How Louisiana solved the BEAD Rubik’s Cube

This Industry Viewpoint was authored by Dr. Nathan Smith, Director of Economics and Policy for Connected Nation

On November 18, 2024, Louisiana’s Office of Broadband Development and Connectivity (also known as ConnectLA) posted its BEAD Final Proposal for public comment, which was an historic achievement.

Not only did Louisiana finish months ahead of other states, but it appears to have achieved the BEAD program’s objective of getting on a track for universal broadband coverage — and overwhelmingly by means of projects that will use best-in-class, end-to-end fiber technology — for hundreds of millions of dollars less in subsidy costs than was budgeted. As a result, a lot of digitally left-behind Louisianians are about to find themselves on the cutting edge of connectivity.

How did they do it? Fortunately, ConnectLA publicly released some detailed and well-organized materials that provide some insight.

Louisiana’s industry-friendly program allowed applicants to bundle small “sub-project areas” (SPAs) into custom project areas, while also encouraging them to identify some SPAs as “separable,” giving ConnectLA the flexibility it needed to skillfully fit the puzzle together. In short, Louisiana’s command of deconfliction was key to its success. ConnectLA defined reference prices — capping grant requests and keeping the BEAD spend in bounds. At the same time, most BEAD subsidies were competitively driven and smaller than the cap.

While 20 internet service providers (ISPs) received awards, and several more participated, most of the money and locations went to the Louisiana Local Fiber Consortium, which is a group of three organizations. Swyft Fiber and REV, two Louisiana-headquartered broadband companies, teamed up with national provider T-Mobile to make up the consortium.

A new dealer at the table: Comparing Louisiana BEAD to RDOF

Louisiana’s BEAD implementation can be benchmarked against the most recent broadband expansion effort of comparable scale and sophistication, namely the Federal Communication Communications’ (FCC) Rural Digital Opportunity Fund (RDOF) program, which launched with a reverse auction in 2020 and is now being implemented all over the country.

While RDOF has often been criticized, it was strikingly successful in securing broadband deployment commitments from ISPs for a low subsidy investment per location. It initially awarded projects covering 3.5 million locations for just over $6 billion, for a subsidy per location well below $2,000. That looks like impressive cost-effectiveness. In fact, when the RDOF program sunsets in a few years, it will likely have funded a lot of lasting rural broadband investment at a bargain price.

Unfortunately, many of RDOF’s promises fell through due to lax vetting, “winner’s curse” problems — where firms won by being too aggressive and then realized their mistakes too late — and often the simple insufficiency of funding. For state broadband offices running the BEAD program with a mission of universal coverage, RDOF’s faults make it a cautionary tale.

BEAD needs a higher success rate than RDOF if the promise of “internet for all” is to be achieved.

So, it’s encouraging that, although Louisiana needed only $748 million of its $1.355 billion in allocated BEAD funds to get commitments amounting to universal coverage, it still will fund most areas somewhat more generously than the RDOF average, as shown in Figure 1:

Figure 1

 

While just over 10% of Louisiana BEAD projects will be subsidized at rates of $1,500 per broadband serviceable location (BSL) or less, the median BSL will get a project with just over $3,300 per BSL in BEAD subsidy funding.

Louisiana’s process resulted in very uneven funding. Half of BEAD-eligible locations with the lowest subsidy costs accounted for less than one-quarter of the total funds, while the 1% that were most expensive will absorb nearly 10% of Louisiana’s BEAD budget. Such imbalanced funding patterns are a natural consequence of the pursuit of universal coverage, and they mostly reflect wildly different costs for deploying broadband to different places.

Over 6,000 BEAD-eligible BSLs will not get fiber. In some cases, ConnectLA settled for cable (821 BSLs), licensed fixed wireless (2,703 BSLs), or LEO satellite (2,869 BSLs). Although these non-fiber projects were much cheaper than the costliest end-to-end fiber projects, ConnectLA never seems to have chosen a non-fiber project over a fiber project for the sake of economy. In one case, a fixed wireless project won where a fiber project had been offered, as a consequence of deconfliction.

Elsewhere, non-fiber technologies won because no fiber projects were submitted. However, as we will see, that sometimes seems to have occurred because ConnectLA-defined reference price and associated cap on BEAD funding requests during the main application rounds made fiber projects uneconomical.

The Louisiana BEAD program will not only bring left-behind places in rural Louisiana up to speed but also enable them to leapfrog ahead of their neighbors. According to the FCC National Broadband Map, only 35% of Louisiana BSLs currently have access to the kind of fiber gigabit service that BEAD will ultimately bring to over 133,000 Louisiana locations.

Dealing the cards: How Louisiana defined project areas and reference prices

The first step in Louisiana’s skillful implementation of the BEAD program was to define project areas and reference prices. Like most states, Louisiana chose to group just under 140,000 BEAD-eligible BSLs into project areas, or “sub-project areas” (SPAs) in the state’s distinctive parlance, such that applicants who wanted to serve one BSL in a project area were required to offer to serve all the others as well.

A total of 1,856 of these SPAs were created:

·         The SPAs ranged in size from one BSL to 1,691 BSLs, with an average of 75.3 BSLs.

·         They were mostly small, with just over 20% consisting of a single BSL.

·         Just over half of SPAs contained seven BSLs or fewer.

·         Most BSLs were in larger SPAs with 321 BSLs or more.

·         90% of Louisiana’s BEAD-eligible BSLs were in project areas with at least 66 BSLs.

The challenge for ISPs was to piece together project areas from these disparate SPAs. Louisiana also defined a “reference price” for each SPA based on an estimate of the costs of deployment to each area.

The reference prices were mostly under $5,000 per BSL but ranged from $1,500 to a cap of $60,000. Since the sum of the reference prices equaled half of Louisiana’s overall BEAD allocation, and subsidy requests during the main application rounds were capped at twice the reference price, the program design came close to guaranteeing that Louisiana BEAD would award no more funds than it had available. The distribution of reference prices is shown in Figure 2:

Figure 2

A few SPAs that didn’t get a fiber project may have been victims of a low reference price. Some SPAs that did not get fiber projects had reference prices as low as $1,500 per BSL, and they might have gotten fiber applications with more funding. Just over two-thirds of the non-fiber award BSLs were in SPAs with reference prices per BSL under $10,000.

At the other extreme, many SPAs had high five-figure reference prices and still did not get fiber projects. Those areas usually went to LEO satellite, even though in some cases, a fiber applicant could have requested as much as $120,000 per BSL.

For 12.8% of SPAs, the BEAD award value was exactly twice the reference price, the most that could be asked for in an application. Another 11.6% of SPAs, containing 5.2% of BEAD-eligible BSLs, got a subsidy exceeding 200% of the reference price because of deconfliction or direct negotiations. But most SPAs got less in subsidies than the rules allowed, presumably because of lower capex costs, or because applicant ISPs were trying to stay competitive. Figure 3 shows what share of the reference price was requested in subsidies by winning BEAD applicants.

Figure 3

Interestingly, the Extremely High Cost Per Location Threshold, a BEAD program feature by which the National Telecommunications Information Administration (NTIA) sought to dial fiber prioritization to a level that each state could afford, did not play an important role in Louisiana. Instead of a statewide threshold, per-SPA reference prices served to discipline BEAD program outlays and limit fiber prioritization.

The final puzzle piece: How Louisiana solved deconfliction

One of the biggest challenges for the BEAD program is “deconfliction,” a term that refers to dealing with overlapping areas among projects. While the BEAD Notice of Funding Opportunity (NOFO) tries to steer states toward setting up “like-to-like comparisons” among projects, and then deciding by means of a scoring rubric, ISPs’ natural expansion ambitions tend to overlap in messier ways than that.

States have faced this challenge in different ways, with some, including Louisiana, developing sophisticated ways to deconflict overlapping projects into puzzle pieces that fit together into a statewide universal coverage solution. We can now see how Louisiana’s process played out.

ConnectLA received applications for 384 distinct projects from 26 different prequalified organizations. Most offered to serve multiple SPAs, usually less than 15, but over 100 in the case of the largest projects. Jointly, the projects served 1,648 SPAs, leaving 187 with no bids, to be dealt with through special negotiations. One hundred and sixty-four projects proposed just one SPA, and 318 SPAs received only one project. But the typical situation was competition among several overlapping multi-SPA projects.

Altogether, the 384 projects that were submitted overlapped in 670 different ways. Or in other words, Louisiana’s SPAs got 670 different combinations of projects offering to serve them. The size of these overlaps varied. Sometimes many SPAs — in one case, as many as 53 — got exactly the same set of projects offering to serve them. At the other extreme, 410 SPAs got a unique set of multiple projects proposing to serve them.

In almost all cases, if multiple projects offered to serve a given SPA, one or more of those projects also offered to serve other SPAs, and the set of other SPAs that the projects offered to serve was not the same. Simple cases of “like-to-like comparison,” where competition for an SPA or set of SPAs was confined to a set of projects whose proposed coverage footprints were co-extensive, were rare, comprising just five of the 670 overlap areas.

The central challenge of deconfliction is that it cannot be assumed that a project is still economically viable if its scope is revised by a broadband office. If Project X proposes to serve areas A and B, but loses area A to a rival project, it may be unwilling to serve area B for a variety of reasons, including that it needs to build to area A en route to area B, and that it relies on area A revenues to cover overhead. When projects overlap in messy and complex ways, state broadband offices need to be able to revise their footprints in order to make them fit together, but they can’t assume applicants will consent to these revisions. They need to ask first.

Louisiana did that by enabling each project application that included multiple SPAs to classify each of its proposed SPAs as “separable” or not.

For SPAs that were not separable, ConnectLA would not consider awarding them except as part of the whole submitted project. If the project as a whole could not be awarded, the non-separable SPAs would be dropped. But separable SPAs would still be considered for standalone awards.

ConnectLA received 220 multi-SPA projects.

Of those, 103 indicated that at least one SPA was separable from the rest of the project. Twenty-three multi-area projects, including some with tens of SPAs, indicated that all their SPAs were separable. The other 80 projects were partially separable, usually with less than half of their SPAs being made available to ConnectLA as potential standalone projects.

There were:

• 164 offers to serve SPAs by single-SPA projects;
• 1,324 offers by multi-SPA projects that were indicated to be separable; and
• 3,191 offers by multi-SPA projects that were not indicated to be separable.

From these numbers, it’s clear that ISPs took advantage of the right conferred by Louisiana’s BEAD process to bind SPAs together into larger project areas that were economically viable for them to deploy connectivity. If Louisiana had not allowed ISPs to do this, its BEAD outcomes would look vastly different. At the same time, many ISPs sought competitive advantage by using the separability feature, and thereby vastly increased ConnectLA’s options for how to piece together a statewide universal coverage solution. In effect, Louisiana had over 1,000 extra projects to work with because of separability.

While the BEAD scoring rubric was used in subgrantee selection, it was frequently not decisive. There were over 100 cases where an SPA was awarded to a lower-scoring project because a higher-scoring project using the same technology was deemed to have been withdrawn. In such cases, the higher-scoring project didn’t win all its proposed SPAs, and it did not indicate that the SPA was separable.

Over 70% of BSLs in Louisiana were awarded to projects that made some use of separability, though fewer, amounting to about 0.7%, ended up in projects that were carved out of other projects. Deconfliction ultimately had a small footprint, but it contributed disproportionately to Louisiana’s success by making possible big projects bundled by ISPs to align with their expansion ambitions and to design their own project areas, based on SPA building blocks.

The use of deconfliction represents an important difference between Louisiana BEAD and RDOF, which was structured around predefined project areas (based on census block groups). Hopefully, the fact that ISPs had more freedom to design the project areas they won will translate into heightened commitment to complete and sustain the BEAD buildouts.

The final score: Who won Louisiana BEAD?

Table 1 shows the list of winners in Louisiana BEAD subgrantee selection, along with the total funding and the number of BSLs. Links are taken from a spreadsheet previously distributed via ConnectLA’s website, though it is no longer posted there at the time of writing.

Table 1

Award organization	Total awarded BSLs	Funding	Share of BSLs	Share of funding	Funding per BSL	Total applied BSLs	BSLs won / BSLs Applied for
Louisiana Local Fiber Consortium	76,815	$450,476,831.90	55.0%	60%	$5,864.44	127,240	60%
AT&T	20,073	$54,943,185.63	14.4%	7%	$2,737.17	59,109	34%
Conexon Connect LLC	8,489	$65,902,273.16	6.1%	9%	$7,763.26	31,914	27%
ClearPath Fiber	7,356	$34,545,961.98	5.3%	5%	$4,696.30	22,507	33%
A2D Inc	4,758	$6,773,004.99	3.4%	1%	$1,423.50	38,684	12%
Cajun Broadband	4,667	$26,720,564.24	3.3%	4%	$5,725.43	10,808	43%
Alternative Technology Provider (pending)	2,869	$28,690,000.00	2.1%	4%	$10,000.00	258	1112%
Brightspeed	2,801	$7,510,130.05	2.0%	1%	$2,681.23	22,008	13%
Nextlink	2,474	$5,311,789.39	1.8%	1%	$2,147.05	19,319	13%
Direct Communications	1,837	$17,442,413.66	1.3%	2%	$9,495.05	11,153	16%
Charter	1,701	$11,739,186.13	1.2%	2%	$6,901.34	26,212	6%
Cox Communications	1,611	$10,685,236.74	1.2%	1%	$6,632.67	23,850	7%
Pelican Broadband	1,314	$4,210,189.66	0.9%	1%	$3,204.10	3,733	35%
SkyRider Communications LLC	764	$5,893,455.73	0.5%	1%	$7,713.95	3,036	25%
Coushatta Tribe of LA	641	$3,529,897.79	0.5%	0%	$5,506.86	31,914	2%
Volt Broadband LLC	444	$4,366,075.85	0.3%	1%	$9,833.50	1,942	23%
Faster Cajun Networks	383	$6,369,256.48	0.3%	1%	$16,629.91	642	60%
Allen’s Communications	310	$1,549,003.23	0.2%	0%	$4,996.78	258	120%
Comcast Cable Communications LLC	205	$749,228.82	0.1%	0%	$3,654.77	11,908	2%
PhireLink	148	$550,002.35	0.1%	0%	$3,716.23	148	100%
FastWyre	17	$68,057.39	0.0%	0%	$4,003.38	18	94%
Total	139,677	$748,025,745.17			$5,355.40

The Louisiana BEAD winners include some of the largest ISPs in the country, including AT&T, Comcast, and Cox; Louisiana ISPs with a much smaller footprint, such as Pelican Broadband, Cajun Broadband, and ClearPath Fiber; smaller ISPs with a footprint outside Louisiana, such as FastWyre (Nebraska, Missouri, Alabama), CableSouth (Arkansas, Mississippi), and Direct Communications (Idaho); and medium-sized ISPs with a multi-state presence (including Louisiana), including Conexon and Brightspeed.

Most organizations that applied for BEAD funds in Louisiana won something, but most won only a small minority of the BSLs that they applied for. For example, Charter beat out several competitors with two fiber projects but lost on technology where it sought to deploy obsolescent cable (coax), as well as on several proposed fiber deployments on rubric score, usually because its subsidy request was higher than the rival Louisiana Local Fiber Consortium. Comcast also proposed mostly cable deployments and lost several areas on technology. Conexon lost many areas to Louisiana

Local Fiber Consortium by asking for a larger subsidy.

In other areas, the roles were reversed, and Conexon requested a smaller subsidy and won. AT&T, the second most aggressive Louisiana BEAD applicant, usually requested less in subsidies than its rivals did, but often lost on rubric score due to other factors such as commitments to network hardening.

BSLs awarded sometimes exceeded BSLs applied for, because ConnectLA circled back in search of solutions for remaining gaps.

The organization that got the lion’s share of Louisiana BEAD awards, both in terms of funds and BSLs, was the Louisiana Local Fiber Consortium. ConnectLA has not yet publicly posted the prequalification applications, which may require redaction, so we cannot yet learn more about who the Louisiana Local Fiber Consortium is. With 60% of BEAD funds going to this entity in return for 55% of the deployment, its nature and performance are critical to completing the success of Louisiana BEAD.

What other states can borrow from Louisiana’s game plan

Other states should study Louisiana’s BEAD experience carefully for lessons that can be applied to their own situations to achieve similar success.

In particular, Louisiana’s use of deconfliction to sort out overlapping proposals merits emulation. Because it had a plan for deconfliction, Louisiana could allow ISPs to design expansion projects — albeit based on small, predefined project areas — that made economic sense to them, rather than conforming to detailed geospatial planning by ConnectLA.

State broadband offices and the NTIA may consider exploring how important this option was to the high industry participation rates that Louisiana achieved. Some states’ Initial Proposals are written to lock in rigidly predefined project areas, but most states have some leeway, within the framework of approved Initial Proposals, to emulate Louisiana’s industry-friendly approach to project intake and deconfliction.

Some states might want to rely more on a single statewide Extremely High Cost Per Location Threshold to curtail costs instead of referring to prices specific to each project area. And, unfortunately, some states will probably find their BEAD allocations less adequate to their needs than Louisiana did. Fiber coverage of 95% probably won’t be achievable in every state.

Still, by solving the BEAD Rubik’s Cube so well, Louisiana should be an inspiration to all state broadband offices. It can be done!

State broadband offices that want help with BEAD subgrantee selection, and especially with deconfliction, should feel free to contact Connected Nation at info@connectednation.org.

About the author:  Dr. Nathan Smith is the Director of Economics and Policy for Connected Nation. In this role, he monitors federal broadband policy, writes public comments for federal agencies that request advice on broadband policy implementation, and helps with business development and proposals.

About Connected Nation:  The organization is a national nonprofit founded in 2001 in Bowling Green, Kentucky, with a mission to improve lives by providing innovative solutions that expand the access, adoption, and use of broadband (high-speed internet) and its related technologies to all people. Everyone belongs in a Connected Nation.

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Categories: Federal contracts · Fiber Networks · Government Regulations