Electric Utility Group Concerned About BEAD Rate Regulation

Jan 05, 2024

By Ted Hearn, Editor of Policyband

Washington, D.C., Jan. 5, 2024 – A trade association for electric cooperatives is concerned that the Biden Administration’s major broadband deployment program includes rate regulation requirements that will fail to compensate Internet Service Providers (ISPs) fully for their costs.

The National Rural Electric Cooperative Association (NRECA) is warning that capping the price of low-cost service plans at $30 a month will not cover the cost to provide broadband in rural and sparsely populated area.

NRECA said rate caps were suggested by the National Telecommunications and Information Administration (NTIA) within its instructions to states that plan to participate in the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program.

“Requiring a BEAD subgrantee to charge customers below their cost of provisioning service would not only deter program participation but would threaten the long-term viability of the subgrantee, and broadband service to the community,” NRECA CEO Jim Matheson said a recent letter to NTIA’s top official, Alan Davidson.

NRECA represents more than 900 consumer-owned, not-for-profit electric cooperatives, public power districts, and public utility districts in the U.S.

The BEAD program plans to award billions in broadband deployment subsidies in an effort to bring high-speed Internet to all 7.2 million unserved locations within five years.

The $30 price cap matches the monthly broadband subscription subsidy in the means-tested Affordable Connectivity Program (ACP) administered by the Federal Communications Commission. The ACP, which includes more than 20 million enrollees, is expected to run out of funding by April.

NRECA claimed the $30 cap was “arbitrarily set by Congress in the Infrastructure Investment and Jobs Act (IIJA) and is not based on any analysis of affordability or the costs to build, operate and maintain a broadband network and was not meant to be a rate ceiling.”

NRECA said at least three states have adopted $30 low-cost plans for low-income households and more are expected to follow suit in their BEAD-funding submissions to NTIA.

“Plans with rigid rate ceilings should be rejected,” NRECA said.

NRECA said its members provide service in 92% of the nation's most impoverished counties and that the vast majority of NRECA members that offer broadband participate in the ACP and support its continued funding.

“However,” NRECA said, “the economics of serving high-cost, low-density areas often make offering a high-speed service plan at the $30 subsidy rate infeasible, even when grant funding is awarded.”

NRECA said pricing flexibility is needed for BEAD to be a success.

"NTIA guidance to states on affordable service plans must urge that they not just address affordability but also ensure the long-term economic viability of projects." NRECA said.