The National Telecommunications and Information Administration (NTIA), the federal agency in charge of distributing funds from the Broadband, Equity, Access and Deployment (BEAD) program, has so far refused to approve Virginia’s proposal on how to use the money because the state is declining to dictate a low-cost option that amounts to rate regulation. If Virginia is forced to institute price controls, this could severely slow down closing the digital divide.

The NTIA’s requirement that states submit plans on how they plan to implement BEAD requires a provision that affordable plans are offered to low-income households. BEAD, which is part of the Infrastructure Investment and Jobs Act, allocates $42.5 billion to states and territories of the United States for broadband infrastructure. Virginia is slated to receive $1.48 billion of that.

Broadband Breakfast noted that states must explicitly state in their required proposals either what the low-cost price point will be or reveal how the state will use a formula to determine that price. Volume 2 of Virginia’s BEAD proposal, the document in which NTIA intended for states to outline that aspect of the program, does neither.

NTIA initially wrote to the Virginia Department of Housing and Community Development (DHCD), which runs the Virginia Telecommunications Initiative, after it submitted its second BEAD proposal that the state “must be able to determine the impact to a customer at the Initial Proposal stage – it isn’t enough to know as of the Final Proposal. Thus, the low-cost option must be established in the Initial Proposal as an exact price or formula.”

Virginia proposed to rate the affordability of applicants’ proposals according to how they conformed with residential benchmark rates of the Federal Communications Commission’s (FCC) Urban Rate Survey. The states applied the FCC’s recommended price for the 1 Gigabit symmetrical tier.

While the language of BEAD is pushing the creation of government-owned networks (GONs), with states required to justify when funds are given to private providers, Virginia is one of those states pushing back against GONs. State law requires cities to conduct feasibility studies before creating a network. The state also bans exploitative monopoly pricing.   

Virginia is moving forward as it awaits its challenge process with the NTIA to play out. DHCD is currently allowing grant applicants to set their own low-cost options. Applications are now posted on the agency’s website, as the state moves relatively quickly through the initial BEAD process compared to other states. In fact, Virginia was the first state to submit all of its BEAD plans. Challenges to applications were due last week.

The Taxpayers Protection Alliance co-signed a letter to Commerce Secretary Gina Raimondo in October calling on her agency to stop NTIA’s attempts at rate regulation. As the letter pointed out, Congress did not authorize the NTIA to adopt price controls in the Infrastructure Investment and Jobs Act that created BEAD, but NTIA’s actions on the notice of funding opportunities have indicated otherwise. Virginia’s plight was noted in that letter, which pointed out that DHCD sought the flexibility not to rate regulate gigabit broadband plans, but was told by NTIA it must do so. “We were pointed back to the NOFO and politely told that that was the way we are to score affordability criteria … how close you are to a hundred dollars on that price point,” said Virginia broadband policy analyst Chandler Vaughan during a September Q&A session.

NTIA Administrator Alan Davidson indicated at a House Energy and Commerce Committee hearing on Dec. 5 that he doesn’t believe his agency’s requirements meet the definition of rate regulation, although many on that panel disagreed.

“We are not setting a price at the NTIA. We are not setting a national price for broadband. We are not setting rates,” Davidson said. “It seems quite reasonable to say that in return for receiving these federal funds … providers need to have a low-cost option.”

Price controls by the Biden administration will only stymie efforts by states to close the digital divide by dissuading some providers for applying for BEAD grants. The NTIA should stop putting up obstacles that are harming efforts to extend broadband to all Americans.

Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance.