The Broadband Equity, Access, and Deployment Program provides $42.45 billion to expand high-speed Internet access by funding planning, infrastructure deployment and adoption programs in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.
The Bipartisan Infrastructure Law directed NTIA to determine how much each state is to receive based on the number of locations in their state unserved by high-speed Internet service.
The allocation formula set in the law includes three components:
- A baseline of $100 million for each state (plus the District of Columbia and Puerto Rico) and $25 million for each territory,
- A calculation of the number of unserved locations in each state divided by the nationwide total of unserved locations, and
- The number of “high cost” unserved locations in each state divided by the nationwide total of high-cost unserved locations.
About High-Cost
Summary
The Bipartisan Infrastructure Law tasked NTIA with defining “high-cost areas” as part of the BEAD allocation formula. This task required NTIA to both define “high-cost" and define “area” (the size of the geographic area in which to assess whether 80% of the locations are unserved and to measure whether the cost is higher when compared to the average cost for all other similarly-defined unserved areas).
NTIA defined “high cost” using a cost model that incorporates an area’s remoteness, population density, topography, and poverty levels, and measures costs over the life of the network. NTIA defined “area” to mean census block groups.
Importantly, this definition of “high-cost area” also determines which households may be eligible for an increased ($75) benefit in the FCC’s ACP program. As a result, NTIA carefully weighed poverty in defining cost given ACP-eligibility and worked closely with the FCC to ensure that the high-cost area definition did not impede the administrability of that benefit.
Explanation
The Bipartisan Infrastructure Law (BIL) requires NTIA to identify “high-cost areas” in the United States – areas in which at least 80 percent of the locations are unserved, and in which the cost of building out broadband service is higher than the average for all such unserved areas.
High-cost areas play an important role in the $42.45 billion Broadband Equity, Access and Deployment (BEAD) Program and the Affordable Connectivity Program (ACP) administered by the FCC:
- 10 percent of the BEAD Program budget – $4.245 billion – is to be allocated among the 56 eligible states, territories, and the District of Columbia (“Eligible Entities”) based on the relative number of unserved locations in high-cost areas in each Eligible Entity;
- BEAD-funded deployment projects in high-cost areas are exempt from the minimum 25 percent matching funds requirement; and
- The BIL provides for a separate enhanced ACP benefit of $75 per month for households that are served by providers in high-cost areas that demonstrate particularized economic hardship to the FCC.
Because NTIA and the FCC must use high-cost areas for both BEAD and ACP, NTIA focused its definition of high-cost area on locations where Eligible Entities face the most difficult broadband deployment challenges and where the availability of the enhanced ACP benefit will have the greatest impact.
To define high-cost area, NTIA was required to define both “area” and “high-cost.”
To define “area,” NTIA sought an existing definition rather than creating a new one. NTIA, the FCC, and Eligible Entities are all required to use this definition in the ACP and BEAD programs, and therefore ease of administrability warranted selection of a universally available standard. NTIA identified census block groups as the appropriate area to measure the cost to build. Census block groups roughly align with the way typical fiber deployment projects are planned and result in an area size that was neither too large nor too small.
To define “high-cost,” NTIA used a cost model to determine the average cost of building out broadband service in unserved areas, utilizing the net present value over the lifetime of the network, not just the cost of construction. The cost model assumes fiber is built to every location to provide an apples-to-apples comparison within each area. This assumption ensures the model is appropriately conservative in its projections.
The cost model also incorporates the four factors identified in the BIL: topography, remoteness, population density, and the rate of poverty.
Topography: The model accounts for the fact that unique topography can often make broadband deployment more difficult and costly. For example, areas with rugged terrain, mountains, or dense forests can pose challenges for laying cables. The need for extensive excavation or underground boring to overcome natural barriers can also increase the cost to deployment. Conversely, flat land often allows for more direct and efficient routing of fiber optic cables. The absence of steep slopes, rocky terrain, or other obstacles simplifies the process and reduces the need for specialized equipment or labor-intensive techniques.
Remoteness: The model accounts for the fact that remote areas will face additional costs for broadband deployment. Building infrastructure in areas with limited road access, across bodies of water, or that contain protected environments can increase costs due to the need for specialized equipment, longer transportation routes, or other cost-increasing measures. Remote areas may also have limited access to reliable power sources that will necessitate additional investments to provide new broadband networks with a stable power supply for base stations, network switches, and data centers.
Population density: The model relies on a calculation of the full business case for deployment of the network, not just the initial cost of construction. For example, this approach accounts for the fact that the provider will earn revenue from providing Internet service that can be used, in part, to pay for the cost of construction. This was an important consideration when incorporating the lack of population density of the area. Areas with higher population densities have a larger potential customer base, supporting higher revenues as well as allowing for more cost-effective deployment as the expenses can be spread across a larger number of subscribers. Areas with low population densities generally present lower revenues and higher per-location costs as the infrastructure investments need to be distributed over a smaller customer base.
Poverty: In addition to the important and highly relevant relationship between high poverty areas and ACP eligibility, high rates of poverty also impact the economics of broadband deployment. In areas with high rates of poverty, the time and ability to recoup costs are longer and lesser, and in the absence of an appropriate subsidy may be unachievable.
To qualify as a high-cost area, the BIL requires the area to contain at least 80% unserved locations. As a result, only census block groups that both met the “high-cost” definition and contained at least 80% unserved locations are eligible to be designated as a high-cost area.