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May 11, 2021
In unveiling his massive infrastructure spending proposal, President Biden suggested allocating $100 billion to "future proof" US broadband networks. Many saw that phrase as shorthand for 1Gbit/s fiber connections.
However, the Biden administration's new guidelines for federal spending on broadband offers plenty of wiggle room around that number.
Specifically, Biden's Treasury and Commerce Departments recently suggested that "broadband" networks in the US provide at least 100Mbit/s download speeds and 20Mbit/s upload speeds. But their rules also consider households to be "unserved" generally if they can't get at least 25Mbit/s down and 3Mbit/s up.
Meaning, the Biden administration is encouraging the construction of telecom networks that provide at least 100Mbit/s speeds, but it will still consider 25 Mbit/s as the baseline for broadband services.
The threat of overbuilding
That's undoubtedly music to the ears of incumbent cable and telecom executives, according to the financial analysts at New Street Research.
"Such advice is a clear signal ... that the Treasury generally wants to avoid allocating funds to projects that would constitute overbuilding," they wrote in a note to investors this week.
Telecom industry executives in general have been worrying over Biden's proposal to "future proof" broadband. Indeed, the chairman of the FCC during Biden's second term as vice president, Tom Wheeler, wrote in recent House testimony that future proofing implied 1Gbit/s speeds "and a 'fiber first' policy."
The logical conclusion to that line of thinking would render vast portions of the US telecom industry as obsolete – and in need of replacing. After all, most cable, copper and wireless networks cannot provide speeds anywhere near 1Gbit/s.
But that's not what the Biden administration – through the new guidelines published by the Commerce and Treasury Departments – is implementing.
"The guidelines suggest that at least the Treasury and Commerce Departments are not supportive of providing federal funding to those areas served by advanced cable networks but not served by fiber," wrote the New Street analysts. "We think such guidelines, by effectively discouraging funding of what investors think of as 'overbuilding,' support what we refer to as the bull case."
What's the New Street bull case? "That the broadband provisions of the Biden infrastructure bill do not result in either overbuilding or price regulation," according to the analysts.
Further, the fact that the Biden administration appears to have settled on 100Mbit/s download speeds as suitable for broadband is also important. After all, most cable and fixed wireless networks advertise 100Mbit/s connections as a baseline – potentially making their services eligible for federal funding.
On the company's website, T-Mobile notes that "customers will see average download speeds in excess of 100Mbit/s, and all eligible households will see average download speeds of 25Mbit/s or more."
Bringing home the bacon
To be clear, the details of Biden's massive infrastructure spending proposal, including his proposed $100 billion in funding for broadband, are still being worked out. Biden recently named his VP, Kamala Harris, to head up negotiations with Republicans on the topic for the White House. Final legislation on the topic is expected by the fall.
In the meantime, though, the Biden administration is developing guidelines for the American Rescue Plan that Congress passed in February. That legislation will dole out billions of dollars to states for projects, including broadband. This week, the Commerce and Treasury Departments laid out the details of how that money should be allocated to states.
As the New Street analysts pointed out, the new guidelines offer a first view into exactly how the Biden administration will handle the details of broadband in the US. "This is important to investors as potentially predictive of the administration's view of broadband issues in the infrastructure bill, which may address similar issues and is likely to provide a far larger source of funding," they wrote.
Of course, there's plenty of negotiating still to be done, and the definition of broadband may still change. But some in the industry have argued that there's little chance the Biden administration will raise the definition of broadband above the 25 Mbit/s minimum threshold. After all, doing so would reduce the number of people the administration can count as accessing broadband speeds – and few politicians will want to approve rules that would result in an overall reduction in the number of Americans with broadband. Instead, they would likely rather oversee an increase in the number of Americans with broadband during their tenure.
This article first appeared on Broadband World News.
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
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