MuniNetworks – Institute for Local Self-Reliance: Recent Episodes

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When a $25 million broadband funding award for the Colorado River Indian Tribe (CRIT) was announced in July 2023, CRIT Chairwoman Amelia Flores celebrated it as a “game changer.”

“Broadband access is essential,” Flores’s statement read, making “remote learning, telecommuting, conducting business, and simplifying staying connected” possible.

Coming amid a rolling series of announcements from the Tribal Broadband Connectivity Program – each lauding millions of dollars in broadband funding for Tribes – it would have been easy to file away CRIT’s award as another from that pathbreaking broadband funding program for Tribes.

But this was not the TBCP. Rather, CRIT was among a handful of Tribes that received substantial funding awards from another federal source that has recently stepped up their grantmaking to Tribes – the U.S. Department of Agriculture’s (USDA) ReConnect Grant Program, administered by the department’s Rural Utilities Service (RUS).

CRIT’s award is a helpful reminder that TBCP is not the be-all-end-all of funding for Tribal broadband. With an award cycle now open, ReConnect offers powerful tools and incentives – including dedicated Tribal funding, 100 percent grants, and consent for any new infrastructure on sovereign lands – for Tribes looking to expand or launch broadband service.

TBCP, ReConnect, and Federal Funding for Tribal Broadband Infrastructure

For now at least, March 22nd marked the close of the TBCP, the single largest federal broadband funding program for Tribes. When round two awardees for the TBCP are announced later this year or the next, the National Telecommunications and Information Administration (NTIA) will have disbursed a total of nearly $3 billion over the last three years. But, given that applications in TBCP’s first round alone totaled $6 billion in requests, and round two applications likewise totaling nearly three times the available amount, no one expects this to be enough to close the connectivity gap on Tribal lands. It will remain important for Tribes to look elsewhere – like ReConnect – for infrastructure funds to continue moving their broadband plans forward.

For many Tribal communities, there are a number of reasons why infusions of federal and state grant funds are especially important to get large broadband projects off the ground.

Due to long-term patterns of digital redlining, Tribal lands are often further away from meaningful backhaul connections and sometimes lack much in the way of existing telecommunications infrastructure.

Given the low population density in rural areas, including many Tribal communities, return on investment for building to these areas is often lower, a fact that large ISPs have long used to justify failing to build there.

And because of often limited tax bases and restrictions on using trust land as collateral, many Tribal Nations find it difficult to secure large sums for infrastructure in the way that municipalities or counties might.

All of this makes the barrier for entering broadband potentially prohibitive for many Tribes without outside funding.

While TBCP was one of the only federal broadband funding programs exclusively for Tribes, it is not the only avenue for federal support available. As the Colorado River Indian Tribe’s story illustrates, the USDA’s ReConnect program has emerged over the past few years as one such avenue. Though ReConnect funds are never likely to match the scale or magnitude of TBCP’s grantmaking, the program’s policies around Tribal deployment and ongoing grant cycles make it a potentially lucrative opportunity.

The ReConnect program (formally named the Rural eConnectivity Pilot Program) is funded through a combination of annual appropriations and one-time legislation like the CARES Act and the Infrastructure Investment and Jobs Act (IIJA). It offers a range of award types – 100 percent grants, 100 percent loans, and 50/50 Loan/Grant Combinations – and must serve rural, mostly unserved areas.

With the announcement of the final tranche of awards for Round 4 (FY 2023) in February, the program had disbursed more than $1.8 billion in that cycle alone. (ReConnect 3 and 4 were unusually large because of infusions from IIJA and CARES). In total, ReConnect has awarded more than $5 billion in funding over four cycles.

More to the point, recent award cycles have made more substantial investments in Tribal broadband projects, a welcome pivot that suggests a growing interest in the work on the part of RUS.

Such projects were barely a blip in the first two rounds of ReConnect – amounting to little more than 1 percent of the total amounts awarded, and only 3 out of 173 projects. In contrast, Round 3, started during FY 2022, awarded Tribes 7 percent of the awards and 8 percent of the funding.

Those numbers increased even more in Round 4, with a total of over $200 million going to nine Tribes or Alaska Native entities, representing about 11 percent of the funding total and 10 percent of the projects. And the awards were substantial. CRIT’s grant, for instance, would have put it near the top of TBCP awards in terms of size. (Several other awards funded projects in Tribal and Alaska Native Village Statistical Areas by third party providers).

The increase of funding to Tribal Governments beginning in Round 3 correlates with RUS’s efforts to integrate “guiding principles for federal infrastructure on Tribal Lands” in line with many best practices advanced by Tribal broadband interest groups and Tribal representatives in consultations.

At that point, ReConnect strengthened and clarified Tribal consent policies, requiring formal Tribal Government resolutions of consent for any proposals seeking to build on or over tribal lands.

ReConnect 3 also introduced a 100 percent grant set aside, at the time for Tribal Governments and Socially Vulnerable communities (now defined a bit more broadly). This portion of the program’s grant funds no longer required a match. Finally, with ReConnect 3, RUS began allowing Tribal Governments to self-certify the served status of their lands, with the federal agency then working to “verify” this status.

Taken together, this set of policies sought to address barriers to Tribal participation in ReConnect, though the ReConnect application process remains complex and technically demanding.

Still, the policy changes have made ReConnect a viable option for Tribes at varying stages of broadband development. Rounds 3 and 4 saw awards go to expand established Tribal telcos like C.R.S.T.T.A. and Tohono O’odham Utility Authority; launch new Tribal networks, like the Colorado River Indian Tribes’ project and Oglala Lakota Network; and support Tribes like the Chickasaw and Choctaw Nations grow what look to be nascent or institutional networks into community-wide enterprises.

ReConnect Round 5 Now Open With $700 Million Available

These are hopeful signs as Tribal nations look to the next round of ReConnect dollars. Hot on the heels of TBCP round 2, ReConnect Round 5 is open now, and will accept applications through May 21. With $700 million total available, Round 5’s funding is substantially lower than in the past few years, but it still represents a significant opportunity.

Up to $150 million of that funding is earmarked for Alaska Native Corporations, Tribal Governments, Colonias, Persistent Poverty Areas and Socially Vulnerable Communities, with maximum awards of $25 million and no match required. Tribal Governments can compete for other segments of this $700 million, including another $150 million in grant money, though this pot would require a 25 percent match. Loans and loan-grant combinations are also available, and have been used by Tribes in past rounds.

One important thing to note: areas that have received previous funding through USDA can be funded again through ReConnect 5 if they currently “do not have sufficient access to broadband” after project completion.

Tribal engagement best practices – like consent requirements, self-certification, and match waivers, introduced in Round 3 – are again in force for Round 5. Additionally, the scoring criteria incentivizes Tribal applicants. Tribal Governments (or wholly-owned entities) seeking to serve an area of which at least 75 percent is Tribal lands will receive 15 points during evaluation. In addition, Tribal Governments qualify for an additional 15 points as a unit of government, non-profit, or cooperative.

Competition for a comparatively lower funding allocation will be fierce, but these eligibility and evaluation criteria should put Tribes in a position to compete. In the face of longstanding concerns about Tribes’ access to BEAD dollars, programs like ReConnect that are looking to facilitate Tribal participation (and potentially existing state grants) will be even more important to ensure everyone has access to reliable high-speed Internet.

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Massachusetts and New York officials hope to entice affordable housing property owners with new grant programs that would pay the retrofitting costs to expand high-speed Internet connectivity into decades-old affordable housing developments.

The programs aim to focus on the multitude of multi-dwelling units (MDUs) in those states, particularly housing developments built before the advent of the Internet.

With property owners and Internet service providers (ISPs) often reluctant to pay the costs of getting these buildings up to broadband speed, Massachusetts and New York have launched the initiatives – using a portion of their federal broadband funds – to chip away at the digital divide in housing developments where a significant number of tenants live in buildings not wired to support reliable broadband or where the service is not affordable, thanks to agreements with monopoly providers.

New York Bytes Into Broadband Affordability

In December, New York Governor Kathy Hochul’s office announced the state’s ConnectALL Office (CAO) was setting aside $100 million New York State received from the federal Capital Projects Fund (courtesy of the American Rescue Plan Act) to bring broadband connectivity to 100,000 affordable housing units across the Empire State.

In announcing New York’s Affordable Housing Connectivity Program, Hochul said:

“With work, school, and essential government services going digital, affordable homes need affordable, reliable broadband, and this funding will help bolster our efforts to build housing equipped with the basic tools that New Yorkers need to succeed.”

To access the program, affordable housing property owners across the state will first need to complete an online “Building Conditions Self-Assessment (“BCSA”).

Then, “CAO will review the information provided by property owners and other information including federal and state broadband maps to prioritize properties for participation in this program. After this prioritization process, CAO will aggregate property data to assemble portfolios of properties,” according to program guidelines.

That process will help the ConnectALL Office determine which properties will be prioritized for “no-cost broadband upgrades to their building.” Once that has been determined, “ConnectALL will pair eligible properties with the best proposals from Internet Service Providers to complete the installation.”

Mass Movement Toward Better Broadband in Affordable Housing

In Massachusetts a similar initiative – known as the Residential Internet Retrofit Program – was announced earlier this month.

Using $22 million of the $175 million in CPF funds the Commonwealth received, the program will be administered by the Massachusetts Broadband Institute (MBI).

Officials say the program will pair ISPs with property owners “to upgrade in-building telecommunications wiring, equipment, and infrastructure within older housing developments.”

In a press announcement, the state Secretary of Economic Development Yvonne Hao said the program is part of the state’s effort to ensure every household has access to broadband because “our economic future depends on high-quality Internet access for all, especially for low-income populations who have been historically overlooked and disproportionately impacted by the digital divide.”

“The Retrofit Program takes an equitable approach to addressing the root causes of low-quality Internet service in public and affordable housing.”

MBI director Michael Baldino noted that a significant part of the state’s public housing units are more than 50 years old, adding that “low-income families in these buildings face barriers to accessing the speeds offered by broadband service if the wiring in their apartments pre-dates the Internet age.”

The program will target 22,000 affordable housing units across the state and can work in tandem with another program known as the Gap Networks Grant Program, which was launched by MBI in October 2023.

Affordable housing property owners interested in leveraging the program are being asked to submit an “expression of interest via MBI’s online form” so state officials can gauge interest and get a more granular sense of the size, scope, and cost of specific retrofit proposals. Later this spring, MBI will issue a Request For Information (RFI) from ISPs, which will help officials put together a formal Request For Proposal (RFP) sometime later this year.

Having recently launched the state’s BEAD challenge process (to help state officials better pinpoint which households do not have access to high speed Internet service), MBI officials anticipate the retrofit program will be rolled out in phases with quarterly RFPs issued along the way with an updated list of eligible locations statewide.

State Senator Michael Moore lauded the program, pointing to the role that nonprofits and nontraditional broadband providers might play:

“Greater access to broadband will bring more opportunities to individuals and families living in these units and ensure fast, reliable Internet is for everyone – regardless of their zip code or socioeconomic status. I look forward to continuing the legislature’s work with nonprofits, Internet service providers, and others to expand high speed Internet to every Bay Stater in every corner of the Commonwealth.”

Meanwhile, State Representative Tricia Farley-Bouvier added something most federal state lawmakers have been loathe to admit, or act on:

“Access to (the) Internet should be guaranteed and protected in the same manner as other utilities like water, heat, and electricity. The Residential Internet Retrofit Program … is a key step towards ensuring all our commonwealth’s residents have access to what should be a public utility.”

Promising Start to Challenging Issue

The retrofit programs emerging in New York and Massachusetts are a promising start to dealing with broadband affordability challenges, especially in light of two realities: first, urban and suburban areas are unlikely to see much, if any, federal BEAD investments (Congress designed those funds to build new networks in mostly rural communities).

Secondly, targeting MDUs (or MTEs – Multi-Tenant Environments) provides a bigger bang for the buck because households that struggle to pay for Internet service tend to be concentrated in affordable housing developments.

Even in places where no such programs exist at the state level, the idea of targeting MDUs with better broadband has met with some success. In Baltimore, Project Waves was able to deploy fiber to a half-dozen low-income apartment buildings and deliver no-cost broadband service using the buildings existing cable wiring without the need for an entire retrofit.

These kinds of programs take on even more significance in the face of an expiring Affordable Connectivity Program (ACP) that 23 million Americans have been counting on to pay for Internet service in a nation where subscribers pay among the highest prices of any developed nation in the world.

Still, there are no guarantees affordable housing property owners and private ISPs will participate. In Nevada, for example, state broadband officials launched the Low-Income MDU Connectivity Program in January 2023 using $55 million of that state’s CPF funds. However, according to Telecompetitor, not a single grant has been issued to date.

An inquiry sent to Nevada’s Office of Science, Innovation and Technology (OSIT), which administers the program, was not immediately answered (as we were hoping to confirm or refute rumors circulating in the broadband world that building owners and property managers simply weren’t very interested).

The Bulk of The Affordability Issue

Irrespective of the state in which these programs are launched, there are challenges with broadband access in MDUs that officials will still need to contend with – not the least of which are bulk service agreements, which have been the subject of intense industry debate for years. Under those arrangements, property owners sign exclusive deals with an ISP and include the cost of Internet service in the rent.

However, as part of the Biden administration’s push to promote competition in the economy, the FCC is currently considering new rules that would ban typical bulk service agreements, “allowing tenants to opt out of bulk billing arrangements.”

When the FCC sought public comment on the issue, Public Knowledge and Consumer Reports submitted comments noting how “landlords and Internet service providers have exploited loopholes to … create de facto monopolies in buildings. The resulting lack of competition increases prices and restricts the choices available to residential and business tenants alike.”

We have been told by FCC watchdogs that they expect the agency will likely prohibit bulk billing arrangements but only in instances where residents don’t have the right to “opt-out,” leaving the “opt-in” model as a permissible one that would, in effect, maintain the status quo and do nothing to prohibit MDU arrangements that do not give tenants a choice in who they can get Internet service from.

In anticipation of the FCC possibly banning bulk service agreements, MDU owners who favor the status quo would likely consider an “opt-in” model in which they retain an exclusive service agreement with a single ISP but then pay the ISP a monthly amount for all of the units in their housing developments.

In that scenario, instead of passing on the costs of Internet service to the tenants as part of the rent, the ISP would pay the MDU owner a sizable percentage of the revenues the ISP gets from tenants who “voluntarily” subscribe for service.

Considering how important Internet service has become, ISPs with exclusive agreements can expect most tenants would “opt-in,” which would mean landlords or property managers could expect roughly the same amount of profit under an “opt-in” arrangement as they would get from traditional bulk service agreements.

The implications of this are not hard to imagine: states may find it difficult attracting property owners to apply for retrofit grants if there is a requirement that multiple ISPs could deploy service to individual units in the same housing development, which would threaten the potential profit that can be made from exclusive agreements.

Wary of wading into the issue, the guidelines for New York’s Affordable Housing Connectivity Program suggest the state will not make the grants contingent on whether a bulk service agreement is in place or not.

The guidelines note that New York’s ConnectALL office “cannot provide legal advice and/or direction regarding the terms, conditions and/or implications of a contract between a property owner and an ISP.”

“Owners with exclusive contracts with an ISP may, at their option and discretion independently of any guidance or involvement from ConnectALL, choose to consider reviewing the terms of the contract to determine if the contract will expire in the near future, or to assess the viability and desirability of paying any cost associated with buying out the contract. Owners with such contracts could also potentially consider, at their option and discretion independently of any guidance or involvement from ConnectAll, approaching their current provider to encourage the ISP to apply for grant funding via the Affordable Housing Connectivity Program.”

As the FCC considers how to deal with bulk service agreements, state and local governments would be wise to consider their own policies much like they do with the enforcement of building codes related to electric wiring and plumbing. In Oakland and San Francisco, for example, city councilors passed ordinances that require MDU owners to allow multiple providers in.

At the very least, states who offer broadband retrofit grants should be aware they will be doing so in an environment in which MDU owners are incentivized to enter into exclusive deals and may be more concerned with maximizing rental income than they are in ensuring tenants have a choice among providers.

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FOR IMMEDIATE RELEASE

For media inquiries, please contact: Sean Gonsalves, Associate Director for Communications for ILSR’s Community Broadband Networks Initiative

[MINNEAPOLIS] – As the new year begins, the Institute for Local Self-Reliance (ILSR) announced its latest tally of municipal broadband networks, which shows a dramatic surge in the number of communities building publicly-owned, locally controlled high-speed Internet infrastructure over the last three years.

Since January 1, 2021, at least 47 new municipal networks have come online, with dozens of other projects still in the planning or pre-construction phase, which includes the possibility of building 40 new municipal networks in California alone.

Ry Marcattilio, Associate Director for Research with ILSR’s Community Broadband Networks Initiative, said the latest wave of new municipal networks runs the gamut from conduit-only networks like the one in West Des Moines, Iowa, that brought Google Fiber, Mediacom, Lumen and local ISP Mi-Fiber to town to offer residents a choice of broadband providers; institutional networks such as the I-net the city of Alexandria, Va. built to serve local government operations, setting the stage for the city to partner with Ting in providing fiber-to-the-home service citywide; to open-access networks like Yellowstone Fiber in Bozeman, Montana; as well as the massive municipal fiber-to-the-home (FTTH) network under construction in Knoxville, Tenn.

The latter network is already offering service to Knoxville residents and businesses, though it will take seven to 10 years before the Knoxville Utilities Board (KUB) finishes building out the entire KUB Fiber network, passing all 210,000 households in its 688-square-mile service area. Once completed, KUB Fiber will be one of the largest municipal broadband networks in the nation, rivaling its Chattanooga neighbor EPB Fiber and the multi-state footprint of UTOPIA Fiber.

“From the Midwest to the Deep South, East Coast to West, we’ve seen an incredible amount of new energy by cities over the last two years. Dozens of cities, ranging from five thousand and a hundred thousand residents alike, have decided that enough is enough,” said Marcattilio, Associate Director for Research with ILSR’s Community Broadband Networks Initiative.

“Instead of pleading with or giving additional handouts to the monopoly ISPs, they’ve decided to invest in themselves. It’s exciting to see so much happening, especially since we know our numbers are not completely exhaustive as there are no doubt cities building networks that have not yet become active or reported service to the FCC,” Marcatillio added.

The latest ILSR tally does not include the plethora of other community broadband networks, such as member-owned electric cooperatives deploying fiber networks in many hundreds of rural communities across the nation, nor does it include the rising number of Tribal Nations building and operating their own networks to bridge the digital divide in some of the least connected parts of the country.

ILSR last tallied the number of existing municipal networks in 2021. At that time, there were approximately 400 municipal broadband networks serving some 600 communities, with nearly 1 in 3 serving nearly every address in the community. The 47 new municipal networks that have come online since 2021 have now been added to ILSR’s database as an increasing number of local communities look to build publicly owned, locally controlled broadband infrastructure amid growing public demand for choice and competition among Internet service providers (ISPs).

Christopher Mitchell, who has spearheaded ILSR’s effort to track the birth and development of community broadband across the U.S. for the past 16 years as Director of the Community Broadband Networks Initiative, said: “The monopoly cable and telephone companies frequently claim that there are no problems with broadband in the U.S., even as millions of students cannot access the Internet from their homes, whether in rural or urban areas. These cities remind us of the work that has to be done to make sure everyone can take advantage of modern technologies.”

Here are a few snapshots of new municipal broadband networks that have been lit up for service over the last three years:

Sherburne, NY (Sherburne Connect)

One of four municipalities in New York State splitting $10 million from the state’s initial ConnectALL municipal grant program, the Village of Sherburne (est. pop. 1,300) – along with three other municipalities (the towns of Nichols, Diana, and Pitcairn) – were awarded the funds to build municipal-owned fiber-to-the-home (FTTH) networks.

In Sherburne, the village’s municipal utility, Sherburne Electric, worked with the New York Power Authority (NYPA) to extend NYPA’s existing middle-mile fiber network to bring last-mile fiber service to the village’s 1,800 homes and businesses. The open-access network, known as Sherburne Connect, offers residents two different ISPs from which to choose: Fybercom and FiberSpark. Both offer a symmetrical 100 Megabits per second (Mbps) service for $10/month or symmetrical gig speed service for between $30 and $45/month. With village residents now getting service, the testimonials are beginning to pour in, with one couple saying the network has “brought us to the 21st Century,” giving them “affordable access to high-speed Internet.”

Waterloo, Iowa (Waterloo Fiber)

Construction of the Waterloo Fiber network began last summer with a groundbreaking ceremony hosted by Waterloo Mayor Quentin Hart. A year ago, the city was putting the finishing touches on a plan to spend $115 million to build a fiber network that passes all 67,695 Waterloo residents after locals approved the city issuing general obligation bonds to fund the start of the three-phase construction project.

After nearly two decades of planning, Waterloo officials recently launched their first limited fiber trial. With plans to connect its first commercial customers in February, the project is on target to deploy affordable fiber service at speeds of up to 10 gigabits per second (Gbps) citywide by 2026. Competing against the likes of CenturyLink and MediaCom, Waterloo Fiber is offering residential subscribers symmetrical 100 Mbps service for $30/month, 300 Mbps service for $50/month, symmetrical 1 Gbps service for $70 a month, or symmetrical 10 Gbps service for $110 a month. Business subscribers have the option of symmetrical 300 Mbps service for $110 a month, symmetrical 1 Gbps for $250, or symmetrical 10 Gbps for $290 a month.

Central Vermont Communication Union District (CV Fiber)

The Central Vermont CUD, one of the state’s 10 Communication Union Districts established to provide telecommunication service to most towns across the Granite State, connected its first fiber-to-the-home subscriber in October 2023 in the town of Calais. Construction crews have now built out the network into East Montpelier and Worcester, now moving on to Woodbury and Middlesex before expanding into the other 14 towns in CVFiber’s service area.

In late 2022, CVFiber broke ground on an ambitious plan to build a 1,200-mile fiber-optic network to bring affordable gigabit broadband access to 6,000 rural Vermont addresses deemed underserved by commercial broadband providers. Total network construction is expected to cost $60 million, $27 million of which is being paid for by federal grants made possible by the American Rescue Plan Act (ARPA). The remaining cost is expected to be funded by network revenue, loans, and future grant opportunities. CVFiber offers subscribers symmetrical 100 Mbps service for $79 a month, symmetrical 500 Mbps service for $99 a month, symmetrical gigabit service for $129 a month, and symmetrical 2 Gbps service for $199 a month.

About the Institute for Local Self-Reliance:

The Institute for Local Self-Reliance has a vision of thriving, equitable communities. We are a national research and advocacy organization that partners with allies across the country to build an American economy driven by local priorities and accountable to people and the planet. The Community Broadband Networks Initiative is a program of the Institute for Local Self-Reliance that works with a diverse group of allies, partners, and local communities on policies to improve local Internet access. Through the initiative, we also research and document what communities nationwide are doing to improve access to high-quality broadband at Communitynets.org.

Find more community broadband resources on MuniNetworks.org.

For timely updates, follow Christopher Mitchell or MuniNetworks on Twitter and sign up to get the Community Broadband weekly update.

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As the new year begins, the Institute for Local Self-Reliance (ILSR) announced today its latest tally of municipal broadband networks which shows a dramatic surge in the number of communities building publicly-owned, locally controlled high-speed Internet infrastructure over the last three years.

Since January 1, 2021, at least 47 new municipal networks have come online with dozens of other projects still in the planning or pre-construction phase, which includes the possibility of building 40 new municipal networks in California alone.

Ry Marcattilio, Associate Director for Research with ILSR’s Community Broadband Networks Initiative, said the latest wave of new municipal networks runs the gamut from conduit-only networks like the one in West Des Moines, Iowa that brought Google Fiber, Mediacom, Lumen and local ISP Mi-Fiber to town to offer residents a choice of broadband providers; institutional networks such as the I-net the city of Alexandria, Va. built to serve local government operations, setting the stage for the city to partner with Ting in providing fiber-to-the-home service citywide; to open-access networks like Yellowstone Fiber in Bozeman, Montana; as well as the massive municipal fiber-to-the-home (FTTH) network under construction in Knoxville, Tenn.

The latter network is already offering service to Knoxville residents and businesses, though it will take seven to 10 years before the Knoxville Utilities Board (KUB) finishes building out the entire KUB Fiber network passing all 210,000 households in its 688-square-mile service area. Once completed, KUB Fiber will be one of the largest municipal broadband networks in the nation, rivaling its Chattanooga neighbor EPB Fiber and the multi-state footprint of UTOPIA Fiber.

Inside The Numbers: ‘Enough is Enough’

“From the Midwest to the Deep South, East Coast to West, we’ve seen an incredible amount of new energy by cities over the last two years,” said Marcattilio, Associate Director for Research with ILSR’s Community Broadband Networks Initiative.

“Dozens of cities, ranging from five thousand and a hundred thousand residents alike, have decided that enough is enough. Instead of pleading with, or giving additional handouts to the monopoly ISPs, they’ve decided to invest in themselves. It’s exciting to see so much happening, especially since we know our numbers are not completely exhaustive as there are no doubt cities building networks that have not yet become active or reported service to the FCC.”

The latest ILSR tally does not include the plethora of other community broadband networks such as member-owned electric cooperatives deploying fiber networks in many hundreds of rural communities across the nation. It also does not include the rising number of Tribal Nations building and operating their own networks to bridge the digital divide in some of the least connected parts of the country.

ILSR last tallied the number of existing municipal networks in 2021. At that time, there were approximately 400 municipal broadband networks serving some 600 communities, with nearly 1 in 3 serving nearly every address in the community.

The 47 new municipal networks have been added to ILSR’s database, as an increasing number of local communities look to build publicly-owned, locally controlled broadband infrastructure amid a growing public demand for choice and competition among Internet service providers (ISPs).

Christopher Mitchell, who has spearheaded ILSR’s effort to track the birth and development of community broadband across the U.S. for the past 16 years as Director of the Community Broadband Networks Initiative, said:

“The monopoly cable and telephone companies frequently claim that there are no problems with broadband in the U.S., even as millions of students cannot access the Internet from their homes, whether in rural or urban areas. These cities remind us of the work that has to be done to make sure everyone can take advantage of modern technologies.”

Overcoming Challenges

The growing success of local communities in establishing municipal broadband systems to deliver ubiquitous, affordable, high-quality Internet connectivity hasn’t gone unnoticed by Big Cable and the Telecom Titans who consider municipal broadband an existential threat to their bottom lines.

Dark money campaigns, often funded by the big monopoly incumbents, have been popping up across the country in an effort to persuade local officials and residents to reject municipal broadband proposals, prompting the American Association for Public Broadband to issue alerts to shed light on the misinformation at the center of these campaigns.

Yet, despite efforts to undermine municipal broadband, in the years to come we expect more communities will join the rising tide of local leaders, residents, and businesses calling for an alternative to the private monopoly model in addressing local connectivity needs.

Here are a few snapshots of new municipal broadband networks that have been lit up for service over the last three years:

Sherburne, NY (Sherburne Connect)

One of four municipalities in New York State splitting $10 million from the state’s initial ConnectALL municipal grant program, the Village of Sherburne (est. pop. 1,300) – along with three other municipalities (the towns of Nichols, Diana and Pitcairn) – were awarded the funds to build municipal-owned fiber-to-the-home (FTTH) networks.

In Sherburne, the village’s municipal utility, Sherburne Electric, worked with the New York Power Authority (NYPA) to extend NYPA’s existing middle mile fiber network to bring last-mile fiber service to the village’s 1,800 homes and businesses.

The open access network, known as Sherburne Connect, offers residents two different ISPs from which to choose: Fybercom and FiberSpark. Both offer a symmetrical 100 Megabits per second (Mbps) service for $10/month or symmetrical gig speed service for between $30 and $45/month.

With village residents now getting service, the testimonials are beginning to pour in with one couple saying the network has “brought us to the 21st Century,” giving them “affordable access to high-speed Internet.”

Waterloo, Iowa (Waterloo Fiber)

Construction of the Waterloo Fiber network began last summer with a groundbreaking ceremony hosted by Waterloo Mayor Quentin Hart.

A year ago, the city was putting the finishing touches on a plan to spend $115 million to build a fiber network that passes all 67,695 Waterloo residents, after locals approved the city issuing general obligation bonds to fund the start of the three-phase project.

Waterloo officials recently launched their first limited fiber trial with plans to connect its first commercial customers in February.

The project is on target to deploy affordable fiber service at speeds of up to 10 gigabit per second (Gbps) citywide by 2026.

Competing against the likes of CenturyLink and MediaCom, Waterloo Fiber is offering residential subscribers symmetrical 100 Mbps service for $30/month; 300 Mbps service for $50/month; symmetrical 1 Gbps service for $70 a month; or symmetrical 10 Gbps service for $110 a month. Business subscribers have the option of symmetrical 300 Mbps service for $110 a month, symmetrical 1 Gbps for $250; or symmetrical 10 Gbps for $290 a month.

Central Vermont Communication Union District (CV Fiber)

The Central Vermont CUD, one of the state’s 10 Communication Union Districts established to provide telecommunication service to most towns across the Granite State, connected its first fiber-to-the-home subscriber in October 2023 in the town of Calais. Construction crews have now built out the network into East Montpelier and Worcester, now moving on to Woodbury and Middlesex before expanding into the other 14 towns in CVFiber’s service area.

In late 2022, CVFiber broke ground on an ambitious plan to build a 1,200-mile fiber-optic network to bring affordable gigabit broadband access to 6,000 rural Vermont addresses deemed underserved by commercial broadband providers. Total network construction is expected to cost $60 million, $27 million of which is being paid for by federal grants made possible by the American Rescue Plan Act (ARPA).

The remaining cost is expected to be funded by network revenue, loans, and future grant opportunities.

CVFiber offers subscribers symmetrical 100 Mbps service for $79 a month; symmetrical 500 Mbps service for $99 a month; symmetrical gigabit service for $129 a month; and symmetrical 2 Gbps service for $199 a month.

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After decades of failed broadband policy-making and incumbent provider neglect, many Tribal communities continue to lack affordable and reliable Internet connectivity. Limited access to capital for last-mile deployment on Tribal lands has been exacerbated by a vast “missing middle mile” problem, and credible estimates put the costs of universal access on reservations at well over $10 billion.

Despite a historic investment in better Internet access from the federal government directly to Tribes, the problem is not even half solved. The first round of the Tribal Broadband Connectivity Program offered $2 billion in grants but received nearly $6 billion in requests from half of the 574 federally-recognized Tribes. With only $1 billion available in the final round of this program, an enormous funding gap remains.

Funding from the Broadband Equity, Access, and Deployment Program (BEAD) will have to be used strategically and collaboratively with Tribes to bridge this gap. The “high-cost area” match exemption could be an important tool to facilitate sustainable infrastructure deployment on Tribal lands, but it is not yet clear that states will make this exemption feasible.

Two years ago, Congress created BEAD and infused it with a historic $42 billion investment for broadband infrastructure with the goal of achieving universal connectivity. In a process overseen by the National Telecommunications Information Administration (NTIA), BEAD funds will be distributed through states with allocations based largely on the number of unserved locations in each state. States, in turn, are tasked with developing a process to disburse those funds to subgrantees. BEAD specifies that each proposed project must offer a minimum 25% match, except where that match requirement is waived – as it has been for designated “high-cost areas.”

“High-cost area” designations are distinct from the similarly-named “Extremely High-Cost Threshold” (EHCT). EHCT refers to a cost limit – set by each state individually – beyond which states may consider funding lower-cost alternatives to fiber optic technology, which should otherwise be the primary choice. If proposals to serve a location or locations with fiber cost more than the EHCT set by a state, it could instead choose to fund a proposal that used wireless, cable, or some other alternative.

(To explore the overlap between Tribal lands and “high-cost areas” further click here to see interactive map*).

In contrast, the “high-cost area” designation was determined by NTIA directly, taking into account levels of broadband access (less than 80% of households in the area are unserved) and certain socioeconomic and geographic parameters. NTIA ultimately chose census block groups as the base geography for determining these areas and applied a cost model that considered remoteness, population density, topography, poverty, and the costs for operating a network over its lifetime. A “high-cost area” designation meant that locations in that area would receive extra BEAD dollars and a boost in Affordable Connectivity Program (ACP) funding.

The “high-cost area” designations impacted the distribution of BEAD funding. Of the program’s $42.5 billion total, about $4 billion was allocated based on the presence of locations in “high-cost areas” in the state or territory. This amount was in addition to the funding states received for those locations in the standard distribution, which took into account the total number of unserved locations.

In short, NTIA determined a set of locations that it anticipated would entail higher costs over the lifetime of the network, and thus would require greater financial support. It then awarded additional amounts to states to provide that support.

The designation also came with an exemption for the standard 25% match. With higher costs for deployment and fewer potential customers in an area, the reasoning goes, match requirements in “high-cost areas” would potentially be cost-prohibitive.

Over the past few months, states have begun issuing their BEAD plans for public comment, and broadband advocates have analyzed those plans for exciting innovation or troubling blind spots. Compared to many other elements of the planning process, NTIA’s “high-cost areas” designation and its accompanying match exemption has received relatively little attention. But they are worth considering further as they could have important implications for Tribal ISPs – as well as many other nontraditional broadband providers.

Tribal Areas Designated “High-Cost” Could Present Opportunities

Encouraged by a recent increase in federal funding for tribal broadband, many Tribal governments have made expanding broadband infrastructure a priority as the ranks of Tribal ISPs are steadily increasing. Like other smaller broadband providers, these Tribal ISPs may struggle to meet a 25% match. Recent funding windfalls through the Tribal Broadband Connectivity Program (TBCP), while helping to drive broadband infrastructure development on tribal lands, cannot be used to fulfill the match. Though some Tribes have funding sources from gaming or other enterprises, many others do not, hampering their ability to meet a high match requirement.

NTIA can grant match waivers in BEAD and there is recent precedent for such waivers for Tribes in other federal broadband programs, including ReConnect 3 and the Middle Mile Program. More broadly, Section 6 of Executive Order 13175, which guides the government-to-government relationship between the US and Tribal Nations, calls for a greater flexibility in granting waivers to Tribes. This is why Joe Valandra of Tribal Ready noted in a recent Fiber Broadband Association webinar, “I think Tribes have a real opportunity, across the board for waivers for BEAD funds,” and urged states to support such requests.

Here is where the “high-cost area” match exemption could be useful. Given the state of the digital divide in Indian Country and the additional parameters used by NTIA to determine “high-cost areas,” it is unsurprising that some Tribal lands received this designation. Whereas NTIA (and to a certain extent states) would generally decide on waiver requests on a case-by-case basis, the match requirement has already been waived in “high-cost areas.”

In keeping with the principles of Tribal sovereignty, states and territories have a statutory responsibility under BEAD to coordinate with Tribal governments. Where Tribal lands lie in NTIA-designated “high-cost areas,” this represents a unique and powerful opportunity for collaboration. Rather than prioritizing minimal BEAD outlay as the single most significant criteria – as most state plans have done – the waiver opens an alternative route for states that can more readily facilitate Tribal cooperation and more effectively ensure universal service.

Many Tribal nations are undertaking fiber-to-the-home (FTTH) build-outs to connect thousands of Tribal members and other residents living on their reservations. BEAD support for build-outs in “high-cost” and unserved locations on their reservations might help extend the reach of their networks or facilitate a greater adoption of fiber in an economically sustainable way.

The presence of “high-cost areas” nearby Tribal lands might also present opportunities for Tribally-owned ISPs to expand their footprint and serve communities that are off-reservation, as some like Gila River Telecommunications in Arizona already do. In several cases, there are High-Cost census blocks that directly abuts reservations with established Tribal ISPs. With a match exemption, Tribal ISPs may be ready and able to extend their networks and provide locally-responsive and community-based broadband service to these areas.

The Match Exemption in State Plans

There are potential roadblocks.

BEAD planning documents released by states so far, and particularly Volume II of the Initial Proposals, have begun to sketch out the subgrantee process. While almost all of these are currently in draft form, many offer little clarity about how states will take the “high-cost area” exemption into consideration when selecting among proposed projects.

Perhaps assuming that the exemption is widely known among potential subgrantees, many states do not expressly acknowledge it, including states with relatively high numbers of “high-cost areas” like Nevada, Montana, and Wyoming. North Carolina’s plan even says that “BEAD requires that all applicants provide a minimum of 25% match.” While about half of the states mention the lower match requirement directly, some suggest it will be treated on a case-by-case basis, not automatically applied.

Moreover, decisions about the subgrantee process might make a match exemption practically impossible, even in states that addressed it directly in their documentation.

First, the scoring rubrics being outlined by most states may pose a significant challenge. States are required to “minimize BEAD outlay” in these rubrics. In fact, in most states, this category receives the single greatest weight, setting up a potential conflict with the “high-cost” exemption.

Many states have chosen to pursue the minimal BEAD outlay priority by incentivizing higher matches in the scoring rubric and, at times, awarding no points for proposals that meet the minimum requirement. This would make it nearly impossible to compete with another proposal. Very few states – like Arizona, Michigan, and Washington – note that the match exemption would be factored into the scoring rubric, and they too often award zero points for minimum matches.

Some states, like Wyoming and Montana, while incentivizing higher matches, propose a scoring rubric that compares applications to a benchmark subsidy level for the area developed by the state, using the benchmark as a cap on funding. It is often not clear the extent to which a benchmark would incorporate the match exemption in a “high-cost area.” A benchmark scaled to 75% of the estimated cost would essentially preclude the possibility of a lower match.

States have significant leeway in their BEAD choices and NTIA’s documentation notes only that the “high-cost areas” are “exempt” from the match requirement, not that states cannot prioritize projects with a match. The planning documents issued by many states suggest that they anticipate a funding shortfall. By downplaying the match exemption, states may hope to stretch their BEAD dollars further.

A second challenge revolves around how states are defining project geographies. Each state is at liberty to pre-determine some base geography or allow subgrantees to propose their own areas. Some states have proposed to diverge from census block groups and set alternative base geographies, often without specifying if and how the presence of “high-cost” census block groups in those geographies will be communicated or incorporated financially. Many states that are electing to use census block groups propose allowing applicants to build larger geographies, potentially posing challenges for making like-for-like comparisons among overlapping applications that involve “high-cost areas.”

The state of Washington is an outlier in the detail it gives “high-cost area” designations, offering clarity that may be especially useful for Tribal ISPs. It proposes a separate scoring rubric for these areas, though it still explicitly incentivizes some match “to optimize every BEAD dollar.”

It has also made two crucial decisions about geography. Most importantly, it has carved Tribal lands out as separate geographies. It has also proactively stated that, because it is not using census block geography, it will clearly mark every “high-cost” location.

Combined with BEAD’s Tribal consent requirement, these processes will likely make it easier for Tribes to make use of the exemption on their lands.

In many ways, Washington’s plan is the exception that proves the rule – highlighting what has been obscured or omitted by other states.

Advocates have raised alarms about the barriers for smaller ISPs caused by BEAD’s match requirements. The BEAD Notice of Funding Opportunity (NOFO) itself acknowledged that “a match requirement could deter participation in the BEAD program by small and non-traditional providers,” and said that states “should consider ways” to remedy this. The “high-cost area” match exemption is one such remedy, already built into the program. But, even though it exists in theory, most states may be making it almost impossible in practice.

Though public comment periods on most of these plans have closed, states await final approval from NTIA and elements of the plans may still change or be clarified.

Tribal Consent Requirement Gives Tribes Leverage

There are significant barriers and limitations for Tribal ISPs looking to use the match exemption, but also potential leverage for Tribal nations.

First, given the much-discussed barriers to infrastructure development on Tribal lands, fewer Tribal areas were designated as “high-cost areas” than might be expected. Undoubtedly, some of this should be attributed to data inaccuracies and provider overstatement in the FCC’s map, which ILSR and many others have called attention to in the past. Higher levels of service in some communities, in part thanks to existing Tribal ISPs, have also put some areas over the service threshold.

Another potentially challenging reality is that the geography that NTIA chose to use to designate “high-cost areas” – census block groups – are often poorly aligned with Tribal boundaries. This is a problem that Tribal broadband leaders have long critiqued. This geographical mismatch could create additional challenges that compound the questions surrounding project geographies, especially where states do not account for Tribal boundaries in their application process.

However, unlike other small providers that the exemption could also benefit, Tribal ISPs may have recourse to additional leverage to bolster their proposals – BEAD’s Tribal consent requirement. By requiring that any proposed deployment on Tribal lands has formal Tribal consent, BEAD departs from the policy of several previous federal broadband funding programs.

If a state should fail to meet their obligations for a robust and collaborative consultation process that invites Tribes to participate in the subgrantee process or if a state’s subgrantee process makes it difficult for Tribal ISPs to win BEAD money without a match, Tribes have the right to withhold consent for any other proposal. And without that consent, “universal service” – the state’s primary mandate – is impossible.

On the other hand, if a state’s subgrantee process leveraged the “high-cost area” match exemption to encourage participation from Tribal ISPs, it could help build a BEAD program that respects Tribal sovereignty, ensures provider accountability and affordability, and meets the goals of universal service.

There are Tribal broadband advocates and Tribal leaders working to establish and expand connectivity in their communities, despite often limited resources and in the face of decades of federal and incumbent neglect. These organizations and individuals are assets that states cannot afford to overlook. A process that incorporates the “high-cost area” match exemption and makes it easy for Tribes to use could allow these experts to participate more fully in BEAD’s historic broadband deployment – and might ultimately lead to unprecedented success.

View Details

In 2015, Charter Spectrum bought Time Warner Cable and Bright House Networks, a mammoth merger in the telecommunications and cable industry that made Charter the second-largest broadband provider in the nation. Jonathan Schwantes, senior policy counsel and manager of special projects at Consumer Reports explains how the cable industry changed dramatically after the passage of the Telecom Act, why millions of consumers are cutting the cord and leaving cable, and what the telecom giants are doing to maintain their monopoly on the way people exchange information.

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3 Things Charter Promises in Its Time Warner Cable Deal: To get regulatory approval for the merger, Charter says it will abide by these terms for seven years.

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Book:

A People’s History of the United States by Howard Zinn

Transcript

| Reggie Rucker: | Hello, and welcome back to another episode of Building Local Power. I’m your co-host, Reggie Rucker, and on this show we continue with our season of How to Get Away With Merger, moving from one public utility or energy system to another public good that is a public utility in reality, but most Americans are reliant on the private market to provide it. That’s our internet, broadband. | | We look at Charter Spectrum’s merger with Time Warner Cable and spotlight how consolidation in the industry is shaping the way communities stay connected and receive information. These days, so much video content. We talk Hulu, YouTube, Disney+, all the things and the internet infrastructure it depends on to get into it. | | I’m going to throw it over to my co-host who never does any of my TV references, partially because I’m getting old and partially because she apparently had better things to do with her time growing up to watch TV. Luke Gannon. | | Luke Gannon: | No, Reggie, it’s not because you’re old. I’m trying to catch up on all the TV classics that I missed as a child, but it takes time. I’ll get your references soon enough. Speaking of TV, if you’re wondering why your TV subscriptions keep getting more and more expensive, our guest on the show today will explain exactly what’s going on today. | | Jon Schwantes, a senior policy council and manager of special projects at Consumer Reports, brings us on his journey of getting into telecommunications and how the cable industry has changed drastically over the last 20 years. Let’s start from the beginning. | | Jon Schwantes: | I grew up in North Central Wisconsin and I’m very much a Gen Xer, so I grew up in the late 70s and all through the 80s. I’m one of six kids. My parents both worked, they were both nurses. We were solidly middle class, lower middle class, and all of my siblings. They had six kids in 10 years, so it was a zoo growing up, cats and dogs all under one roof. It was a lot of fun and I learned a lot. | | It wasn’t Leave It to Beaver. I tell folks who maybe aren’t familiar with or didn’t live during that time, it was probably more like the movie Dazed and Confused or even Fast Times at Ridgemont High. The high school was nuts, a lot of shenanigans and pranks, things that seemed completely normal in the early eighties would get you kicked out of school nowadays, I would imagine. | | As for me, I was always drawn to politics. Whether that was student council… I wanted to be on student council, I wanted to be student council president, and I was I guess a bit precocious as a child and had this feeling, this wanderlust of as much as I love my snowy winters in Wisconsin, I am going to do more. And I did. | | I think for better or worse, I would say better, I knew I wanted to do work in politics and I knew I wanted to go to law school and this would’ve been… Oh gosh, maybe fifth or sixth grade. I say for the worst because I was always on that track. I never thought I’d do anything else. | | I went to college at the University of Minnesota and then my junior year, I did a semester in Washington, D.C. working in the House of Representatives, and then I did a semester in London working in Parliament and I just ate it up. I couldn’t get enough of it. I really enjoyed it. What was funny at the time is I didn’t know how much I liked it, and that would be my future career because when you go to law school, you think well shoot, maybe I should go work at a law firm. | | I did that for one summer in Chicago and that’s all I needed. I’ve got family members and some of my best friends work at law firms, they are what I call real lawyers. It’s just not for me. After I graduated law school, I came out to Washington, D.C. without a job, begging and scraping all the contacts I made during my junior year internships saying please, please, please, I need to get a job. | | Through a great deal of luck and… Really luck, I found myself on the Senate Judiciary Committee working for my home state senator, Senator Herb Cole, who was on the Antitrust Subcommittee. It’s really funny because all of the law that I use in my career now as an advocate in the telecommunications space, I didn’t take any of those classes in law school. | | I didn’t have antitrust law, I did not have telecommunications law, I did not have administrative procedures law, nor did I have corporations, but such as Life on the Hill, you learn whatever issues are thrown at you. For me, I came into Washington, and this is a good segue at 1998, that was two years after passage of one of the landmark telecommunications laws, the 96 Telecom Act. | | The industry, and consumers, and policymakers were trying to figure out what is the future of telecom? What is the future of the video marketplace? That was the last law, coming up on 30 years anniversary, that really addressed these issues. | | Luke Gannon: | Jon worked in the Senate for nearly eight years and had an opportunity in 2007 to try his hand on K Street. Jon joined a small lobbying firm that had a variety of clients, some of which included cable clients, but this work wasn’t for Jon. | | Jon Schwantes: | My heart wasn’t in it. I think it might have been a little more interesting if I were in-house with a company so you can still work on the substantive issues, but I think for me, and one of the reasons that I led the Consumer reports and quite frankly was more than willing to take a pay cut, is I wanted to get back to the work that inspired me and made me proud of what I did. | | There’s no faking what I do at Consumer Reports. When I’m talking to you, when I’m talking to reporters, when I’m testifying before Congress, that’s the real me. Yes, I have to do it on behalf of Consumer Reports, but it’s a win-win. That’s basically how I ended up at Consumer Reports and it’s been a hell of a good time. | | Luke Gannon: | A lot has changed in the telecommunications and cable industry since 1998. What does the cable industry look like in the US currently? Who are the big players and how much of the market do they control? | | Jon Schwantes: | The short answer is it has changed dramatically. It has changed dramatically in my time in Washington and even since this merger happened, this merger being Charter, Time Warner Cable, Brighthouse Network. The FCC and the Department of Justice, DOJ approved this merger I want to say almost a year later in April of 2016, so that was more than seven years ago. The cable marketplace looked very different then than it does now. | | How has it changed? At the time this merger was approved, Charter had almost 7 million subscribers. Time Warner Cable had just over 16 million, and Brighthouse had two and a half million. Back in the napkin, what is that? Almost 25 million subscribers for video for their old school cable TV product. Broadband was obviously becoming more and more important, and Comcast had even more at 28 million. | | They’re barely Comcast and Charter, now Charter has Time Warner Cable, Brighthouse, they’re now under 15 million. Why? This marketplace has dramatically changed and I would argue for the better for consumers. In just that short seven years, millions of consumers are cutting the cord and leaving big cable. | | What do we need to look at then in respect to where are we now? It’s all about broadband and that’s why it’s still a concern that these big cable companies control the broadband connection into consumer’s homes. Why is that important? Because how are consumers consuming video these days? Some consumers, I think Comcast and Charter have about 15 million video subscribers, as we call it in the lingo. Today, that’s down from 25, 28,000,000 seven years ago. | | But a lot of people are cutting the cord and moving to streaming video, both what we call OVD, online video distributors, like Netflix where you just watch whatever Netflix serves you up whenever you want to watch it, and then… Here comes some more alphabet soup, what we call virtual multichannel video program distributors, which is like YouTube TV or Hulu Live. | | They look and feel like cable, and so that has dramatically shifted. YouTube TV has 6 million subscribers compared to Charters, 14.5 million subscribers. This marketplace has dramatically changed. When I talk to policymakers about it, you have the video marketplace and then you have broadband, and cable does both. Whereas you have video like YouTube TV, they’re only providing you that video product. They’re not providing you broadband. | | If you look on the video side, you still have DirecTV and Dish Network, the satellite companies, they’ll try to do broadband but not really in the same way that cable does. You’ve got unicorns like Verizon Fios that will give you fiber broadband to the home, and they are still doing the five Fios video product, which is about 3.5 million subscribers. | | If we were having this conversation 10 years ago, we would be talking about how cable and really just a handful of companies dominate the video marketplace. That’s no longer the case in 2023, and that’s a good thing. Really through really… Let’s not give credit to big cable, I think a lot of consumers have left cable for a lot of very good reasons. It’s more about a competitive marketplace, but we still need to be concerned about the dominance cable has over the broadband connection because consumers are really only enjoying the competition in the video marketplace because of that broadband connection and because cable to date has not thwarted that competition. | | Reggie Rucker: | Can you help me understand where Charter fits into this equation? You mentioned some concerns about cable getting into the broadband space. Can you make that connection for me in terms of Charter and the purchase of Time Warner and Brighthouse? | | Jon Schwantes: | That’s a great question. I will. We’ll back up a little bit. If you just look at cable video and broadband, Comcast is still the biggest cable company in the country. Charter’s number two. At the time of the merger Charter I think was number four, and Time Warner Cable was number two. Two and four got together and became even bigger. I think it made Charter four times as big as what they were at the time. | | What’s really fascinating about this industry is Comcast and Charter do not compete head-to-head. If you look at a map of what we call in the industry, their footprint, where are Comcast subscribers, where are charter subscribers? It’s like a crazy blotches here and there typically around the country, but they don’t overlap. Now, there are exceptions like Verizon Fios will compete head-to-head with Comcast and Charter in some markets, but they’re not huge, but they’re significant, but that’s what’s really, really interesting about this marketplace. | | Why is that important? Yes, we’re seeing competition on the video side and that’s thanks to broadband, but you have consumers way too many, on the order of millions, who when you talk about broadband, it’s only Charter, it’s only Comcast. If you are in the right neighborhood in a big city, and let’s be honest, the wealthy neighborhoods, you’ll see some competition. You’ll see an upstart like RCN, but by and large there are way too many consumers that only have one choice of broadband, and that’s typically provided by Comcast or Charter. | | I don’t want to guess, but I want to say those two cable companies alone, it is more than half the country gets their broadband from either Charter or Comcast. That’s concerning. Now, that might change. I know industry will tell you wireless competes with us now. People can just use their 5G connection and I want to be honest, yes, that is growing and exciting for consumers if someday they can wire their home with a 5G connection, but when we’re talking about 2023, we’re not there yet. | | Reggie Rucker: | Let me go ahead and follow up on that point. You laid out this footprint, was there something that Charter was seeking to accomplish? Were they trying to move into territories where they didn’t have a footprint yet? What was the incentive that they were seeking, the advantage that they were seeking to gain by making this purchase of Time Warner, Brighthouse? | | Jon Schwantes: | A little bit of context in this industry, Comcast bought NBC Universal in 2010, 2011, and that was huge because they already were the largest cable company, but now they bought a huge broadcaster with all that contact. In it, I’ll just be honest and use some colorful language, scared the shit out of people. | | They’re going to have all this NBC universal content and they’re the largest cable company in the country and all these other cable companies and video providers are going to need that NBC content. Is Comcast going to put people over a barrel? It was a moment, but that merger was approved with conditions. Different story for a different podcast. | | Time Warner Cable was spun off of Time Warner in 2009. They were always corner of odd. They were a completely separate company, they never changed the name, people were kind of confused like is Time Warner Cable, Time Warner? I’m like no, it’s this new thing called Time Warner Cable. But you kind of got the feeling like are they in this for the long haul? | | They were the number two cable company in the country. They had 16 million customers, so it was this lucrative, kind of putting on my old Wall Street hat. A lucrative prize and who’s going to buy Time Warner Cable? As this happens, and I’m not an economist, I’m not a finance guy, I’m a lawyer in DC, but their stock prices going up. This is all great for shareholders or Time Warner Cable. | | Comcast took a shot at it, they gave it a run and they were going to acquire Time Warner Cable and was focused on the positive. That merger was shot down. Department of Justice, FCC said no. Number one and number two, typically in antitrust law, that’s a hard sell even in Washington. | | That Left Time Warner Cable like are there any other suitors and Charter came up and is like we would like it. Why? The simplest way I explain this is looking at restaurants and franchises. Let’s say I own three McDonald’s and let’s say it’s profitable. At the time, 2014, 2015 cable companies were super profitable. | | They had monopolies, they didn’t compete against each other, they had this broadband business, and on the video side, those margins were huge. So why have three McDonald’s when I can have 30? I think sometimes we overthink things in Washington, and especially in this policy space. It was about this is profitable and let’s gobble them up. That’s exactly what they did. They being Charter, made themselves four times bigger. | | I also think at the time, these cable companies, they’re very savvy, they’re savvy business people. They knew which way the wind was blowing. They knew that streaming video was starting to eat their lunch. What do we need more of? Where is the new monopoly? Broadband. If I could suddenly get more than 20 million broadband subscriptions, absolutely they wanted a larger footprint of a profitable business, and they also knew ha-ha, broadband monopoly, and I can get this, especially after Comcast got rejected, we’ll probably get this merger approved. And it was. | | Luke Gannon: | Jon, as you mentioned earlier, and you have throughout this podcast, there’s not one, but two federal agencies that were regulating this merger, the Federal Communications Commission and the DOJ. They mandated that Charter agree to seven years worth of conditions. | | Can you talk a little bit about what those conditions were and how this merger actually ended up going through? What was the government’s response? Why did it end up being okay? | | Jon Schwantes: | Antitrust law can get complicated. They look at markets and they look at market shares. They did acknowledge that Charter and Time Warner Cable and Brighthouse Networks didn’t compete head-to-head with each other. At antitrust, we look at horizontal mergers and vertical cultures. | | Horizontal, the classic example is if Coke bought Pepsi. You then would have no competition, you take number one and number two, soft drink and companies and all of that competition would go away because all of a sudden, now let’s say Coke has 99% of the software business in the United States, that would be a bad merger. | | But when you look at cable, it’s like they don’t really compete against each other. Comcast was scary because they just bought NBC Universal and again, number one and number two rarely ever get approved. But this was like there’s not really an antitrust concern. The FCC can look at things in a little softer lens because it’s not exactly a pure antitrust review at the FCC, it’s more of a public interest review, so they can extract some concessions out of the merging parties. | | I can tell you, having been on all sides of these transactions, they want to get to yes. So they agreed to, let’s see, the big ones from that one, no data caps. Yay, that’s fantastic. Data caps on the fixed broadband market are consumer killers and until at least for seven years, Charter wasn’t able to inflict them upon consumers. We’ve just had the anniversary, so let’s not get too excited. Those merger conditions have since expired, but there were no data caps. | | Comcast charges data caps, Cox Communications, big broadband cable company here in the Mid-Atlantic, they charge data caps and it’s really, really anti-consumer on the broadband side, just to be clear. Also, another great merger condition was no interconnection fees. | | Let’s get down the telecom rabbit hole, but basically Charter agreed that if we’re allowed to merge with Time Warner Cable and Brighthouse that we won’t inflict interconnection fees, meaning we won’t tell Netflix and we won’t tell Google, YouTube TV that you have to pay us to connect to our networks. | | There was a big dust up, I want to say 10 years ago, between Comcast and Netflix. Basically Comcast is like you pay us an interconnection fee or this merger condition was saying look, you can’t extract these anti-consumer things because there was a feeling of we knew consumers were cutting the cord, but the fear would… Big cable that controls broadband and they importantly still had that monopoly so a lot of consumers have nowhere else to go but get broadband from Charter. | | Would they charge so many fees against Netflix and other streaming videos to make it more expensive to then make their old school cable video cost competitive, which it rarely was at the time and still isn’t. They agreed to that. | | Another one, which I love in the book of did that merger condition happen? Your guess is as good as mine. Comcast agreed to expand their broadband business to 2 million new customers, 1 million being in markets where there already was competition. Now, I wish I could tell you I looked up to see if that merger condition was satisfied. I honestly do not know, and that is a great segue to the biggest problem with these merger conditions. | | Who enforces them and how do we know? Let’s say we found out they didn’t expand, they didn’t honor that. They [inaudible 00:20:09] data caps into connection fees. Great, but did they really expand their broadband for this? If we found out they didn’t, is the government really going to go back and break up Charter and Time Warner Cable? Short answer is no, they are not. | | Reggie Rucker: | I wanted to follow up, actually precisely on that. The government found their way to yes. Were groups like yours and other community advocacy groups, were you all satisfied with the terms that they laid out or was there a fight that continued to some degree? Tell us about what the response was there. | | Jon Schwantes: | Yeah, it’s not the best analogy. It’s like the game is over and you look at we won some, we lost some, but a lot of times people move on to the next one. I know at the time when Comcast announced their proposed merger to Time Warner Cable, remember they wanted to buy them first, immediately there was a public interest and industry coalition, and I want to say it had a real unoriginal name like Stop Mega Comcast. | | Consumer Reports was part of that coalition, a few other DC groups like Public Knowledge and Common Cause, but that was fun because some of the business rivals who were scared of big cable like Dish Network [inaudible 00:21:30] Coalition, if memory serves. That’s just your classic let’s do some media buys, not really so much for the nonprofits like ourselves, but a coordinated lobbying effort. | | You can file at the FCC, you can oppose a merger, for example. I once wrote a comment opposing the Sinclair Tribune merger and you just explained how all these fantastic reasons why the commission should find it’s not in the public interest. All a bunch of lawyer gobbley gook. That was the stop [inaudible 00:22:03] Comcast. That succeeded. The government stopped that merger and Comcast withdrew. | | Shortly a few months later it was like let’s get fired up because Charter’s trying to buy Time Warn Cable. I think the same Motley crew, including Consumer Reports, renamed it the Stop Mega Cable Coalition and much the same, let’s try to stop it, let’s get people fired up. But there was color commentary, a resignation of I don’t know if lightning’s going to strike twice here. We’re going to do it, we’re going to oppose it and raise a ruckus. | | Luke Gannon: | One of the things over this season that we’ve learned, Jon, is that these merging companies often make promises that never come to fruition. I was reading that Charter specifically claimed that the acquisition would allow it to improve its broadband network throughout the country leading to faster speeds and better video products. | | It has now been almost 10 years since this merger happened. Is that true? Were Charter’s claims true? How has this looked for communities across the US? | | Jon Schwantes: | Let’s look at some facts. 2016 compared to 2023, I’m happy to say that broadband speeds have increased by a significant amount. That is a good thing. Most consumers get broadband from a private company. Video, since the merger happened, costs for that video product have gone through the roof and what they do, they charge a broadcast TV fee, that is a broken part of the video marketplace by where cable pays broadcasters for their content and it is broken. | | All cable decided to do is we’re just going to break it out into a junk fee and we’re going to charge that fee to consumers because we can’t figure out this broken marketplace broadcasters. What started off in 2009, 2010 as a dollar or two, most consumers are like what’s this broadcast TV fee? Cable being cheeky about it, not really telling folks that they’re the ones charging it. Boy, it’s got a really good name right up there with the regional sports fees. These are all junk fees charged by the cable industry. | | It’s basically like if I decided, and we did a report on this a few years ago, if a serial company said The cost of cardboard is really expensive, we’re going to do a cardboard box fee and we’re just going to keep breaking that out, even though most people thought well, I never paid for the cardboard box. Shoot, I’ll just take the bag and you can keep your stupid box. | | In broadcast TV fee, those are now well over $20 and they’re mandatory. So for those poor consumers who are either uncomfortable cutting the cord or what have you, and that is not in the advertised price, so you’re like oh wow, broadband and cable for 90 bucks, that’s not much more than YouTube TV. | | I’m like, yeah, right. Wait until you pay the fees, you’re going to be paying close $150 a month. I would say that the video side of it has not been good for consumers, especially for those consumers who are stuck with just one provider and like I said, aren’t comfortable cutting the cord and maybe going with a virtual option. They’re paying more than ever for that old school cable video product. | | Reggie Rucker: | We’re going to spin this forward now. Put your genie hat on, get your crystal ball out. What do you think the future of this industry looks like? | | Jon Schwantes: | I just testified at a hill hearing in September where we looked at the future of the video marketplace and we went through it and it has totally changed. That is a good thing and that is because of broadband. Where I get a little antsy is what’s the future of broadband? Because so much of that competition in the video space is dependent upon broadband. | | As far as [inaudible 00:26:01] of the industry, some analysts will say the old school cable TV video product is in a death spiral, and the number suggests that. When this merger happened, they had 20 million, 25 million subscribers. Now they’ve lost 10 million in seven years. I don’t think a lot of those subscribers are coming back. It’s a pain in the butt for cable to keep doing video and having to deal with broadcasters. | | What maybe isn’t in the news stories is it’s not a very profitable line of business. They want to shift to broadband, which really isn’t regulated thanks to the repeal of net neutrality and subject of another podcast, but broadband’s where it’s at, baby. It’s unregulated, they can charge whatever they want, and by and large, until wireless catches up and becomes a true competitor, and hopefully that’s me being optimistic, it will, it’s getting there. But right now they’re still enjoying monopoly rents. | | As we talk about monopolies on the podcast here, that’s still one of the best ones going. Get into broadband, do it through a cable wire, and there are many towns where you’re the only game in town and you can charge whatever you want. | | Reggie Rucker: | The thing I was just curious about is I have Hulu and get my live TV through Hulu, and it feels like at this point, and I don’t even think I’m exaggerating, it feels like every three or four months, we’re going to add extra $5, we’re going to add extra $10, we’re going to… Two to three years ago, it’s probably about a $50 package and now it’s creeping up towards $100. | | There were some comments in our chat the other day that it was like it’s basically becoming cable. It’s all the channels wrapped up and it’s $100, $150. Do you have some insights, just your own commentary on what’s happening in that Hulu versus YouTube Live, versus… What’s your take on how these bundles are playing out? | | Jon Schwantes: | I do. There’s two giant things to consider here that help inform and answer this question. Number one, whether you are a streaming service like Hulu or YouTube TV or old school cable like Charter or Comcast, it’s for a lot of reasons, so expensive to get content from the content producers. Who are the content producers? They’re Disney, they own an ESPN, all the Disney channels, ABC. They’re CBS Viacom. | | That content, and a lot of it is driven by live sports is what we call must have content. It’s a free market negotiation, but it’s increasingly expensive because the content holders know that in order for Hulu to be successful and do a live-streaming service, they’re going to need to have the NFL games on in the fall. That content is getting expensive for all video distributors. | | The second thing is something unique to the streaming industry. This is everything from Netflix to Paramount+, to I think HBO is calling itself Max now, Disney+ and it is Hulu, which has Hulu live and YouTube TV. It’s very consumer friendly. I can sign up, pay for a month, watch my Packers lose and get irritated, and then cancel my subscription. I don’t have to return a set top box, I don’t have to talk to somebody on the phone for an hour, I just do it all online and I’m done. | | I think that’s great for consumers and all of our survey data at Consumer Reports shows that consumers are high on streaming, and one of it is their customer service is very consumer friendly. But it creates churn, churn and burn, whatever you want to call it, and it’s real. For as many customers as the streaming services signs up, they could lose the same within a month. | | We’re trying to figure out how do I make this sticky? How do I make it so a consumer subscribes, they got to stick around for three months. They do that by dripping out their episodes once a week. They do that by, and they know it’s going to hurt and they might lose more subscribers, increasing their prices. They’re getting it from both ends. The content holders are jacking up their prices and streaming is trying to figure out, we had a really bad investor call, we got to make more money, we got to increase prices. | | I think it will get resolved. I think it was really the subject… It’s also another fascinating subject, but what we see consolidation in streaming services, will we see what we’re seeing that they’re going to actually license their content to each other. What do I mean by that? | | Disney told Netflix a few years ago when they launched Disney+, screw you, we’re not going to share any more Marvel, any more Star Wars movies that’s only going to be on Disney+. If consumers want to watch all nine Star Wars movies, they’re going to have to come here. | | Most consumers are like fine, I’ll get it for a month, pay you seven bucks, watch all the movies and then cancel you. They’re figuring out like we actually do make money when we license that to Netflix, we do make money when we license that to Amazon Prime, and so I think we’re going to see that in the streaming industry. | | There are also bigger questions, bigger antitrust questions about are we going to keep tolerating these big content holders bundling all of their packaging? What do I mean by that? It doesn’t mean Charter goes to Disney and said we just want ESPN, don’t want ESPN2, we don’t want the Disney channels, just want ESPN. Disney’s like no, you’ve got to take all seven of our channels, or you know where the door is. | | More cutting edge sort of policy wonks in this space saying well what about wholesale bundling? Makes my head spin. But that would have to come from the government and having worked in politics, I don’t think it’s happening anytime soon. | | That’s where we’re at. It is really two main reasons and I don’t know how that’s going to get resolved. Other than that we encourage consumers to… Well, to your question, the cable replacement looks and feels like cable, like Hulu Live and YouTube TV. Those are cost pressures that are causing those increases. I think you mentioned it, you still also have to pay for a broadband connection. | | Reggie Rucker: | I wanted to close out with the last question that we ask all of our guests, which is to recommend a book that has influenced the way you think about your work, the way you go about living and living out your purpose. What is something that you would recommend to people who enjoyed this conversation and want to get deeper into the thinking behind it? | | Jon Schwantes: | I think for me, I would pan out a little bit and think about a book that I read more than 20 years ago that informs my work and the fight in these issues. That would be Howard Zinn’s People’s History of the United States. Now, it’s much broader in sweep, going all the way back to Columbus’s arrival on this continent more than 500 years ago, and it’s a little heavy-handed in parts and a little reductive in others. | | But by and large, what I think Professors Zinn does in that work is tell the untold part of the story. I think for me, realizing corporate power and consumer power and how this country is set up, and let’s just take broadband, it truly is for a lot of consumers, take it or leave it. You either pay $120 a month for broadband, or get out of here. And you don’t have broadband, which I think we all agree is a public utility and should be treated as such and should not be priced at whatever the broadband provider who has a monopoly wants to price it at. | | I think that book helps understand of like, no, no, no, no, no. There is more to the story and at the end of the day, as my former senator told me, and it helps inform, these are private companies. It is not a crime in this country to make a profit if you do so legally, but they’re not doing things by and large out of the goodness of their heart. They’re doing things to make money and increase their stock price and make their board happy. | | It’s not to make, not in all cases, make their consumers happy. Now, where there’s competition, absolutely you want to make your consumers happy because you need them to choose you instead of the other company. But when there’s no competition, that’s a problem and what I describe as the stuck consumer. You’re stuck, you’re in a take it or leave it proposition and in that scenario, the corporation has just about all the power. That book helped me and continues to help me understand that there’s more to the story. | | Reggie Rucker: | Thanks for this, Jon. This was really great. | | Luke Gannon: | Thank you so much, Jon. This was truly an enlightening episode. Now, if you are interested in Jon’s book recommendation A People’s History of the United States, ILSR has a book library through bookshop.org. | | Bookshop.org allows you to choose a local bookstore of your choice and gives them a share of the profit. It also helps nonprofits like ours. If you buy a book from our ILSR store, we will receive 10% of the proceeds. | | That’s right. If you can’t make a donation right now, but still just really want that book, please click on the show notes for this episode and buy the book at bookshop.org. Now I’ll pass it to my co-host who always brings me energy, Reggie Rocker. | | Reggie Rucker: | Thanks, Luke. Great work as always. Jon, thank you again for sharing your story and deep insights with us today. I enjoyed that conversation so much. Side note, Jon and his wife, I’m told get some credit for this, have impeccable fashion sense. I need to go shopping. | | Anyways, I hope you all enjoyed this episode as much as we did. If you’ve made it this far, I assume that means you did, so please share it with even just one person you think will enjoy it too. | | I keep talking about our goal of 10,000 listens, but it’s not just a number to us. You sharing this episode brings more people into this conversation that we must have as communities about what type of society we want to live in. | | Do we want to live in a society dominated by big corporations that have one interest, how deep they can line the pockets of their executives and shareholders? Or do we want to live in a society where communities, neighbors who are interested in seeing each other succeed and thrive because when my neighbor is winning with good schools, and job opportunities, and thriving businesses, and culture with stable infrastructure and a circular economy that preserves our planet for the future, that’s not just them winning. I win too. We all win. | | That’s the conversation we need more people involved in, and that’s why we need you to share this episode. If you’re not a subscriber to the podcast yet, make sure to hit that subscribe button so you know when every new episode drops. Of course, your donations are essential to help us keep this podcast going and support the research and resources that we make available on our website for free. We truly welcome and appreciate it all. | | Last, if you have feedback for us or want to share a story about how your community approaches this issue, send us an email to buildinglocalpower@ilsr.org. We’d love to share these on a special mailbag episode one day. We’ll keep an eye out. | | This show is produced by Luke Gannon and me, Reggie Rucker. This podcast is edited by Luke Gannon and Andrew Frank. The music for this season is also composed by Andrew Frank. Thank you so much for listening to Building Local Power. |

Like this episode? Please help us reach a wider audience by sharing Building Local Power with your family and friends. We would love your feedback. Please email buildinglocalpower@ilsr.org. Subscribe on the podcast platform of your choice.

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Podcast produced by Reggie Rucker and Luke Gannon

Podcast edited by Luke Gannon and Andrew Frank

Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

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With the $14.2 billion Affordable Connectivity Program (ACP) on track to run out of funds by spring/early summer 2024, finally there is a request from the White House to extend funding for the program that over 21 million housholds now rely on to help pay for high-speed Internet service.

Last week, the Biden administration formally asked Congress for another $6 billion to extend the program through November 2024, joining a chorus of public interest groups (including AARP) calling on Congress to replenish the rapidly depleting fund.

(According to our calculations, an additional $6 billion would not fund the program through December 2024 as the White House said. It would fund the program through the end of November 2024. It would take $6.9B to get through the end of December).

First established with the passage of the Infrastructure Investment and Jobs Act (IIJA) in 2021 as part of the Biden administration’s “Internet for All” initiative, the ACP – currently administered by the Federal Communications Commission (FCC) – provides income-eligible households with a $30 monthly subsidy ($75 per month for those living on Tribal lands) to pay for their Internet service bill. The program also provides a one-time $100 benefit to go towards the purchase of an Internet-connected device such as a laptop or tablet.

“Without this funding, tens of millions of people would lose this benefit and would no longer be able to afford high-speed Internet service without sacrificing other necessities,” the White House said in a statement, echoing the sentiment of broadband-for-all proponents across the nation as well as a bipartisan group of federal lawmakers who recently wrote a letter in support of further ACP funding to House and Senate leaders.

Long Term Funding Needed, Solution Remains Elusive

Currently, 21.3 million households are enrolled in the program, though upwards of 52 million households qualify for the benefit.

While digital equity advocates rightly celebrate the White House request for additional funding as a national effort is underway to boost ACP enrollment, leading digital inclusion organizations – such as the National Digital Inclusion Alliance (NDIA) – have also been advocating for a more permanent funding solution, possibly through reform of the Universal Services Fund.

A permanent funding solution is vital especially considering that the United States has among the highest prices for broadband service of any developed nation in the world.

And while the infrastructure bill in general, and ACP in particular, does little to address the root causes of the broadband affordability crisis (e.g. lack of competition in a market dominated by monopoly incumbents), it is an important immediate solution to ensure that low-income households are not left on the wrong side of the digital divide in areas where broadband is available.

Of course, predicting how the ACP funding request will play out and what kind of compromises might be involved in a deeply partisan Congress is hard to gauge.

Hopefully, the GOP-led House of Representatives, which has called for deep cuts in domestic spending, will see the ACP as, not just another welfare program for low-income Americans, but an important part of the business plan for providers looking to build new networks in sparsely populated rural communities.

For independent providers to invest in rural networks where it is most expensive to build – and where a significant portion of the subscriber base cannot afford service – the ACP can make the difference in whether newly built networks will be financially sustainable or not, especially when it comes to the sustainability of Tribal networks.

The implications the ACP has in attracting private (and public) investment is further buttressed by a recent report, “Closing the Digital Divide Benefits Everyone, Not Just the Disconnected,” published by Common Sense and the Boston Consulting Group (BCG). It makes the case that in addition to providing low-income households some short-term relief from pricey Internet bills, the ACP can also provide an economic incentive for ISPs to invest in unserved and underserved communities by increasing the return on investment (ROI) in areas that have previously been considered unprofitable.

Avoiding the Broadband Elephant in the Room

Still, should Congress grant the Biden White House request to extend the program, it won’t resolve the long term funding question, nor does it address the structural issues behind the high-cost of Internet service.

As we have previously written:

“Giving money to regional monopolies to temporarily lower the high prices they created through a sustained, multi-decade assault on competition isn’t genuinely fixing the underlying problem of broadband affordability, one of the top obstacles to expanding access and adoption.”

“The FCC rarely embraces policies or penalties that seriously threaten regional monopoly power, has failed to accurately map broadband access, has struggled to maintain a modern, ambitious definition of acceptable broadband access, and is routinely absent when it comes to advocating for the interests of community-owned broadband alternatives…”

“Political and policy rhetoric about the ‘digital divide’ often excludes solutions for the kind of harmful regional monopolization and industry consolidation that makes it difficult for smaller broadband competitors to survive.”

“ILSR studies have consistently shown how subsidies alone aren’t capable of addressing the root cause(s) of broadband inequity. Real solutions have to address concentrated monopoly power and its impact on competition. While programs like the ACP are hugely beneficial for struggling Americans, they remain a band-aid for a much deeper problem.”

“A more equitable and sustainable path forward requires developing policies that take direct aim at monopoly power, as well as supporting the more than 900 communities driving popular, locally-owned broadband alternatives (though even in communities where costs are reasonable or deemed as widely ‘affordable,’ there will likely remain a subset of any community who will need some form of subsidy to pay for service).”

“Eliminating a program currently providing aid to 20 million struggling households without first addressing the real cause of high broadband prices would be a painful disservice to Americans long trapped on the wrong side of the digital divide.”

Community-Owned Broadband Addresses Affordability Head-On

Increasingly, local communities are coming to realize the link between competition and affordability and therefore have come to favor a community broadband approach in which local governments, cooperatives, or nonprofit providers build and own network infrastructure, viewing the service more like a utility than a for-profit venture hungry for a quick return on investment.

In Cleveland, as we reported here, the city opted to award $20 million of its American Rescue Plan funds to the Cleveland-based digital equity non-profit DigitalC, which is building a fixed wireless broadband network capable of providing symmetrical 100 Megabit per second (Mbps) service for $18 a month.

And in Chattanooga – home to the celebrated municipal broadband network, EPB Fiber – over 15,000 low-income students in that city are getting free fiber Internet service at home for a decade through HCS EdConnect, which was established before the ACP even existed.

While permanently funding ACP is vital and necessary, if we are going to achieve universal access to broadband, affordable to everyone, eventually lawmakers will have to honestly address the monopoly question and seek to create the conditions for meaningful competition in the broadband market.

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With the Affordable Connectivity Program (ACP) poised to run out of funding in early Q2 next year, and no funding source lined up to keep the program alive, a recent U.S. News & World Report survey underscores the significance of the program in the face of rising prices from the nation’s major Internet Service Providers (ISPs).

The ACP offers a monthly benefit of $30 dollars for qualifying households and $75 for qualifying households on Tribal lands (as well as in some remote areas). Over 20 million Americans to date have enrolled in the program to help pay their Internet service bills, but with the $14.2 billion ACP program on track to run dry as soon as May of next year – even amid a historic national effort to establish “Internet For All” – the affordability crisis has become more worrisome for a growing number of Americans.

U.S. News & World Report’s survey found that Internet prices are going up and that families are compromising other expenses to pay for connectivity, affirming the urgency among digital equity advocates to identify a source of continued funding for ACP, as well as push for more structural solutions that address the root causes of why Americans pay among the highest prices for broadband service in the developed world.

Though the report doesn’t directly explore monopoly concentration in broadband markets, it does offer some revealing insights. Conducted in August 2023, U.S. News & World Report surveyed 3,500 adults in the United States to get a sense of the choices that broadband-hungry Americans have, the speeds they are getting, and how affordable their Internet service is.

Survey respondents subscribed to an array of different Internet Service Providers, but the most commonly observed were (in order): Xfinity from Comcast, Spectrum, AT&T, Verizon, and T-Mobile.

The report found that 8 percent of respondents had download speeds lower than 25 Mbps, and 36 percent download speeds of 100 Mbps or less. And as the study notes:

“The Federal Communications Commission says broadband capability requires consumers to have access to actual download speeds of at least 25 Mbps – and a surprising number of U.S. internet users aren’t even getting that. After completing the internet speed test, 8% of our respondents report having a download speed less than 25 Mbps – meaning that nearly one in 10 households doesn’t actually have broadband internet service.”

“When Internet speed is too slow, users may encounter lags, buffering, or poor quality, and in some cases the app or website may time out. This is frustrating, but – more importantly – it may present an obstacle that prevents the individual from performing essential tasks or getting critical information.”

Of those surveyed, 20 percent said they only had one ISP available to them for service, while 38 percent reported that they didn’t know how many ISPs were available to them.

The report suggests that poor consumer literacy may contribute to these figures, citing the FCC maps which indicate 94 percent of Americans have three or more options. It can be debated whether it’s literacy, a failure of monopoly incumbents to report accurate data, or federal policymaker’s willingness to accept faulty mapping data. But, what is beyond dispute is the near universal agreement that the maps overstate the service options available to potential subscribers.

(A 2020 ILSR report found that 83 million households were living under a cable monopoly.)

The report goes on to note that nearly 2 in 5 respondents are having to compromise other personal expenses in order to afford their Internet connections. To further buttress the point, the survey also found that 53 percent reported paying an initial $20 to $60 at the beginning of their current contract, and now 48 percent report paying between $41 and $80.

Additionally, 61 percent of respondents cite inflation, including its effect on other household expenses like groceries, has made it hard for them to afford their Internet connection. Only 45 percent of respondents feel they are getting their money’s worth for the monthly price they pay for their Internet connection.

Without a reallocation of ACP funding, Internet subscribers across the country are at risk of losing their Internet access or being charged for service they cannot afford.

Some are advocating for bridge funding to keep subscribers connected in the near term, with longer term funding for the program coming from a reconfigured Universal Service Fund. Recent advocacy has pushed to get funding reallocations integrated into the farm bill, among other upcoming legislation.

While renewal of support for the ACP will be essential to ensuring that low-income families don’t get their Internet service cut off in the near term, and as some economic analyses suggest, can even help incentivize investment in some high-cost rural areas, additional structural solutions are needed to make quality broadband affordable to everyone long into the future and ensure that digital discrimination, or digital redlining, is eliminated.

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As the National Telecommunications and Information Administration (NTIA) continues to move forward in administering the single biggest federal investment to expand high-speed Internet access in U.S. history, each state and U.S. territory is wrestling with how to best spend the windfall as they lay out their Five Year Action Plans and Initial Proposals necessary to claim their portion of the $42.5 billion BEAD program.

One major barrier to providing universal access to fast, reliable and affordable Internet service–long recognized by ILSR, telecom experts, and a growing number of ordinary citizens–are the monopoly-friendly preemption laws that either outright ban or erect insurmountable barriers to building publicly-owned, locally-controlled broadband networks, aka municipal broadband.

Preemption in the BEAD Era

Currently, 17 states have such preemption laws, most of which have filed their Five Year Action Plans and/or their Initial Proposals. In each of those states, at the behest of Big Cable and Telecom incumbents, state lawmakers have erected legislative barriers to municipal broadband to protect the monopoly players from competition, which is at the very heart of why the digital divide exists in the first place and why tens of millions of Americans suffer from the slower speeds and higher costs that go hand in hand with monopoly service.

These legislative barriers also happen to technically run afoul of the Infrastructure Investment and Jobs Act (IIJA), which enabled the BEAD program. To conform to the letter and spirit of the infrastructure law, state legislatures would have to reverse these preemption laws as the IIJA specifically says that state BEAD plans must “ensure the participation of non-traditional broadband providers (such as municipalities or political subdivisions, cooperatives, non-profits, Tribal Governments, and utilities).” In other words, municipal broadband and other non-profit public sector entities should, by law, have access to BEAD funds.

The subsequent BEAD Notice of Funding Opportunity (NOFO) goes on to say that “NTIA strongly encourages (states) to waive all such (preemption) laws for purposes of the Program.” Still, NTIA officials, likely out of fear of the political firestorm it would cause in an election year, have already said the agency will not withhold BEAD funds from states that do not remove those barriers. However, the BEAD NOFO does require those states to “identify all such laws in its Initial Proposal and describe how the laws will be applied in connection with the competition for subgrants (and), in its Final Proposal, disclose each unsuccessful application affected by such laws and describe how those laws impacted the decision to deny the application.”

Here’s a look at what three of those states are saying about preemption in their Five Year Action Plans (with links to the Five Year Action Plans/Initial Proposals of the rest):

Pennsylvania Breezes Over State Preemption

Poised to receive $1.2 billion in BEAD funds, Pennsylvania–which filed its Five Year Action Plan in August–articulates what has become a truism across the nation:

”The varied impacts to populations who lack Internet access are considerable and costly. Not having access to education, employment, health care, entrepreneurship, and more limits some Pennsylvanians in their overall quality of life,” adding that “the digital divide is increasingly worsening for Pennsylvanians from communities of color, vulnerable populations, and lower-income demographics.”

For the 333,133 “unserved and underserved locations” the state will target (based on the FCC’s faulty maps), “Internet for All” advocates will have to contend with an antiquated state preemption law–one that outright bans local governments from providing broadband service–unless broadband services are not provided by the local telephone company and the local telephone company refuses to provide high-speed Internet service within 14 months of a request for service from a local government.

As detailed by the Coalition for Local Internet Choice (CLIC), the law further says that “in determining whether the local telephone company is providing, or will provide, broadband service in the community, the only relevant consideration is data speed. That is, if the company is willing to provide the data speed that the community seeks, no other factor can be considered, including price, quality of service, coverage, mobility, enhanced efficiency of other utilities, etc.”

Glaring “Obstacles and Barriers” Omission

So what does Pennsylvania’s Five Year Action Plan say about such a strict preemption law? Very little, even though it’s loaded with indications that laws protecting monopoly incumbents from municipal broadband competition are inextricably linked to the state’s stubborn digital divide.

On page 32 of the 85-page Plan, the state notes: “limited competition among broadband providers…can increase prices for consumers.” But, even when you get to the “Obstacles and Barriers” section of the Plan, which begins on page 46, there’s no mention of the severe legislative limits placed on municipal broadband, despite mounting evidence that municipal broadband, wherever it’s been successfully established, almost always offers community-wide connectivity that is more reliable and affordable than what the monopoly incumbents offer.

It’s not until you reach page 62, under the “Key Execution Strategies” portion of the Plan that the state first makes clear it “strongly encourages the establishment of public-private partnerships (P3),” arguing that “combining efforts and resources from both the public and private sectors will expedite infrastructure improvement.”

Immediately following that, there’s a single paragraph acknowledging that “a law from 2004 allows telephone companies to block municipalities and counties from becoming an ISP, described as a ‘virtual veto.’ Attempts to remove the restriction in 2019 and 2021 stalled in committee without coming up for a vote.”

Failure to Connect the Dots

And yet, as the Plan documents, resident surveys found that nearly 46 percent of respondents said they “strongly agreed” with the statement “I would choose a different type of Internet subscription if more choices were available”–with another 33 percent saying they “somewhat agreed.” Additionally, 45 percent reported difficulty affording their Internet bill.

To further make the case that Pennsylvanians are screaming for competition (and more affordable prices), when residents who do not have home Internet service were asked why they don’t, the top three answers were: “The cost is too expensive” (56.05%); “Service is unreliable or has frequent outages.” (43.14%); and “I don’t like the available service providers.” (31.30%).

On the flip side: Among those with home Internet subscriptions, “56% have cable Internet and 17% percent use DSL. More than 55% reported they have no choice of provider, with only one provider available. Over 50% of survey respondents indicated that the cost of their Internet subscription is over $100/month.”

The long and short of it is: besides banking on the big incumbent providers and promises of encouraging public-private partnerships to build out infrastructure, Pennsylvania’s only answer to the affordability crisis is the Affordable Connectivity Program (ACP), even as the state’s ACP participation rates are below the national average with only 31.5% of eligible households enrolled in the program.

The Plan acknowledges as much, while making a concise point on the nexus between affordability and competition.

“Ultimately, the ACP is only one way to promote affordability and, as a federal program, it has limited funds available. Currently, the ACP is projected to run out of funds in 2024 without further Congressional action. Addressing the needs and gaps impacting broadband affordability requires a combination of long-term policy solutions, including increasing competition, subsidizing broadband costs for low-income households, and supporting small broadband providers. By addressing these gaps, more households can access affordable high-speed Internet services.”

Sounds good. But details are scant on how the state intends to “support small broadband providers” in markets dominated by regional monopoly incumbents and with a rising chorus of small providers who say the BEAD program’s “letter of credit” requirement will make it extremely difficult, if not impossible, for small providers to secure grants and compete.

A Way Around Preemption Law?

At least in rural parts of the state, the Plan points to a way around its preemption law. “In efforts to bring broadband to rural communities, one region of the state created a nonprofit to become the owner of the broadband network.” But, that is quickly followed up with a caveat: “This route may not be feasible for smaller communities. It may prove easier and more effective for counties and municipalities to partner with ISPs directly in order to bring broadband to the community.“

The Plan also gives a nod to electric cooperatives, which in other states are bringing fiber networks to large swaths of rural areas.

“The Commonwealth of Pennsylvania has 13 electric cooperatives across the state with large amounts of assets that could be used for placing fiber. Some of these cooperatives are currently providing high-speed Internet access through a subsidiary; others are looking into options that are best for their memberships.”

While the state’s inaction on removing municipal broadband barriers is breezed over in its Five Year Action Plan, the issue hasn’t gone unnoticed by residents–as is evident by one Allentown resident who wrote a letter-to-the-editor in The Morning Call:

“Expanding Internet access to all Pennsylvanians could best be demonstrated by collaborating … to eliminate the public utility code provisions that prevent localities from setting up their own municipal broadband systems. Instead, we have a system where after over two decades of private companies being in charge, there are still … almost 280,000 unserved locations here in Pennsylvania alone.”

“Fortunately, the federal government is finally stepping in with Broadband Equity, Access and Deployment funds to provide the necessary infrastructure that the cable and wireless companies have failed to provide during their period of monopoly control.”

North Carolina Statute Creates ‘Chilling Effect’

In contrast to Pennsylvania, North Carolina’s Five Year Action Plan confronts a similar preemption law more candidly. It notes that since the enactment of its 2011 “Level Playing Field Act,” which “places limits on and establishes requirements for local governments seeking to provide broadband service,” it has meant that “no local government has met the requirements of the statute to provide broadband service to its residents.”

And the result, the Plan says, has been “a limit on the number of options available for broadband service, particularly in areas where the private sector is not providing adequate, affordable service.”

The Plan goes on to note how the statute has also curtailed the construction of open access networks, which have become an increasingly attractive way for states and local communities to create the conditions for competition.

“This statute created a chilling effect for local governments interested in exploring alternative networks like open access networks. Municipalities that own conduit and dark fiber have been reluctant to lease their infrastructure to private internet service providers or create open access networks operated by a private entity for fear of violating the statute.”

“This provision limits the options available to residents, particularly in areas where incumbent internet service providers may not want to provide service. It also unnecessarily restricts existing public service providers from leveraging grants to expand within their jurisdictions.”

While the Plan doesn’t specifically mention the municipal network in Wilson, NC, the city’s Greenlight network is a prime example of what municipal broadband could bring North Carolinians in other parts of the state.

In 2016, Greenlight initiated a partnership with the Wilson Housing Authority (WHA) to connect hundreds of public housing residents to $10/month low-cost fast Internet access. And since the city-owned fiber network was built, it has been credited with helping local businesses thrive while attracting new companies to relocate to the area, which led to Wilson in 2019 being ranked as the 10th best small city in the country to start a business.

Yet, when Greenlight extended the network to its broadband-starved neighbors in the Pinetops, the cable lobby pounced and forced Wilson to sell its assets and stop offering service in that community, which eventually became the subject of the short documentary “Do Not Pass Go: The Battle for Broadband.”

South Carolina Residents Tired of Monopoly Rule

Of all the state’s with preemption laws that block municipal broadband, South Carolina’s Five Year Action Plan goes the furthest in shining a light on how it will hamstring BEAD funded projects–unless state lawmakers remove the barriers.

The Plan highlights the bevy of complaints state officials got when they hosted “roadshow events” to get public input.

“Throughout these roadshow events, the general public expressed a lack of trust in ISPs (Internet service providers). This was a running theme throughout roadshow events and was the most commonly raised issue by participants after expressing that they had a poor connection or no connection to high-speed broadband.”

And in surveys the state conducted to inform its Five Year Action Plan, it became clear that “many South Carolinians do not feel that ISPs are taking their concerns seriously.” The survey found three common complaints:

“1) ISPs are not interested in expanding Internet service if it is not profitable, which can result in lack of access or spotty service in an area; 2) that ISPs are creating monopolies and customers are beholden to the prices and services they offer, regardless of the quality of services; and 3) that ISPs are difficult to contact, are not helpful with repairs and provide confusing information about service offerings and costs.”

State broadband officials even included several direct quotes from the state’s listening sessions that indicate how clearly residents understand the dynamics involved:

“What is being done to stop companies from becoming a monopoly due to the contracts that they make you sign to be able to use their services?”

“[Our] current service does not match the amount of money [we] are spending.”

“There is a monopoly — why don’t we have an array of ISPs to choose from?”

Broadband Office May Raise Preemption Alarm With State Lawmakers

Elsewhere in the state’s Five Year Action Plan, it says the South Carolina Broadband Office “may raise any concerns for the consideration of the State General Assembly.”

The Plan first notes that the infrastructure law stipulates municipalities are eligible to apply for state administered BEAD funds. However, a state law prevents municipal broadband in South Carolina on the grounds that it “ensures that government resources are not used in an unfair, anticompetitive manner and requires various procedural requirements, limitations and additional tax considerations that some may consider to be barriers to the provision of municipal retail broadband service.”

The only exceptions to that law so far have been in Orangeburg and Oconee Counties where municipal broadband service currently exists. However, the Plan says, “municipal broadband networks have to first show that there is no ISP or Internet service available in an area prior to offering retail broadband services.”

Reiterating how “state law intends to ensure that government resources are not duplicative of the market, are efficiently utilized and are not used in an anticompetitive manner,” it may be a bridge too far for state broadband officials to spell out what is obvious to many residents: the broadband market is broken and the idea that local governments competing with deep-pocketed national companies is somehow “unfair” is laughable, at best–to say nothing of the fact that these laws effectively protect monopoly incumbents from competition.

Regardless of intent, the Plan acknowledges that South Carolina’s municipal broadband barrier has meant “no government entity has chosen to make a filing at the Public Service Commission of South Carolina to declare an area is unserved and that the government entity seeks to provide retail Internet service in that unserved area.”

Barriers to municipal broadband aside, the Plan does make the point that local governments can build and own open access networks or “operate broadband networks as wholesale suppliers, leasing its infrastructure to private ISPs that can then offer broadband service to residents,” citing examples in Orangeburg County and Newberry.

Also, the Plan makes it clear that electric cooperatives “can provide retail broadband service in their electric service areas to their members and within two miles of its authorized electric service area,” further adding that “electric cooperatives may go anywhere in the State if provided a state or federal grant.”

Finally, the Plan says, given that the BEAD program “encourages states to address laws that may restrict BEAD participation from nontraditional applicants, such as municipal broadband providers,” in its annual report, “SCBBO may raise any concerns for the consideration of the State General Assembly.”

What About Other States?

A handful of other states with municipal broadband blocking preemption laws have also submitted their Five Year Action Plans or Initial Proposals. They include: Georgia, Montana, Utah, Virginia, Tennessee, and Wisconsin.

You can find links to those plans and proposals at the NTIA website here.

Here you can read a 2020 study presented at the 48th Research Conference on Communication, Information, and Internet Policy that details how “the existence of municipal broadband restrictions tends to lower availability and broadband competition.”

Also below, you can listen to ILSR Community Broadband Networks Initiative Director Christopher Mitchell and CBN’s Associate Director for Communications Sean Gonsalves discuss how various states’ BEAD plans are shaping up.

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LA County is accelerating its plan to deliver affordable broadband access to the city’s unserved and underserved, with an eye toward building one of the biggest municipal broadband networks in the nation...… Read More

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The National Telecommunications and Information Administration (NTIA) announced earlier this week that Louisiana will be the first state in the nation to receive federal grant planning funds to help states prepare for the deployment of high-speed Inter...… Read More

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