This post originally appeared at https://www.badgerinstitute.org/government-overregulation-stymies-broadband-buildout-in-rural-wisconsin/

Pricey federal plan produces no results yet; observers down on prospects

Government overregulation is imperiling the start of a $1 billion plan to expand broadband service to the hardest-to-reach places in Wisconsin.

The problem is nationwide, with telecom companies balking at bidding for a piece of a $42 billion federal Broadband Equity, Access, and Deployment (BEAD) program, a tiny part of the $1.2 trillion Infrastructure Investment and Jobs Act passed by Congress in November 2021.

Nearly three years after passage of the bill, not a single household or business in the U.S. has been connected by a foot of broadband fiber. Program directors are conceding that work is unlikely to start anywhere before well into next year. At a luncheon this summer, Wisconsin Public Service Commission chair Summer Strand was less than confident the project could be completed by 2030.

“It doesn’t mean the money is going to flow in 2025 and everyone’s going to be online in 2026,” Strand said at the time. “My conservative estimate would be that we would be close to serving every underserved and unserved location in the state by 2030.”

There is good reason to believe the broadband plan cannot be completed at all, at least with the $1 billion from the BEAD program. The PSC’s own estimate to provide complete broadband access has been growing for years and stands at $1.8 billion. A recent report by the American Society of Civil Engineers estimates the cost at $2.2 billion.

Gov. Tony Evers and his Task Force on Broadband Access are asking for state taxpayer funding in the 2025-27 budget to complete the job, although neither has said how much is needed. As the Badger Institute reported in June 2023, Republicans in the state Assembly yanked $750 million for broadband expansion from Evers’ budget, questioning how the state had handled previous federal broadband grants.

Meanwhile, companies expected to do the work say that the  Broadband Equity, Access, and Deployment program is wildly overregulated. The Badger Institute this week spoke to two people in the telecom industry who were confident that some companies, large and small, would pull out of the bidding process unless changes were made to their requirements.

The two industry people agreed to discuss the regulation issue without being identified.

“There is a high level of political sensitivity right now,” one of them said. “This feels like a program designed by politicians.”

At this stage, dozens of companies, including AT&T, Spectrum and Comcast, have filed letters with the Public Service Commission announcing their intention to bid on contracts, most of them in rural Wisconsin, according to documents reviewed by the Badger Institute.

These are letters of intent to bid on contracts, not actual bids, and much of the anxious talk in the industry during this stage has been about regulations making it impossible to make a profit on a broadband contract, one of the industry members said.

Nearly 90% of the state has some kind of broadband access. The remaining 10% is where it is most expensive to lay fiber and hardest to have enough residential and business customers to make providing broadband service profitable.

Applicants seeking taxpayer support for expansion must meet permitting and environmental requirements, as well as exclusive hiring preferences for union and “underrepresented” labor groups and for felons and others with criminal backgrounds.

Program designers decided that only broadband fiber would be considered, excluding satellite and wireless companies from the bidding, even though in many places those alternatives would be less expensive for the consumer.

There is also the matter of equity, something the Badger Institute has written on extensively, particularly in government and education. Reflecting the goals of the federal BEAD program, the PSC got approval for the state plan in a document that makes reference to equity 250 times in 135 pages. Still, companies have little idea what the word means or how, exactly, it would affect the broadband work, one industry member said.

Emails to the PSC office in Madison asking for comment were not returned by the time this story was posted.

Companies are most concerned with the regulation setting a nationwide monthly service rate of $40 for low-income families and businesses that qualify, a rate likely to make it prohibitive for small telecom companies, the industry members said.

“One of the biggest issues here is the effort to socially engineer what amounts to a tech project,” one of the members said. “The other is the effort to control the price and force the company doing the work to offer the service.”

After getting negative feedback from prospective bidders, the PSC agreed to set up a rate negotiation process, but after companies have borne the expansion costs, there are no guarantees the PSC will allow those companies to charge so much as enough to break even.

The State of Minnesota agreed to no negotiating process, and some major telecom companies there are in open revolt over the regulatory burden of BEAD.

Brent Christensen, president of Minnesota Telecom Alliance, representing 70 independent and affiliated telecom companies, caused a stir this summer when he said not one of the companies he represents would be participating in BEAD. Last week, the Wall Street Journal took Christensen’s rancor national.

Christensen confirmed the concerns of the Badger Institute sources and said those concerns are shared by every broadband company considering navigating the regulatory maze that is BEAD.

“People have asked me why I spoke up,” Christensen told the Badger Institute Wednesday. “I said I am doing this because when this program falls flat on its face, I can say I told you so.”

Member companies began complaining from the start about an onerous application process. Like many federal programs, BEAD weights applications in favor of small companies — the little guys — but they are the companies least able to afford the cost and labor required just to file the lengthy letter of intent, Christensen said.

“I have been telling anybody who would listen what a train wreck this is,” Christensen said. “The state is stuck with a federal program that is very politicized.”

Mark Lisheron is the Managing Editor of the Badger Institute.

Any use or reproduction of Badger Institute articles or photographs requires prior written permission. To request permission to post articles on a website or print copies for distribution, contact Badger Institute President Mike Nichols at mike@badgerinstitute.org or 262-389-8239.

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