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House lawmakers are at odds over a BEAD provision that requires low-cost service options from participating providers
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The provision prompted a rate regulation debate during a House Subcommittee hearing on the 2025 NTIA budget
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Analysts and lawmakers have mixed interpretations of "price regulation" and the government's role in ensuring broadband affordability without strict rate controls
Lawmakers are butting heads over a provision within the Broadband Equity Access and Deployment (BEAD) program that allows states to require low-cost service options from participating service providers. Democrats are calling it an affordability policy. Republicans say it's heavy-handed government regulation.
The provision came up more than once during a May 15 hearing in the House Subcommittee on Communications and Technology, which was meant to focus on the 2025 budget for the National Telecommunications and Information Administration (NTIA).
As part of the BEAD planning process, the NTIA is considering each state’s definition of a low-cost option, provided that it meets the standards laid out in the program’s statute. The agency has already approved some state BEAD plans that set $1 as the amount for a required low-income service option.
NTIA head Alan Davidson said he thinks that process is “consistent with the [BEAD] statute which required a low-cost option.”
However, in her remarks Rep. Cathy McMorris Rodgers said that it amounts to the NTIA “allowing and even encouraging” states to conduct rate regulation. She argued that the Infrastructure Investment and Jobs Act (IIJA), which governs the BEAD program, “explicitly states” that NTIA is not authorized to regulate rates charged for broadband services.
“Yet, we continue to hear from states that NTIA is pushing them to include rate regulated options in their initial proposals for BEAD funding, which completely violates the intent of the law,” Rodgers added.
Rep. Bob Latta (R-OH) also suggested that the NTIA's "pressuring states" to require a low-cost option is breaking the IIJA law. But Davidson maintained the NTIA is “acting with fidelity to the [BEAD] statute,” which requires the low-cost service option. He said the agency is not engaging in anything other than approving states which have put in place grant conditions for how they're going to give out their BEAD money.
“We do not believe that the states are regulating rates here. We believe that this is a condition to get a federal grant. Nobody's requiring a service provider to follow these rates. People do not have to participate in the program,” Davidson added.
In the NTIA's defense, New Jersey Rep. Frank Pallone said that funding broadband infrastructure alone will not close the digital divide if the cost of internet service is too high. “That's why we included an important broadband affordability provision in the bipartisan infrastructure law, which requires that providers who receive grant funds to build out this infrastructure must offer a low-cost option to certain households in the build out areas,” he said during the hearing.
Pallone pointed out the statute allows states to determine what that low-cost figure will be, but it also sets out a process for the NTIA to disapprove of that number. Critics of the low-income policy “wrongly characterize it as a rate regulation, but I think that's misreading the statute,” he added.
Regulation technicalities
In many ways this debate comes down to semantics. It's true that the NTIA is not authorized to regulate rates under the IIJA, but the agency doesn't regard the BEAD low-cost rule as rate regulation.
New Street Research analyst Blair Levin told Fierce Network there is "a consistent but often unspoken difference" in what people mean with the term "price regulation."
“Republicans tend to mean any policy which constrains a price. Democrats tend to mean policies that set a price,” Levin said.
Levin suggested the BEAD program should include some price constraints so that ISPs make their service affordable, rather than price to maximize profit, especially as BEAD providers will likely be monopolists in previously unserved areas.
“One can have a debate about the best way to do that (or whether, given the demographics of rural areas which are usually low-income, affordability and profit maximization overlap),” he added, “but Davidson's point is that the states have to assure some level of affordability but that does not require price regulation, as Wall Street would understand the term.”
In a bleak observation, Levin also noted that this would be a non-issue in a world in which ACP was continuing.
That is to say, if the Affordable Connectivity Program (ACP) survived, every BEAD subgrantee would likely offer a low income plan for $30. “Alas, with the likely end of ACP, it is a big issue, one of the many negative consequences of ACP's demise (though far from the most problematic.),” Levin concluded.