private educational institutions (Priority 2), although the FCC indicated that all priority 1 requests must be covered before funds are allocated to priority 2 and lower priority requests, which means that the FCC will head back to Congress for more funding.
These are only a few of the many broadband funding programs available in the US, others like the Rural Digital Opportunity Fund ($20.4b), the USDA’s Broadband Reconnect Program ($1.5b), and a myriad of smaller ones are or have been allocating capital toward expanding the US broadband network to potential users that are outside of typical coverage zones. In most cases these are not 5G related and based on fiber, although speed is the requirement regardless of the connection mode, so that infrastructure would be up to the carrier or government agency running the project. All 50 states have applied for funding from at least one program although we note that some of the states have allocated funding toward creating broadband ‘offices’ as part of the state government, so not all the dollars will wind up in the ground. All in, after even this quick look, we look back at China’s 5G funding with a slightly less biased view given the extent of funding for just these few programs. As to whether the dollars will be spent wisely, that is fodder for another note but China is now facing a number of internal investigations as to where some of its funding programs actually went, so we would expect a similar situation here down the road if history is any teacher[2]
[1] Thanks to Diana Goovaerts @ Fierce Wireless for building the dataset.
[2] As far back as the Andrew Jackson administration (1829) political monetary corruption was a hallmark of US politics. The 1st we could find was Samuel Swartwout, a presidential appointee to the New York City Collector’s Office, who embezzled $1.25m in customs receipts to purchase land. He fled to Europe before prosecution. There were many earlier scandals but none involving the theft of funds.
Here are a few[1]:
Infrastructure Investment & Jobs Act – 11/2021 - $65b for Broadband – “Access to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States. The persistent ``digital divide'' in the United States is a barrier to the economic competitiveness of the United States and equitable distribution of essential public services, including health care and education. The digital divide disproportionately affects communities of color, lower-income areas, and rural areas, and the benefits of broadband should be broadly enjoyed by all. In many communities across the country, increased competition among broadband providers has the potential to offer consumers more affordable, high-quality options for broadband service”.
The plan funds projects that provide broadband service to locations that have no service or speeds less than 25MBs. $100m is allocated to each state, including the US Virgin Islands, Guam, Samoa, and the Mariana Islands, with the remainder allocated on an application basis. No more than 5% of the funds can go to planning and no more than 2% for grant administration. All project requests must show a 5 year plan for deployment to be considered.
Broadband Equity, Access & Deployment Program (BEAD) - $42.45b for new Broadband equity – Each of the 50 states receive an initial allocation of $100m with the remaining funding being distributed based on coverage maps to be provided by the FCC. Each state must submits a 5 year plan including prioritized locations. State grants require that the applicants offer at least 100MBs speeds and is open to cooperatives, non-profits, public/private partnerships, private entities, utilities and local governments. The program began in January of this year and by May 32 states had requested program participation.
Affordable Connectivity Program aka Emergency Broadband Benefit Program – Currently $14b – Allocates a $30 credit to qualifying families toward their internet service and $75 for those on tribal lands. Eligible households can also receive a one-time discount of $100 toward the purchase of a laptop, desktop computer, or tablet if they contribute between $10 and $50 toward the purchase. Eligible households must have an income at or below 200% of Federal Poverty Guidelines or participate in USDA breakfast/lunch program, SNAP, Medicaid, WIC, public housing, or are on a veteran pension. Under this program an additional $7.75b has been set aside for additional smaller projects for distance learning, telemedicine, and ‘middle-mile’ infrastructure. In June of this year there were over 12.2m participants in the program.
American Rescue Plan Act of 2021 - $350b for all projects – States decide how much goes to broadband. Virginia allocated $700m toward providing universal broadband access across the state, while California allocated $3 toward a $6b commitment to expand middle and last mile connections. Late last year the US Department of the Treasury issued guidance as to how states should use money from the $10b Capital Projects Fund that was created by the ARPA, emphasizing its use for investments in fiber technology, broadband networks owned or operated by local governments or non-profits. The awards for Louisiana, New Hampshire, Virginia and West Virginia total $582.8 million and will cover projects designed to deliver connectivity to 200,373 locations. Louisiana has qualifying broadband coverage across only 75% of the state and the new funding will serve 88,500 locations while the funding for West Virgina will cover 20,000 locations and New Hampshire’s allocation will cover 15,000 unserved locations. Virginia was approved to receive the entirety of its $219.8 million Capital Projects Fund allotment, which will allow it to deliver broadband to an estimated 76,873 locations.
Emergency Connectivity Fund - $7.2B – Administered by the FCC, this fund is to help schools and libraries purchase broadband devices such as routers, tablets, and hotspots or add connectivity if it is not currently available. By May of this year, about 9 months since the initial program funding, there was only $1.5b remaining as 7,369 schools or school districts, 628 libraries and 133 related groups had applied for grants.
Of course even the most abbreviated summary of broadband funding in the US would not be complete without the December 2020 Consolidated Appropriations Act (aka Huawei (pvt) ‘Rip & Replace’), a $5b program that was the original funding for the Emergency Broadband Benefits Program and allocated $1.9b to carry out the ‘Secure & Trusted Communication Networks Act of 2019 which required carriers to remove network equipment from Huawei and ZTE (000063.CH). By February of this year the FCC had received over $5.6b in reimbursement requests for the replacement program and the FCC indicated it will ‘prioritize’ the funding starting with service providers with 2m customers or less (Priority 1) and then move to public or private educational institutions (Priority 2), although the FCC indicated that all priority 1 requests must be covered before funds are allocated to priority 2 and lower priority requests, which means that the FCC will head back to Congress for more funding.
These are only a few of the many broadband funding programs available in the US, others like the Rural Digital Opportunity Fund ($20.4b), the USDA’s Broadband Reconnect Program ($1.5b), and a myriad of smaller ones are or have been allocating capital toward expanding the US broadband network to potential users that are outside of typical coverage zones. In most cases these are not 5G related and based on fiber, although speed is the requirement regardless of the connection mode, so that infrastructure would be up to the carrier or government agency running the project. All 50 states have applied for funding from at least one program although we note that some of the states have allocated funding toward creating broadband ‘offices’ as part of the state government, so not all the dollars will wind up in the ground. All in, after even this quick look, we look back at China’s 5G funding with a slightly less biased view given the extent of funding for just these few programs. As to whether the dollars will be spent wisely, that is fodder for another note but China is now facing a number of internal investigations as to where some of its funding programs actually went, so we would expect a similar situation here down the road if history is any teacher[2]
[1] Thanks to Diana Goovaerts @ Fierce Wireless for building the dataset.
[2] As far back as the Andrew Jackson administration (1829) political monetary corruption was a hallmark of US politics. The 1st we could find was Samuel Swartwout, a presidential appointee to the New York City Collector’s Office, who embezzled $1.25m in customs receipts to purchase land. He fled to Europe before prosecution. There were many earlier scandals but none involving the theft of funds.
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