October 27, 2023

IIJA Communications Advisory Commission, ConnectMT Broadband

Dear Member of the Montana IIJA Communications Advisory Commission,

On behalf of the 8,883 members and supporters of Citizens Against Government Waste (CAGW) in Montana, I urge you to advise the Department of Administration to amend the ConnectMT Initial Proposal Volume II Initial Draft Overview for Montana’s Broadband Equity Access and Deployment (BEAD) funding application with the National Telecommunications and Information Administration (NTIA) to eliminate rate-setting for low and middle-income plans, expand the type of technologies and vendors for which this funding would be made available, and reduce the speed threshold considered “high-speed” in order to qualify for BEAD funding.

On September 28, 2023, the Montana Department of Administration’s Broadband Office submitted its funding proposal to the NTIA governing how the state will administer the $629 million it will receive from the $42 billion BEAD program created by the Infrastructure Investment and Jobs Act (IIJA) of 2021. The ConnectMT draft proposal contains several provisions that would impede broadband investment, innovation, and competition in Montana, and make it more difficult to bridge the digital divide. These provisions are likely to reduce connectivity for the residents of rural and mountainous expanses of Montana where fixed infrastructure options would be prohibitively costly to deploy.

An especially problematic provision of the ConnectMT application is the inclusion of rate-setting provisions for middle-income plans that would make it more difficult for providers to continue subsidizing service for their low-income customers. While the BEAD Notice of Funding Opportunity (NOFO) guidance, which we would remind the commission is not legally binding, recommends inclusion of a middle-income rate limit, this requirement does not appear in the IIJA and is contrary to congressional intent. It should be removed from the ConnectMT application.

The ConnectMT application includes a 1 Gbps symmetrical speed threshold for both upload and download activity, which implicitly preferences expensive, hard-wired fiber-optic infrastructure over less-costly alternatives that may be better suited for deployment in more rural areas of Montana like cable, fixed wireless that uses TV white space and other licensed and unlicensed spectrum, mobile broadband, and low earth orbit satellite broadband, many of which now are capable of delivering high-speed services of 100/20 Mbps, or perhaps even higher speeds.

BEAD funding is intended to prioritize connecting unserved communities across the country. According to BroadbandNow, Montana is ranked 44th in internet coverage, speed, and availability. Wired or fixed wireless providers cover approximately 83.9 percent of households in the state with plans of at least 25/3 Mbps speeds, and fiber-optic service is only available to 23.4 percent of the population. This leaves many residents in Big Sky Country without any internet access. The state should take a technology and vendor neutral approach to ensure that households that wish to be connected have internet access available and ready to serve them.

The ConnectMT proposal lays out a point-based, competitive grantmaking process that grades providers’ applications. Following the NOFO’s nonbinding guidance to the letter, the ConnectMT draft proposal imposes a government-dictated price range for an affordable plan for low-income households and for a higher-speed plan, delivering 1 Gbps speeds for middle-income households. Again, this requirement is not contained in the IIJA and has no legal authority.

Providers applying for a BEAD grant will be required to disclose the monthly rate they intend to charge households for each of these plans. For households opting to receive the high-end 1 Gbps plan, the proposal prescribes a maximum price of $159 per month and for those selecting the “affordable” 100/20 Mbps plan, a maximum rate of $65. Providers’ applications would be judged based on a point award system, which gives each applicant a point for meeting the criteria laid out in the application, including those provisions of the guidance not expressly approved in statute. This is a form of price control over internet service that will end up reducing the quantity and quality of service and leave many households without broadband.

The NOFO guidance suggested prioritizing fiber-to-the-premises offering 100/100 Mbps speeds and creating low-income and middle-income rate schedules. On April 23, 2023, 11 of the 13 Republican members of the Senate Commerce, Science, and Transportation Committee sent a letter to NTIA asking the agency to “revise or issue a new NOFO for the BEAD program.” They noted that the NOFO was, “inconsistent with NTIA’s statutory authority.” The letter further stated that NTIA does not have the authority to conduct rate-setting or to require speed or affordability conditions for a middle-class plan. The boundaries of congressional authorization supersede NTIA’s guidance, and where they conflict, ConnectMT should follow congressional intent.

The senators wrote, “A ‘middle-class affordability plan’ is a new term that does not appear in the law. Asking States to pursue various strategies for achieving this new objective, including by requiring ‘providers receiving [BEAD] funds to offer low-cost, high-speed plans to all middle-class households using the BEAD-funded network,’ is another indirect form of rate regulation. Elsewhere, the NOFO requires States to review the affordability of a 1 Gbps symmetric service and 100/20 Mbps service as part of their prioritization for program scoring. That requirement is also not part of the law. Congress did not invite States to adopt rate regulations that the statute plainly prohibits, nor can NTIA go beyond the statutory affordability initiatives in the law.”

Secretary of Commerce Gina Raimondo reiterated in an October 24, 2023, Senate Commerce, Science, and Transportation Committee hearing that the IIJA does not permit NTIA’s guidance to require rules to engage in back-door rate setting. “I want to be clear. We are not rate regulating,” she testified, “we are not price setting, and we are not requiring states to do that.” The secretary’s comments confirm that the NOFO guidance does not legally bind the ConnectMT proposal’s affordability provisions.

While we understand there could be fear that NTIA may reject a proposal if it does not include their unauthorized provisions, states like Montana should work with their congressional representatives to ensure that NTIA follows the letter of the law for BEAD funding so they can effectively and efficiently provide broadband access to unserved communities. Provisions like those found in the ConnectMT application would do little to help unserved communities and instead foster growth in areas where there are already service providers.

Rate-setting, like other forms or price controls, results in reduced investment, innovation, and competition, which will lead to slower speeds, less reliable service, and fewer products and services for consumers. It could also raise energy rates for consumers in areas where broadband service would be provided by a public utility. The industry invested a record $102.4 billion in private capital in 2022, bringing the total to $2.1 trillion since 1996. The proposal for broadband service in Montana will stifle further investment.

For these reasons, I again urge you to request the Department of Administration to amend the ConnectMT application to NTIA, and ensure that the new proposal does not include rate setting for middle income households; broadens the types of services to include all broadband technologies and vendors; and does not limit funding opportunities to fiber-only symmetrical 1 Gigabit service, which would preclude other technologies capable of providing up to 100/20 Mbps service.

Thank you for your consideration.

Sincerely, 

Tom Schatz

President, CAGW