By: Hailey Farrow, Marketing Manager on behalf of CostQuest Associates.
Per NTIA’s BEAD NOFO, as part of the rules of the BEAD program, states and territories must define what is called an “Extremely High Cost Per Location Threshold.” The Extremely High-Cost Threshold will dictate locations that are “high-cost” and may be serviced by alternative technologies instead of fiber-to-the-premise (FTTP) solutions, where they are less expensive but still meet BEAD broadband speed requirements.
Before we start discussing how states and territories might consider setting their high-cost thresholds for BEAD, let’s dive into what exactly is a high-cost area and an Extremely High-Cost Threshold, and a real-life example of why setting an Extremely High-Cost Threshold matters.
What is a high-cost area for the BEAD Program?
A high-cost area “means an unserved area in which the cost of building out broadband service is higher, as compared with the average cost of building out broadband service in unserved areas in the United States.”
Incorporating factors include:
- The remote location of the area
- The lack of population density in the area
- The unique topography of the area
- A high rate of poverty in the area
- Any other factor identified by the Assistant Secretary, in consultation with the Commission, that contributes to the higher cost of deploying broadband service in the area.
*“For purposes of defining “high-cost area,” the term “unserved area” means an area in which not less than 80 percent of broadband-serviceable locations are unserved locations.”
What is an Extremely High-Cost Threshold for the BEAD program?
As stated in the NOFO, “An Extremely High Cost Per Location Threshold is a BEAD subsidy cost per location to be utilized during the subgrantee selection process in which an Eligible Entity may decline to select a proposal if the use of an alternative technology meeting the BEAD Program’s technical requirements would be less expensive.”
In other words, it is the minimum cost to serve per location, where, if the cost to serve a location with a Fiber to the Premise (FTTP) solution, exceeds the state or territories extremely high-cost threshold rate, alternative solutions that still meet BEAD requirements exclusive of fiber can be accepted.
Why it’s important for States and Territories to consider setting an Extremely High-Cost Thresholds for BEAD funding distribution.
When states and territories set their Extremely High-Cost Thresholds, it becomes a matter of setting a threshold that incentivizes deploying fiber (FTTP) to as many unserved locations as possible while considering an efficient distribution of the total BEAD funds to provide sufficient broadband access to as many unserved and possibly underserved locations as possible. In other words, stretching BEAD funding in a manner, that meets the state or territory’s broadband goals. These goals likely include not leaving unserved locations behind due to exceptionally costly areas tying up significant portions of the BEAD funding pool.
Above is an example of how a state’s (let’s call it State A) cost model might look like when calculating the total investment and average unit investment to deploy Fiber to the Premise to all unserved locations. In this example, the average unit investment for FTTP is $5,589.
To start visualizing how many locations fall within a high-cost range, in the chart above, the purple dots represent the low-density areas with locations in the top percentile in terms of needed investment. As you can see, 2.5% of the total locations in State A will require 28.1% of the total fiber investment, if fiber is deployed to all.
Conversely, 46% of the total locations require 29.2% of the total investment. These competing values demonstrate the potential need for a threshold that provides funding for more total locations in a state.
Let’s dig further into the numbers to help visualize:
State A:
| Unserved Location Count | Fiber Cost to Serve | % of Total Locations | % of Total Fiber Investment |
|---|---|---|---|
| 2,508 | $157,579,741 | 2.5% | 28.1% |
| 48,163 | $163,748,343 | 46% | 29.2% |
Considerations when setting an Extremely High-Cost Threshold
To effectively determine high-cost areas and define an Extremely High-Cost Threshold, it is vital to have a precise count of unserved locations across your state and a detailed cost model of the investment required to service all unserved locations with FTTP. Without a precise count of unserved locations and cost model detailing the required cost investment for each location, it becomes challenging to determine the cost to service each location with FTTP, determine how many locations fall within the average cost and high-cost ranges. Therefore, a lack of information would make it difficult to define a state’s “Extremely High-Cost Threshold,” which dictates when a non-FTTP proposal can be accepted.
Goal of the BEAD Program and Extremely High-Cost Threshold
The goal of NTIA’s BEAD program is to deploy high-speed connectivity solutions that are “future-proof” to meet the increasing bandwidth needs of tomorrow while balancing the current need to leverage funding to service the most unserved and underserved locations as possible. This is where the Extremely High-Cost Threshold rule comes in, to act as a balancing scale to distribute BEAD funds in an efficient manner that meets the overall BEAD program’s goals in providing high-speed broadband access across the states and territories.