BEAD Program: Defining Project Boundaries
An ACA Connects White Paper | November 7, 2023
Introduction
The Broadband Equity, Access, and Deployment (BEAD) Program requires Eligible Entities (States and Territories) to provide a detailed plan for competitively awarding subgrants for broadband deployment projects. In this plan, the Eligible Entity has the freedom to define the geographic boundaries for the funded projects. Defining effective project boundaries is fundamental in achieving the Program’s aim of delivering direct fiber connectivity to as many households as economically feasible. As we explain below, Eligible Entities should allow providers to construct project areas from the smallest possible “building blocks” – if not individual locations then census blocks, with the highest-cost locations removed and treated separately. As we explain, this is the most cost-effective approach because it will encourage the broadest possible participation and thereby maximize competition for funds, and it is administratively feasible.
What are the key considerations for defining project boundaries?
Eligible Entities will need to weigh the following factors when deciding upon the most suitable approach for defining project boundaries:
1. Network Design Efficiencies for Service Providers. In maximizing the cost effectiveness of their deployments, broadband service providers (BSPs) seek to aggregate individual locations where the build is economic. As a general matter, BSPs will be more willing to bid and bid aggressively for BEAD funds to the extent a project would align with their business plans. From a network design perspective, BSPs largely ignore boundaries established by governments; rather, cost per location and potential revenue are the key factors in deciding where it would be economic to build and in driving project design decisions.
2. Maximizing Fiber Broadband Deployment While Ensuring All Eligible Locations Are Served. Eligible Entities, each with different funding allocations, are charged with ensuring that eligible locations receive BEAD funding, prioritizing unserved and then underserved locations. They must also uphold BEAD’s preference for fiber connectivity by setting the Extremely High Cost per Location Threshold (EHCT) at a level that ensures fiber is deployed as widely as possible. For administrative convenience, Eligible Entities are likely to apply the threshold at the minimum biddable geographic level. For example, if the minimum biddable unit were a census block, each census block would be deemed either above or below the threshold based on the average costs of serving eligible locations within that census block. Hence, the larger the geographic area at which the threshold is applied, the greater the possibility that many of the very highest cost locations will be included and hence that “fiber viable” locations will not receive fiber because they are “grouped in” with these highest-cost locations.
3. Administrative Feasibility. Eligible Entities may find that a straightforward project area design process that leveraging existing administrative boundaries will result in a manageable number of bids and will simplify the process of awarding subgrants.
What are the consequences of setting boundaries that are too large?
Where average cost per location is calculated based on a large project area with a significant number of extremely high cost locations, it will lead to larger proportions of locations falling above the EHCT. Conversely, smaller boundaries will lead to more locations falling below the EHCT, consistent with the BEAD program’s preference for fiber technology.
Figure 1 reflects the impact of setting boundaries by Census Tract or Census Block Group for two example counties. As the figure demonstrates, setting boundaries at the more granular level of Census Block Group results in a far greater share of BEAD-eligible locations falling below the threshold.
Figure 1: Note we have assumed that only BEAD eligible premises will be included in the boundary
What are the possible approaches to defining project areas?
Eligible Entities could define the project areas using existing administrative boundaries (counties, Census Tracts, Census Block Groups, Census Blocks) or by offering BSPs the opportunity to provide input into their preferred areas.1
Below are the possible approaches for defining the project areas:
1. County or Census Tract Areas
There are ~3k counties and ~80k Census Tracts in the US with an average of 25-30 Census Tracts per county. Using county boundaries or Census Tracts as the project boundaries may appear to be the simplest approach with the least administrative burden. There may be existing regulations and provider relations at county or Census Tract level, and using such large boundaries would result in a relatively small number of projects for which to receive bids.
However, these large areas carry a higher risk of the inclusion of a natural boundary, such as a river or mountain range, that could sub-divide the area and make it prohibitively costly for any single applicant to serve. Furthermore, using larger areas would tend to limit viable fiber builds (See Figure 1, above). Finally, smaller BSPs would be deterred from submitting bids for such large areas – reducing competition in the funding process. In sum, these larger area present risks of poor outcomes, undermining the BEAD program’s aims.
2. Census Block Group Areas
There are ~230k Census Block Groups in the US and an average of ~3 Census Block Groups per Census Tract. Opting for this smaller boundary size may further encourage the participation of smaller providers, which in turn increases competition in the bidding process for subgrants. Similarly, Census Block Groups would likely increase the share of fiber over alternate technologies, compared with larger boundaries. However, an even smaller boundary would produce more optimal outcomes, with minimal additional administrative burdens.
3. Census Block Areas
The smallest administrative boundary that could be used is the Census Block – and this would tend to maximize cost effective fiber builds, although with additional administrative overhead. The number of Census Blocks per state ranges from ~6,000 (District of Colombia) to 670,000 (Texas), although many have no BEAD-eligible locations and can thus be ignored. As this is the most granular boundary, it would be the most appealing to smaller providers and least likely to disadvantage fiber builds. BSPs could submit applications using aggregations of census blocks. Eligible entities, either on their own or at the recommendation of BSPs, could remove the very highest cost locations from a Census Block to enable more cost effective bids.
In certain instances, Eligible Entities also may decide to aggregate census blocks in advance of the application process using sensible, contiguous sets of Census Blocks. To facilitate analysis of competing applications, these “custom” boundaries would be mutually exclusive and should be informed by research of provider presence and estimated costs per location. This approach benefits from the ease of using existing administrative boundaries while also accounting for network design efficiencies.
4. Subgrantees set the project areas
Eligible Entities could allow the potential Subgrantees to determine project areas. BSPs and other relevant parties could submit their preferred areas, to be assessed and consolidated by the Eligible Entity. This approach would be most likely to generate interest and encourage bids from a broad range of potential Subgrantees.
How could Eligible Entities Resolve Partially Overlapping Project Areas?
The smaller the biddable unit, the greater the likelihood that bidders, where permitted to aggregate these units, will submit applications with partially overlapping project areas. This prospect should not deter Eligible Entities from making Census Blocks (or even individual locations) the minimum biddable unit, as there are a variety of ways for an Eligible Entity to address these overlaps. For instance, the Eligible Entity could conduct the following process:
- In preliminary subgrant application review, identify applications with overlapping project areas;
- If applications contain overlapping eligible locations, notify the relevant applicants of these overlapping locations and permit them to revise their applications within a reasonable time (e.g., 10 business days);
- If applications still contain overlapping eligible locations after the initial period for revisions, convene the relevant applicants and seek to mediate a resolution;
- If mediation fails to resolve all such overlapping of eligible locations, evaluate and revise one or more of the applications to remove the overlap; in making such revisions, the Eligible Entity should be guided by the objectives of maximizing network efficiencies and use of funding;
- After producing the modified eligible locations for each application, enable an applicant to withdraw from the process within a reasonable time (e.g., 5 business days); and
- If an applicant does withdraw, permit the remaining applicant(s) that had proposed to serve the previously overlapping eligible locations a reasonable time (e.g., 10 business days) to revise its/their application(s) solely to reincorporate previously overlapping eligible locations that the Eligible Entity had assigned to the now withdrawn applicant.
As discussed above, if the withdrawal of an application as a result of this process leads to unserved and underserved locations not being covered in any approved application, the Eligible Entity has the ability to develop solutions to address such gaps in coverage. For instance, the NOFO provides that an Eligible Entity “may engage with existing providers and/or other prospective subgrantees to find providers willing to expand their existing or proposed service areas” to cover the remaining locations, and may even “consider inducements such as use of state funding toward the match requirement.”
Conclusion
It is important that project areas are defined such that Eligible Entities can deliver fiber broadband cost-effectively to as many unserved and underserved locations as possible. Defining project areas granularly – such as at the Census Block level – will maximize participation from prospective bidders and best ensure that “fiber-viable” locations actually receive fiber, especially if the very highest cost locations are removed and treated separately. We encourage Eligible Entities to collaborate with potential Subgrantees to facilitate participation from a broad spectrum of BSPs.
1 The vast majority of counties, census tracts, and even census blocks in the United States do not achieve the 80% threshold if considered in full. Eligible Entities will therefore need to make clear that within each biddable unit, bidders must prioritize coverage of BEAD eligible locations. Beyond this, bidders may include additional (served) locations while remaining above the 80% threshold, but there is no obligation to do so.