If NTIA strictly enforces the administration’s “Buy America” policy, distribution of Broadband Equity, Access, and Deployment (BEAD) funding could be delayed. So says New Street Research Policy Advisor Blair Levin. How the BEAD money is distributed is of key interest to telecoms and especially to tower owners and tower workers.
Contrary to initial investor reactions, government investments in broadband are primarily positive for ISPs, according to the analyst. When the BEAD and other deployment funding programs were announced, “many investors apparently believed the plans would be negatives for incumbents. They feared that significant funds would be spent on overbuilding and municipally owned networks,” writes Levin in a client report. Continue Reading
However, NSR thought the fears were overblown as Congress and the subsequent administrative process would focus on unserved and underserved communities, and low-income persons. That expectation proved correct. Now the investment question is not what the damage will be but rather, how high the upside will be for incumbent ISPs, he believes.
The financial upside may prove limited by inaction or uncertainty about the Affordable Connectivity Program (ACP) and other issues. Unresolved questions will affect the amount of upside, including the ACP which will run out of funding in the first half of next year. If Congress renews the funding, the upside for ISPs will be “significant,” according to Levin.
Pole attachment issues and charges remain unresolved, Inside Towers reported. Levin says, “Uncertainty about the ACP and the timing and economics of pole attachments are causing significant stress in state broadband offices and among enterprises preparing to bid on the BEAD dollars.” The states and the bidders must make assumptions about government decisions that are difficult to predict, he notes.
How the administration’s “Buy America” stipulation is applied to infrastructure deployment funding is key. “If the policy applies to the fiber optic cable, there is no problem as there is a significant supply that is made in the United States. If, however, it applies to all the elements of the project, there will be a problem,” writes Levin.
In his State of the Union address, President Biden specifically said Buy America would apply to “fiber optic cables.” NTIA has said the policy would be strictly enforced. This past week, NTIA Administrator Alan Davidson said waivers were possible, but the bar has been set high. The Office of Management and Budget has begun the process to clarify existing requirements and provide guidance on implementation of the requirements.
Usually, the arguments relate to how the requirements raise costs, Levin notes. “That would be true here as well, but the more critical investor point is that strict enforcement could delay deployment to a point where it is irrelevant.”
He lists the critical telecom network elements that cannot be sourced in America. These include components for switching, routing, transport, access, operations systems, and customer premises/end user equipment and devices. Setting up sources to make these products here could take years. These reasons, plus the fact that infrastructure deployments will provide American jobs, is why NSR believes the NTIA will grant some waivers.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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