Connectivity is the lifeline that powers the advancements of modern-day technology. However, nearly one in eight Americans lacks access to broadband internet. The federal government’s Broadband Equity Access and Deployment Program (BEAD) aims to bring high-speed internet to all Americans, with $42.5 billion of funds focused on the unserved and underserved. As states receive initial BEAD funding by the end of 2023, they will determine how to build out more expansive networks, with fiber optic and cable providers and manufacturers expected to capitalize.

Inequity in access

Without reliable, high-speed internet, unserved and underserved individuals face a significant disadvantage in a multitude of opportunities ranging from employment to education. The Federal Communications Commission (FCC) defines broadband internet as access with download speeds of at least 25 megabits per second (Mbps) and upload speeds of at least 3 Mbps. BEAD funding will give priority to unserved areas, with speeds below the FCC’s broadband definition, followed by underserved areas (download speeds below 100 Mbps and upload speeds below 20 Mbps).

Among the over 20 million homes in the U.S. without broadband, the lack of access disproportionately affects those with lower family incomes, those without a college degree and Hispanic, African American and Native American populations. BEAD grants should be a catalyst in closing the gap for underserved communities, with a focus on affordability for all.

Rural communities are also disproportionally affected by a lack of broadband access. Based on 2021 data from the National Telecommunications and Information Administration (NTIA), the five states with the highest proportion of households lacking broadband were Mississippi, Oklahoma, Wyoming, Kentucky and Arkansas. On average, 39% of households in these states did not have broadband access. The average rural population in these states ranged from 35.4% to 53.7%, compared to a nationwide average of 20.0%, according to the 2020 U.S. census.

Who will be allocated BEAD funds?

On June 30, 2023, authorities determined the initial fund allocations for each state or territory based on the following: a baseline of $100 million per state and $25 million per territory; a calculation of unserved locations in each state as a percentage of total unserved locations; and the number of high-cost unserved locations as a percent of total high-cost unserved locations. The largest allocations were Texas ($3.3 billion), California ($1.9 billion) and Missouri ($1.7 billion). States have until December 2023 to submit proposals regarding the operations of grants received as well as to challenge the initial funding allocations.

Starting in December 2023, states will receive up to 20% of their allocated BEAD funds to improve infrastructure. Funds will continue to be distributed and allocated to specific projects over a four-year period. Initial analyst estimates believe the funding will be allocated 70%-80% to labor, 10%-15% to cabling and 5%-15% to equipment companies.

Fiber providers and manufacturers are poised to win big

With the injection of capital to fuel expansion, each state must decide which technology to deliver the broadband connection: cable, fiber, fixed wireless, copper or satellite. Satellite and fixed wireless carry higher cost barriers and maintenance, while copper lines can struggle to maintain the speeds required by the program.

The expectation is that fiber will emerge as the big winner, as it provides a reliable solution to delivering high-speed bandwidth, particularly for last-mile connections. Despite high upfront investment costs, fiber cable is weather-resistant and requires less maintenance than other broadband options. Its durability and reliability make it a front-runner for a “set it and forget it” strategy.

Fiber optic providers and equipment manufacturers must comply with the Buy America provision within BEAD, requiring a significant portion of materials to be sourced domestically. Vendors may be able to meet the requirement through leveraging contract manufacturing.

Cable providers are likely to benefit as well. The timing could not be better for cable providers that have expanded coverage in the last few years through edge-outs, which have extended their networks into adjacent markets lacking wireline broadband access. However, new cable broadband additions declined to historic lows in 2022, with just over a quarter million new subscribers.

Ultimately, fiber is poised to gain market share, and providers should seize the opportunity to expand networks and advance fiber offerings. However, recipients could be subject to fines and penalties without attention to compliance and reporting as outlined within the program.

Reporting requirements for BEAD recipients

As with most government funding, the grants come with reporting requirements. Recipients must report on the status of implementation to the state and the NTIA. Recipients who fail to meet the reporting requirements will be subject to fines and penalties.

The reporting requirements include cybersecurity and supply chain risk management plans; public awareness campaigns; participation in the FCC’s Affordable Connectivity Program; aggregate customer penetration rate for the grant locations; number and dollar amounts of contracts and subcontracts given; broadband speed available to customers; and various other reporting metrics, including some to be determined.