BEAD’s Benefit of the Bargain Round So Far: The Good, the Bad, and the Uncertain

September 4 marked the deadline for states to complete their "Benefit of the Bargain Round " in which they determine which broadband projects to fund with their share of the $42 billion Broadband Equity, Access, and Deployment (BEAD) program. Not all states' results are yet public, and some received an extension, but there are some interesting takeaways from the information that's out there.

The Benefit of the Bargain round is a step toward the goal of closing the digital divide by making the program more technology neutral and cost conscious. BEAD can only succeed at closing the digital divide if it achieves universal deployment while also saving enough funds to address the much larger causes of the digital divide: adoption and affordability. Serving locations cheaply and preserving a substantial sum for non-deployment efforts is a prerequisite to this success.

As results trickle in, the Benefit of the Bargain round looks like it's working. Cost per location is more reasonable than some early states' proposals under the prior version of BEAD. And NTIA reports that states have so far reserved $13 billion compared to the pre-Benefit-of-the-Bargain program. Still, the outcomes have not been uniformly good, and uncertainty remains, especially about the fate of money saved by good-actor states.

Scoring the Early Returns

There are two key metrics we can evaluate for states' performance at this stage: How low were per-location costs? And how well did a state preserve its funding compared to an ideal scenario? The following data is derived from states' complex proposal submissions and public statements from states; it should be considered preliminary.

Per-location Cost

The first metric is straightforward; the total BEAD support divided by the number of locations served yields the average cost per location. The reformed BEAD program's tech-neutrality rules combined with the requirement to pick the lowest cost option that meets certain performance requirements have pushed these numbers lower. Still, there is a wide range of results. While some variance is expected, NTIA will be looking to see if some of the higher awards are necessitated by the state's local circumstances or if they could be "excessive costs" for locations that could be better served by cheaper companies or technologies.

Efficiency

The second metric is an efficiency score that is a state's "leftover" funds (total BEAD allocation minus proposed spending on deployment) as a percentage of the leftover funds it would have had if it averaged $1,200 per location, as ITIF recommended.

Under this metric, states that overspend on per-location costs can still get a decent grade if they need to reach relatively few locations (since, then, reducing per-location costs would not save much money). Likewise, a state with relatively low per-location costs could get a lower grade because its overspending adds up and has a greater opportunity cost in terms of non-deployment activities.

This method rewards states that reserved as much as possible for non-deployment activities while also adjusting for the unequal distribution of funding among the states. It evaluates how states did with what they had without regard to whether the initial allocation was the right one.

The Good

Three states were in the top five of available proposals for both per location cost and efficiency score: Maine, Delaware, and Nebraska.

Maine is, so far, the state with the lowest per-location cost and achieved 92 percent of its potential efficiency.

Delaware's proposal has the second highest efficiency score while also having the third lowest per-location cost.

While Nebraska had slightly higher per-location costs than the other two best states, it achieved universal deployment while spending only 12 percent of its BEAD allocation, the second lowest of all states.

While all these states could likely do better, they are some of the best at creating the conditions for BEAD to successfully close the digital divide.

The Bad

Three states were in the bottom five on both metrics: Washington, Oklahoma, and New Mexico

Washington had a middle-of-the-road cost per location, but that amounted to 75 percent of its BEAD allocation, giving it the worst overall efficiency. That extreme spending on deployment leaves very little left to address adoption and affordability.

Oklahoma had the second highest per-location cost at over $12,000 per location. It is likely that some of the higher cost awards should be deemed excessive and that more cost-effective technologies would be better suited to complete deployment while reserving funds.

New Mexico is next in line with high deployment costs, including some in rural areas with clear views of sky which would seem to be good candidates for LEO satellite. NTIA should scrutinize such awards.

Hawaii was also in the bottom five for both metrics, but its extreme terrain and remoteness require more detailed analysis before determining whether its high cost plan is justified.

The Uncertain

All of these state plans are preliminary. States have submitted them to NTIA for review, and NTIA can reject them.

The chief uncertainty, however, is what will become of states' unused funds. Since affordability and adoption remain major causes of the digital divide, NTIA should enable states to spend their remaining funds on targeted, efficient programs to address those barriers. NTIA has promised guidance on this front, but none has yet been forthcoming.

While some speculation has assumed NTIA will attempt to rescind unused funds, that would be a mistake. If BEAD accomplishes only broadband deployment while leaving far larger causes of the digital divide unaddressed, it will fail to deliver Americans the full benefit of the BEAD bargain.

In the meantime, states may take solace in the fact that BEAD's statutory framework explicitly enables broadband adoption efforts as a permissible non-deployment use of BEAD funds. States should move forward with these efforts while NTIA prepares its final guidance.