If you can

There is an especially important change in the air.

Over the past year, much has been made of the monumental resources aimed at improving broadband service throughout our country.  The demand for data transfer is experiencing exponential growth.  From streaming devices to the Internet of Things, Artificial Intelligence, 5G, Virtual Reality, Autonomous Transportation and Manufacturing, Virtual Education and Medicine, and on and on.  Let’s face it, we’re headlong into a once-in-a-generation societal shift.  Life will change, fortunes will be realized.  And much of the change will pivot on the flow of money.

Following the flow of funds into this space may seem simple and obvious.  If we were in a more top-down society, perhaps like China, maybe it would be simple.  But we live in a market-based country with much innovation, competition, diverse interests, and much freedom.  That is a good thing.  But it can be confusing.

Not long ago (5/14/21) I wrote an article entitled BROADBAND TAILWINDS: Where The Money Is.  But as recent as that piece is, there is new and vital information to add.  In that work, I pointed out the many private and public sources of funds lining up to improve broadband service generally, add real solutions to the lack of rural broadband (known as “The Digital Divide”), and address the phenomenon of 5G deployment.  It was cited that billions of dollars were being spent by private internet service providers (ISPs) and various governmental agencies, both local and federal, to meet the rising broadband demand.  In short, the spending is unprecedented and calls to mind the deployment of electricity infrastructure across the land in the early twentieth century. Probably with similar life-changing impacts.  Even Thomas Edison did not see this coming.

The private sector will continue to shed less productive assets, redirect internal assets, and tap the capital markets all in favor of more capital expenditures on broadband.  They are under intense market pressures to do so.  Competition for subscribers is intense as market demand and user expectations accelerate.  No one wants to be left behind.  Being in line to help these service providers, both big and small, in their massive broadband deployments (much of it riding on fiber optics) is an attractive place to be.  

On the public side, things are about to change, it seems.  Until now, funds for broadband have been disseminated in a myriad of ways.  Funding has supported better and faster broadband through grants and loans from the Agriculture Department, through programs for schools and libraries (called E Rate), through COVID relief measures, emergency responder funding, and massive “reverse auctions” conducted by the FCC and bid on by telecom companies and electric cooperatives.  All of this before the recent talks between the Administration and Congress for a massive infrastructure spending bill. 

That spending bill is gaining steam quickly as bi-partisan members of congress come together in tepid agreement.  The funding for broadband infrastructure being agreed to is about $65 billion.  This will come, it appears, on top of all the billions of dollars being spent by the private sector and through the recent previous government efforts named above.  In all, it is easy to deduce that hundreds of billions of dollars will be spent on broadband deployment during the next decade.  Some of that, quickly.  

For example, according to PEW Research, in the administration/congressional compromise being pushed forward at this writing…this $65 billion…is being targeted as a “five year” deployment.  This is much faster, and more money, than the Rural Digital Opportunity Fund (RDOF) being rolled out through the FCC as we speak.  That one has a 10-year horizon for completion.  

Now for the big news.  Of this pending $65 billion, $40 billion would go to the states, not as subsidies like in RDOF, but in outright grants to expand broadband.  $15 billion would go to the USDA for rural broadband deployment and another $10 billion would go to public/private broadband partnerships (which are fast cropping up across the country as local jurisdictions take broadband access into their own hands).

Why is this such a big deal?  It just sounds like more of the same, right?  Until now, those looking for opportunities to participate in this business have focused on where the capital expense has been taking place…mostly, the telecoms and other ISPs.  That will continue.  But now it appears enormous amounts of money will be administered and disseminated by state governments.  According to PEW, 47 states currently have agencies involved in broadband projects, and fully 40 states have broadband funding administrative mechanisms in place.

What does this mean?  Just like infrastructure contractors have been methodically building contacts and relationships with telecoms and other ISPs so they will be front of mind as that deployment happens, perhaps it is time to mobilize in building relationships with state and local governments as they come into billions of dollars of broadband deployment cash.  Who are the state and local agencies in each jurisdiction?  Who are the politicians?  Who are the civic leaders?  Who are the engineering and permitting staff members?  It is likely a good idea to begin answering some of those and other related questions.

With this shift in fund deployment, it is time perhaps to build those relationships, maybe to offer government entities assistance in design and deployment of the new broadband networks.  Early involved contractors may be able to work with jurisdictions on a “negotiated bid” to expedite deployment rather than slower, more cumbersome RFP processes.  Those that are in place early, with strong relationships built on trust and cooperation, may win the day…and walk away with the most work.

Make no mistake, how the money flows in this business matters…a lot.  There are great advantages in following the money and offering to help those more local government officials tasked with the brisk deployment (as funding may well have completion deadlines) of broadband infrastructure.  This is different, this is a change in the flow of dollars into our space.  As we noted in previous work, professional hockey great Wayne Gretsky said in effect, “Skate to where the puck is going to be.”  Good advice indeed.

Next up?  Keep an eye on this—the government is changing the definition of “broadband.”  No kidding!  It was defined as 25 mbps download and 3 mbps upload. But the 25/3 standard is fading fast…and this matters a lot.  More to come on that.