As service providers contemplate whether to pursue BEAD grants, concerns about the upfront financial commitments and the penalties for withdrawals and delays frequently overshadow revenue potential. Service providers are justified in having concerns about achieving the desired ROI when bidding on BEAD grants due to the significant financial risks involved. The locations can be challenging and costly to reach, and there is a history of actual construction costs often exceeding the original budget.
This creates a conundrum where service providers can almost feel caught between a rock and a hard place. If they decline to bid, they not only lose the opportunity to grow their revenue base but they also make it easier for a less cautious competitor to make inroads on their existing market share. Yet, if they submit a winning bid that ultimately proves to have dramatically underestimated the cost to build, they risk performance penalties on top of jeopardizing commitments to shareholders.
But what if there was a way to quickly build more accurate cost models? With better data and more accurate modeling, service providers can avoid these costly financial risks and penalties, and pursue BEAD funding with confidence.
Financial Commitments and Penalties
BEAD recipients are typically required to provide a minimum of 25% matching funds of the total project cost. This may be fulfilled through cash or in-kind contributions, such as equipment or services. In addition, grantees may receive funding based on the completion of certain milestones such as planning, permitting, or deployment, rather than the entire grant amount up front. This incentivizes timely project completion and ensures that funds are used effectively. And, they must budget for project planning, community engagement, and administrative costs, which are often incurred early in the process, before receiving full federal reimbursement.
These funds are at risk if the service provider dives into the project only to find that project costs were miscalculated and the project will not end up being profitable, causing them to withdraw.
If a grantee withdraws from the program after receiving an award or fails to comply with program requirements, they may be required to repay the funds already disbursed. This is often stipulated in the grant agreement and will depend on the stage of project completion. Non-compliance with the terms of the NOFO, such as missing milestones or misuse of funds, could result in penalties, including the potential return of funds or termination of the award.
Penalties for delays are also a risk. If a grantee is significantly delayed in meeting project milestones or fails to meet performance goals such as expanding broadband access to underserved areas, they may face financial penalties or reductions in future payments. In cases of severe non-compliance or withdrawal, the grant agreement may be terminated, and the grantee would forfeit any remaining grant funds. This also impacts the grantee’s eligibility for new grants.
However, service providers can take steps to improve their modeling and quickly develop more accurate bids. Understanding the existing technology infrastructure, the viability of technology and deployment options, and environmental data such as geology, topology, and atmospheric norms is key to developing a relevant and accurate investment plan.
Trust-worthy Data is Critical to Mitigate These Risks
Service providers require reliable data to first evaluate the cost/benefit of each BEAD-eligible and/or project funding area (PFA) and then present persuasive proposals for the projects they pursue. Frequently, service providers operate with incomplete or inaccurate information regarding households in their market. This can harm their competitiveness and leave them vulnerable to competitors who encroach on their territory, even when the service provider could already provide high-quality service or achieve it with minimal effort. Utilizing precise data and analysis can enable effective challenges and, ideally, proactive engagement with the community to offer better services.
To accurately assess the cost of network expansion in the BEAD framework, service providers must incorporate critical construction insights into their analytical framework to make informed business decisions. These include a comprehensive understanding of the utility pole line; assessing the feasibility and cost of "make ready" expenses for installing new utility poles; soil conditions that impact trenching, plowing, or boring; existing technology infrastructure; and environmental risk factors for each market.
VCTI’s Fiber IQ is powered by two solutions – Pole IQ™ and Geology IQ™ – that utilize AI to provide crucial insights into aerial and underground broadband deployment options and their respective cost implications without sending teams into the field for visual inspections. This more granular insight, early in the planning process, enables service providers to determine the most effective construction methodology, deploy resources faster, and enjoy better insight into costs quickly.
This precision in cost modeling enables Fiber IQ to deliver an average 20 percent improvement in capital budget. Accurately assessing the viability of utility poles for aerial deployments and analyzing soil and rock hardness for a 1000-mile fiber deployment typically requires three to four months for field assessment, plus the cost of personnel. Fiber IQ delivers accurate insights in less than three weeks without sending a single person into the field.
