UPDATE Now that new BEAD application rules are out, look for the broadband build funds to “significantly” shift from wireline to satellite and fixed wireless. So says New Street Research Policy Advisor Blair Levin, in an analysis of the impact.
Elon Musk’s Starlink service and Amazon’s Kuiper service are likely to be two major winners of the new rules, according to NSR. From an investor perspective, NSR believes it’s “appropriate to write down any potential gain by T and VZ on their wireline side. T, VZ and TMUS may have some small gains in offering a fixed wireless service but T and VZ are unlikely to have the gains they would have had if the Biden era rules had stayed in place,” writes Levin in a client note.
In a sense, the shift to satellite is a windfall as the new rules and the shift in dollars will not cause any change in satellite deployment. “It will, however, reduce new dollars (and jobs) going into network deployments in rural areas,” NSR believes.
The result? The “technology neutral” provision puts wireline bidders at such a disadvantage that NSR is hearing that many are considering not bidding. That’s as some states may decide they don’t want further delays in funding broadband connected to rural areas. That increases the gain for satellites as it increases the price ceiling for which they can bid and still prevail, according to this analysis.
“Carriers who previously won and now are likely to lose in the bidding may have grounds to sue, but we think the big carriers are likely to think they have other battles to fight that are more important. Smaller rural carriers, however, may view the new rules as an existential threat and litigate,” writes Levin.
In addition, NSR said “significant” backlash is coming from states to the new 90-day application period. NSR thinks it will be hard for many states to comply, “given state laws, software changes, mapping changes, and the time it takes to run a fair and transparent bidding process.”
The bottom line? Now it’s clear states will have to re-bid with a requirement to award the funds to the cheapest bid. NSR calls the re-bidding requirement “a negative for all the companies that have been involved in bidding to date,” including Comcast, Charter, AT&T, Verizon/Frontier and T-Mobile. “Not only are they likely to receive less funding, they also will be negatively impacted by the inability of states to spend on adjacent projects that increase the addressable market,” states Levin.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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