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State broadband officials offered practical advice for BEAD subgrant awardees at Terrapinn’s annual Connected America conference, held near Dallas in mid-April. Klein Law Group principal Philip Macres led a crisp discussion that covered finance, permitting and BABA, among other topics.

 

Chandler Vaughan, Associate Broadband Director in Virginia, explained that BEAD subgrantees in his state need to provide a letter of credit or a performance bond for at least 10% of the award amount. He said some states may require up to 25% of the award amount, and noted that providers who opt for a letter of credit will probably need to have that in hand when they execute their subgrant agreements, while those choosing performance bonds can provide those after signing. He said NTIA requires states to include revoking mechanisms in their contracts so that awards can be rescinded if the financial instruments are not provided by stated deadlines. If that happens, states will look for alternate providers, he said. He encouraged providers to keep an eye on awards they missed narrowly.

 

"Maybe you were the second place applicant of those BEAD areas, and you maybe are getting hints or hearing rumors on the street that the first primary provider isn't going to perform. or it's kind of shaky, or might blow the process. You probably ought to go talk with your state broadband office and say, ‘Hey, you know, we're still interested in this. We might need more money to serve it than what was awarded.’” Vaughan said recent guidance from the Department of Commerce makes it clear that this is allowed.

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Vaughan also said some awardees hesitate to disclose financial issues, and may blame delays on something else. He said that when providers claim they can’t secure materials, he wants to first “make sure it’s not a financial issue masquerading as a fiber shortage.” Moderator Philip Macres pointed out that for many Tier 2 and Tier 3 ISPs, fiber shortages are indeed real.

 

Termination for Convenience/Contract Redlines

Some states include language in their subgrantee contracts that allows them to exit agreements without consequence, Macres said. Nicholas Capozzi, state broadband director at the Arizona Commerce Authority, said his state removed that language from its subgrant agreements after it was “redlined” by stakeholders who were invited to comment.

 

Virginia’s Vaughan did not say whether his state maintained termination for convenience, but did say redlines were not part of Virginia’s BEAD process. “No red lines in Virginia,” he said. “We will have one standard agreement for all ISPs. It will not be custom-negotiated with one agreement for each one of the 23 providers.”

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Panelist Lyndsay Moyer, VP of state government affairs at Comcast. said redlines can help providers. “We're actively going back and forth right now with a handful of states on various iterations of their subgrantee agreements. I feel like this has been a fairly extensive process, honestly, going back and forth,” she said.

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Connor Sadro, Regional Broadband Director at the Deep East Texas Council of Governments (DETCOG), said loss mitigation for existing providers, whose infrastructure may impede planned BEAD builds, is an important addition that should be made to some agreements. “When it comes to destruction of existing infrastructure, there’s got to be more protections for those on the ground,” he said.

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BABA Compliance and Progress Reporting 

Capozzi and Vaughan said they will be monitoring subgrantees to ensure compliance with the Build America, Buy America Act (BABA0, which established a domestic content procurement preference requirement for federally funded public infrastructure projects.

 

Capozzi said he is working with a technical team to ensure Arizona has the resources neeeded to verify BABA compliance. "It's part of one of our milestones," he said. "You need to prove to us that you have BABA compliant equipment. And once you do that, that's a part of a milestone, then you'll get paid. We're doing a fixed amount sub award mechanism, so we're issuing funds based off of actual progress." 

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Vaughan said Virginia will investigate vendors before shovels break ground, so that it can let subgrantees know who is BABA compliant. "We are requiring free contract documentation," he said. "There's been a conversation with the vendor that, yes, this vendor supplies BABA compliant material. We are locking in those supply chains as much as we can. Right now, we will also go into a site visit of the laydown yard, or the equipment yard, to make sure that the equipment that was procured from that vendor is what's actually on the lot." 

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States will be required to report regularly to NTIA on BEAD-funded builds so that the federal government can remove uncovered locations from its maps as they gain coverage. In addition, states will maintain their own reporting systems so that they can get updates from subgrantees. Comcast's Moyer noted that for providers who may be working in several states, standardization of this reporting would be a big time saver, and she encouraged NTIA to provide this. She said that in prior BEAD guidance "it was strongly recommended that states consider local coordination as a scoring criteria. So that strong recommendation made it into 34 different states scoring criteria for BEAD and the local coordination in order to get those points, it was defined in 34 different ways." Moyer said that going forward "some clarity, some shared definitions, some consistency in these reports, will set the providers up for better success."

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NEPA/Historical Reviews

Comcast's Moyer said permitting and environmental/historical review processes will lead to “healthy tension” because of “timing concerns.”  She said the state permitting roundtables that are going to get underway will be helpful forums. “The intent is to create a forum for all of these issues to be brought to the forefront so that folks can learn from one another," she said. 

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The broadband officers said they are using the Environmental Screening and Permitting Tracking Tool (ESAPTT) built by NTIA to manage NEPA reviews, and they are learning how to handle historical reviews. BEAD awards often include a requirement for the grant recipient to participate in the Section 106 review process, which requires federal agencies to take into account the effects of their undertakings on properties listed, or eligible for listing, in the National Register of Historic Places (NRHP). 

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“Texas Historical Commission has definitely been the slower portion of those review processes, and that kind of hit us,”

said Sadro. DETCOG is building a fixed wireless network to address coverage gaps in the region, independent of BEAD. He wishes he’d secured environmental clearance on both sides of the Deep East Texas Highway, because after getting clearance on one side he learned that it “just so happened to have an overflow area of a very old cemetery.”

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Vaughan also said getting environmental clearance on both sides of a road can save time if problems arise later in the targeted area, and he said historical reviews have been “the long pole the tent for Virginia,” simply because state broadband offices are still in the process of building relationships state historical departments.

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Additional Funds for Broadband?

The Trump Administration's Benefit of the Bargain mandated a new round of subgrantee selection. and reduced the amount of money states are planning to spend on broadband deployment to $21 billion. Meanwhile, states continue to discover locations that do not have broadband available and were not identified in the state BEAD proposals. At the same time, locations slated for coverage under the Rural Digital Opportunity Fund (RDOF) are remaining unconnected as RDOF grant winners default. 

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With only $21 billion of BEAD's approved $42.5 billion slated for deployments now, more than half the BEAD money could theoretically be used to connect the locations that were not part of initial BEAD proposals. The state broadband officers on the panel clearly hope this happens. "Arizona knows Arizona better than DC. So if we can have some of that decision-making authority to best enhance the lives of our constituents, that would be how we want to spend these funds," said Capozzi. 

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Virginia's Vaughan said the best outcome would be "NTIA publishing guidance that states have the discretion to choose from a menu of options, what to invest in, and coordinate with local partners to figure out what the best priorities are."

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Panelist Philip Powell, South Region Director for NTIA, said "States across the country have had opportunities in listening sessions with our fund office at NTIA to give feedback on what to do. ... They did a great job in the Benefit of the Bargain round. They saved this much money, and I know the fund office has been very interested to take input." 

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