Chad Duval: This is a truly unique program, a great time to be in the broadband space, I believe.
Even though there’s a lot of challenges that we’re going to talk through here, it’s just a program that I really, truly believe that companies need to figure out a way to participate in, even given those challenges.
Jeff Johnston: That was Chad Duval, partner at Moss Adams urging rural broadband operators to make sure they do their due diligence and to take a good hard looking at participating in the BEAD program, despite some of the challenges with it.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast, where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the communications industry. This podcast is brought to you by CoBank’s Knowledge Exchange group.
The BEAD program is a once in a lifetime kind of opportunity to connect the underserved and unserved in rural America with fast, reliable internet service. But, like most government programs the devil is in the detail, and the BEAD program certainly has its fair share of challenges.
Chad has over 20 years of telecom consulting experience and has deep domain expertise when it comes to rural broadband and government programs. So I was thrilled when he agreed to come on the show to talk about this unprecedented opportunity.
So, without any further ado, pitter patter let’s, see what Chad has to say.
Chad Duval, welcome to the podcast. It’s an absolute pleasure to have you on today.
Duval: Thanks for having me on the podcast, Jeff. Rumor has it that you passed on an opportunity to host a debate between Kamala Harris and Donald Trump on broadband policy today, because you’d already asked me to be on the show. I’m honored. I don’t know where that rumor came from, of course, but it sounds plausible to me.
All kidding aside, I’m a long-time listener and a big-time fan of the podcast. I’m really excited to be here. Thanks for having me.
Johnston: Look, I’m thrilled to have you on. We’ve known each other for a while. I respect your insights and your perspective. I think listeners are going to walk away from this podcast a lot smarter than they did before they started listening to it. Even though we don’t have Donald and Kamala on, we’ve got you. Quite honestly, I’d rather have you.
Let’s start off with the-- I want to talk about the BEAD program. When I first heard about it, I thought, wow, what a great program. Unprecedented amount of money. Really exciting for rural America.
I don’t know if that things have gone maybe as well as some had hoped or maybe not as fast as some had hoped. I wanted to start to talk about the BEAD program. Before we get into the specifics of it, Chad, maybe you can just set the stage for our listeners and give us an idea of what exactly is the BEAD program, what are its objectives?
Duval: Sure. Completely agree with you, Jeff. Really exciting times in the broadband space. Having this funding available is absolutely incredible. I know there’s a lot of stuff that we’re going to cover in the next 30 minutes. Being a big believer that I am in executive summaries, I just wanted to hit on one thing up front. I’ll give a bit of a spoiler alert for those who don’t time and want to just hit on the first couple of minutes here. This is a truly unique program, a great time to be in the broadband space, I believe.
Even though there’s a lot of challenges that we’re going to talk through here, I’m sure, just a program that I really, truly believe that companies need to figure out a way to participate in, even given those challenges.
BEAD program is the Broadband Equity Access and Deployment Program, which was established through the Infrastructure Investment and Jobs Act.
It’s a $42.5 billion initiative that was really designed by the federal government to close the digital divide It’s administered by the National Telecommunications and Infrastructure Administration, or NTIA. It really places an emphasis on deployment to high-cost-to-serve areas, which tend to be rural markets. The lower the population density, the higher cost-to-serve it is. Those are a lot of areas that have historically been where broadband service has been limited or unreliable.
Of that $42.5 billion, each state and U.S. territory, so there’s 56 different participating jurisdictions, if you will, they received at least $100 million each. Then additional funding was allocated based primarily on the number of unserved locations in the state.
They really identified or outlined three primary goals. The first is to expand infrastructure. The program really prioritizes building new networks or expanding on or improving existing networks, and focusing in on deployment of 100 by 20 megabits per second or faster, hopefully, service.
Finally here under this expanding infrastructure, priority given to projects that utilize end-to-end fiber optics. Not all projects are going to be fiber optic-based, but there is definitely priority given there. Couple of other goals, promote digital equity. It’s not just about providing access to broadband. It also talks about affordability being one of the really key, I don’t want to call the secondary goal, but secondary to access is affordability.
The next one being digital literacy, making sure people know how to utilize those tools and know how to utilize the access that they have, and so promoting that digital equity. Then finally local empowerment. Essentially this just has to do with the fact that it’s not being distributed at the federal level. It’s being distributed to the states and territories and then they have their ability to distribute that funding to what I’ll call are grantees.
I want to hit on how I think that’s going to impact rural areas and maybe give a few examples of different states and how we’re seeing those states approaching the program,
I’ll start with Michigan. It seems that their program is really focusing on community input. They’ve done a lot of listening tours and pre-marketing efforts to really drive adoption within the state and to get companies to participate. Shifting gears to Louisiana has been a really interesting one. Louisiana has been really upfront and forward, a first early adopter in the BEAD program. They seem to be really emphasizing resilient infrastructure to withstand natural disasters. Recent hurricanes and the like that we’ve seen drove home that point.
State of Nevada is another good example where they’re really trying to balance that infrastructure being very important, but also looking at digital literacy and affordability initiatives, and really bringing that affordability to the forefront.
Then the final example I’ll throw out is the state of Georgia, where they seem they be, and this is, I want to say way out there, truly unique, but they’re really focusing on workforce development, training residents for broadband jobs and supporting minority-owned businesses. Using it more from an economic development perspective.
Johnston: That’s a fantastic overview, Chad. When I was just listening to you talk, thinking about one of the objectives, the local empowerment objective, that makes a lot of sense as you walk through the different states or the examples that you’ve seen, because look, every state’s got different priorities and different objectives. When it’s done at a federal level, those state level nuances, I think get lost. Do you like what you’re seeing with this local empowerment state-level implementation approach, I guess?
Duval: Double-edged sword, definitely. There’s pros and cons to it. Certainly as a self-serving perspective as a consultant that works with companies all across the country, it’s a little bit of a challenge to understand 56 different programs and help advise and guide clients to the right answers and helping them work through the process. Setting my self-interest aside, I do like the more local approach. I do feel like it’s really important for each state, each territory to look at what’s most important.
Johnston: Chad, let’s move on here as you’ve done a great job laying the foundation of the program.
We’re hearing at CoBank, and you pick it up throughout the industry, that despite how well-intended and how impactful this program could be, and hopefully ultimately will be, there’s some hesitation on the part of operators who have looked at this and for whatever reason have decided that, maybe now’s not the time, or maybe there will never be a time for them to really lean into this BEAD program. From your perspective, Chad, maybe just help us understand a little bit, and we know what you’re hearing specifically around what are some of the challenges, be it financial, operational that’s giving some operators pause as it relates to BEAD participation?
Duval: First of all, Jeff, I completely agree with you. Early on in the BEAD process, we work with a lot of companies all across the country, and it arrived with an overwhelming thud, if you will. Just early on, people were saying, just not interested in this program, too many hurdles, too many things that we’re not used to doing, not the approach we want to take, just a lot of reluctance or a lot of just reticence to really jump into the program. I’d say it’s gaining some slow momentum, the snowball’s starting to roll downhill.
Fortunately, I think we’re starting to see more and more operators get in the phase of, “all right, we maybe don’t love everything about this program, but we understand the importance of it and we need to get on board and we need to deal with these challenges.”
A couple of areas that we’re seeing big challenges, especially with the smaller rural providers that we tend to deal with. That has to do with labor standards and compliance documentation, and things along those lines. Those are some of the bigger challenges where many of the smaller rural operators are starting to realize that maybe they’re lacking some of those formalized policies, reporting infrastructure, and workforce programs that are required by the BEAD program.
Some of the challenges with labor standards in Kansas, Kansas has requirements for a detailed workforce and labor standards documentation. Some of the things that they require is detailed plan and standards on recruitment of a diverse workforce, and including your efforts to hire underrepresented populations, fair labor practices with policies that detail your compliance with prevailing wage laws.
You think about a lot of small rural providers, not that they’re opposed to those things, they’re just not used to having to go through that process and the documentation and having policies in place.
Developing those from scratch require a lot of time and oftentimes external expertise that complicates the process and candidly adds cost to the process. That’s one thing that we’re seeing as a potential hurdle here is that this is going to be a very costly process to go through because we’ve got to do stuff we’ve never done before.
That’s some Kansas-specific stuff that I just wanted to touch on because I think it’s very timely. Not picking on the state of Kansas. There are a lot of states that will run across those same challenges. And then I did want to focus on some of the general reporting burdens from the I’ve heard a lot about the compliance with Build America Buy America Act.
Basically that requires that all materials used in the broadband deployment project have to be produced in the United States, which I think is a great concept, but we know that there’s a lot of equipment manufacturers out there that don’t necessarily comply with that. This Build America Buy America requirement can complicate procurement. And unfortunately, it may well increase the cost of the deployment.
Duval: The second area of the BEAD general terms and conditions is the environmental and historic preservation review process. This isn’t unique to BEAD,. We’ve seen this happen in the RUS ReConnect program and other grant programs that require similar reviews. The challenge there is that we’re seeing those review processes take significant amounts of time, up to multiple years. We have clients who were awarded ReConnect Round 3 funding from RUS that are still in the midst of their environmental and historic preservation review process a couple years into it.
I’m concerned we’re going to have something similar play out from a BEAD perspective. All of these builds are supposed to be complete by the end of 2029. That could really compress the time frame, or it could require states to push out the time frame.
The final challenge here that I wanted to talk about, and this will sound hollow coming from me, a partner in a CPA firm, but the financial reporting requirements are proving a little bit onerous for certain companies, especially smaller rural providers.
They’ve got to have audited financial statements. They’re going to have ongoing financial monitoring throughout the project. That can be burdensome for some smaller providers. It takes resources away from getting the job done because they’ve got to focus on compliance. Those are some significant concerns that we’ve seen, areas where people are facing challenges and wondering if it’s really worth it.
I just wanted to close with a little bit of a thought on impact on small operators here.
There’s a little bit of a dichotomy here because we look at the larger broadband providers, and I won’t name who they are, but we know who they are. They already have the necessary human resources, infrastructure, compliance teams, all of that stuff in place. They got a lot of people doing a lot of compliance-related work because it’s just part of the day-to-day operations. Whereas the smaller operators don’t always have that because they’re just limited resources and limited need for those things today. I’m concerned that it’s some of those smaller operators who are probably best suited to serve these rural areas that are currently underserved. They could struggle to meet the BEAD program’s significant documentation and reporting requirements.
Johnston: For the operators out there that have looked at this program, Chad, and said, I just don’t think it’s the right thing for me to do, for whatever justification they might have. There’s risks in doing things, and there’s also risks in not doing things.
Is there any advice you can give them to really make sure that that’s the right decision for them? Any advice, guidance that you can provide so that they don’t look back and say, jeez, that was a mistake, despite the headwinds that you’ve outlined here, I still should have participated in the program.
Duval: I’ll get back to my opening comment, my spoiler alert, I guess, in that I think it’s absolutely necessary that all rural providers look at this opportunity and figure out a way to participate because these opportunities don’t come along very often. We’ve never seen a program of this size or anywhere near this size. Prior programs talk about it as if it’s small amounts, but a couple of billion dollars at a time. We’re talking about a program that’s probably 20 times larger than any of the recent programs that we’ve seen at a federal level.
To not participate now, I think is just a huge mistake. We’re looking at it from a few different perspectives. One is the offensive perspective of, this is an opportunity to expand the scope of where you serve. Is there an opportunity for you to expand the scope of what you do and how you do it?
Maybe there’s never been a business case to go out and competitively serve that neighboring market. Here now is the business case because a lot of the funding is coming from elsewhere. The other thing, and I think you intimated this a little bit earlier, Jeff, and I think it’s a real good point about being defensive of your existing service territory or the areas that you care about.
You look around the country and unless there’s a company that’s deployed fiber to every single location, or there are aggressive competitors in these rural markets, or a company is accepted like the Enhanced A-CAM program that comes with an enforceable commitment to serve every location, rural providers are going to have eligible locations in their service territory. This isn’t a, we’re not going to do it, no one else will, kind of thing. There is going to be someone who’s awarded funding to serve those locations. From a defensive perspective, I think rural carriers have to be very, very cautious about allowing a competitive provider to get federal funding to deploy fiber into the middle of their network.
Once they get that fiber there, they’re naturally going to expand.
Looking at this as well as a strategic tool for long-term sustainability, even in rural markets where we’ve got high-cost support through the federal universal service funding and through some of the states, there’s still a lot of places where we’re lacking fiber deployment for a lot of very legitimate reasons. Here’s an opportunity to go in, build that fiber and generate hopefully some long-term sustainability because of the low cost of deployment. All we now have to focus on and not that it’s a nominal thing, operating costs are a real thing.
There’s many situations where even if you 100% fund the capital expenditure through a grant program, the operating expenses are substantial, and end user revenues may not be sufficient to recover that entire cost. We’ve got to think about that as a way of generating that long-term sustainability.
Johnston: Great points. I really like what you said as far as the defensive aspect of the strategy. That’s really important. For operators that maybe haven’t been used to a lot of competition in their communities because they’re high-cost areas and traditionally nobody really wanted to go there, to your point, that could change and could change in a pretty big way. Thinking through that and being aware of that, I think is really, really important. I thought those were great points.
Before we wrap it up, I just want to give you an opportunity to share any closing thoughts or comments or anything that we didn’t touch on or you want to emphasize before we wrap it all up. The stage is yours.
Duval: Wow. I think I’ll keep it fairly simple. I want to get back to that optimistic side of things. It’s just really, really important to know that broadband providers need to seriously be considering participating in the BEAD program. These are opportunities that don’t come around very often.
This is going to be sort of a one and done, or at least one for a long time. I really just feel like people who are being pessimistic about the program or who are looking at it and saying, there’s too much of an uphill battle here, I’ve got bigger fish to fry, I guess I’d say I don’t think there are bigger fish to fry. I think that this is something that everyone really, really needs to be seriously considering. If the markets look too big, if the proposed areas where you’d have to serve look too big, figure out how to partner with others. Figure out how to get a little bit uncomfortable here.
Because I think if we don’t get uncomfortable with the BEAD program, don’t get ourselves into that space, we’re going to become very, very uncomfortable over time with the end result of not having participated.
Johnston: Well said. I hope those who are on the fence are listening to you because I would agree with you 100%, and hopefully people take a very serious, hard look at this from both an offensive and a defensive perspective because I think you made some great points. Thank you very much, Chad, for being on the podcast today. This was fantastic.
Duval: Thanks for having me, Jeff. A lot of fun, really appreciate it. Look forward to future episodes of the podcast, because like I said, I love listening.
Johnston: A special thanks goes out to Chad for being on the podcast today.
Wow, lots to digest here – Chad did a great job kind of laying out the factors that need to be considered. This program comes with a lot of what sounds like onerous reporting requirements and other considerations that are new to small rural broadband operators, and I know it’s giving them heartburn. But I agree with Chad, that operators need to take a long hard look at participating in this program, be it for defensive, offensive or sustainability reasons.
Hey thanks for joining me today and a special thanks to my fellow CoBank associates Christina Pope and Tyler Herron who play a critical role in making this podcast a reality. Watch out for the next episode of the All Day Digital podcast.
