The digital divide between urban and rural households in the U.S. is growing. At a time when access to the internet is becoming increasingly vital for education, remote working, and accessing certain government services, almost 10% of rural households still have no access to fixed-line technology at broadband speeds. Compare that to less than 1% of urban households without fixed-line broadband, and the problem becomes stark. What’s worse, these figures only consider access to basic broadband services. When we look at optical fiber broadband — which is quickly becoming the new standard — the digital divide is undeniable. Less than a quarter of rural households and businesses in the U.S. have access to optical fiber broadband.
The U.S. government is taking steps to remedy this growing divide through initiatives such as the Broadband, Equity Access, and Deployment (BEAD) program. In May 2022, the U.S. administration announced funding for three broadband subsidization programs totaling $45 billion, with the biggest share of funding going toward the BEAD program. BEAD refers to a set of policies and initiatives that aim to improve broadband access and deployment across the U.S., especially in rural areas.
BEAD is the right approach to closing the digital divide
BEAD is a broad-sweeping program. One of its key initiatives is the Rural Digital Opportunity Fund (RDOF), which is designed to provide funding to internet service providers (ISPs) to expand broadband access in underserved rural areas. The RDOF will provide up to $20.4 billion in funding over ten years to support the deployment of broadband infrastructure in areas that are currently lacking in internet connectivity. BEAD also contains the Broadband Data Act, which aims to improve the accuracy and granularity of broadband coverage maps. The act requires ISPs to report more detailed information on their coverage areas, which will help identify areas that lack broadband access and prioritize funding for infrastructure deployment.
Crucially, and something of great importance to service providers, is that BEAD also includes measures to streamline the regulatory process and reduce barriers to infrastructure deployment. For example, the FCC has introduced new rules to speed up the process for deploying broadband infrastructure on federal lands, and has proposed new regulations to make it easier for ISPs to install broadband infrastructure on utility poles.
A fly in the ointment?
This is all good news. However, there is a potential fly in the ointment. The Infrastructure, Investment, and Jobs Act introduced the Build America, Buy America Act (BABAA) in 2021. This stipulates that at least 55% of the products and services funded by the federal government (including BEAD projects) should be manufactured and sourced within the U.S.
This presents a potential problem for providers. According to CRU estimates, optical cable demand in the region totaled 91.3 million km in 2022 and will likely increase to 127 million km by 2025. According to CRU reports demand for optical fiber cabling in the U.S. will outpace supply in 2023 by an additional 11% on last year’s figure. There is a very real risk that the ‘Build America, Buy America’ mandate could act to slow deployments as domestic supply chains struggle to keep pace with deployment plans. There are BABAA waivers in place for certain industries under certain circumstances, but broadband infrastructure currently has no such waiver. The National Telecommunications and Information Administration (NTIA), which is responsible for allocating BEAD funding at a state level, is currently standing by BABAA. In a recent media interview, an NTIA representative put it this way:
“If it can be Made in America, it should be made in America — and it’s why we’ll strictly enforce ‘Build America, Buy America’ requirements. Our expectation is that industry will be able to produce enough quantity [of fiber] to satisfy the demand from the Broadband Equity, Access, and Deployment (BEAD) Program over the coming years.”
The Fiber Broadband Association has since written to the senate about the need for BABA waivers on products that exclude optical fiber and fiber cable but that include other optical connectivity products, fiber optic adapters and connectors, and fiber cable assemblies and enclosures. The concern is that if these products have to be made in the U.S., costs would increase and deployments would slow down.
Acts like BABA have the potential to cause issues for companies that specialize in the development and rollout of optical fiber technology. If they are required to ensure that 55% of their end product is made on U.S. soil, investments from initiatives such as BEAD are going to be negated by production and supply chain issues. As in other countries, there are countless manufacturers in the U.S. that depend on the global supply chain, and anything prohibiting the use of that supply chain is likely to have an adverse effect — particularly when it comes to infrastructure and closing the digital divide.
