By Stephen Smoot
During the Biden Administration, the United States Congress passed legislation referred to as the Broadband Equity Access and Deployment program. It carried the ambitious goal of spending $42.45 billion “to connect every American to high-speed internet by funding partnerships to build infrastructure.”
Applications for grant funding brought forth an immensely broad spectrum of companies seeking to join the effort. Companies sent in proposals for service expansion in underserved areas and were approved for funding. Trouble emerged when many of the approved applicants were found to have bit off more than they could chew.
One such company was ZiTel, based in Moneta, Virginia. Itts work focuses on expanding fiber optic internet service into more sparsely populated areas and centers in the counties to the east and south of Roanoke.
ZiTel won an award from the BEAD program to expand broadband to areas of rural North Carolina and six other states. Those awards granted to the company, which reports about $5 million in annual revenue, totaled approximately $150 million. ZiTel had to eventually pull out of the North Carolina project, “due to concerns about its operations,” according to an analysis from the Taxpayer Protection Alliance “and is now facing questions in Alabama about its ability to complete projects there.”
Alex Karras and Michael Santorelli from the Advanced Communications Law and Policy Institute at New York Law School studied recipients and found that many received awards significantly out of proportion to their service areas and revenues.
Their study, published in March, examined recipients in terms of their footprint at the time of application compared to how much each company planned to expand with BEAD funding. For example, Citynet LLC, based in Morgantown and serving much of central West Virginia, has 41,909 Federal Communications Commission verified locations with plans to add 25,744. That puts it in the category of expanding by between 50 and 100 percent.
In the 10 to 50 percent category lies GigaBeam Networks LLC based in Bluefield and Micrologic in Buchanan. Micrologic is currently expanding internet service in Grant County, for example.
It should not be inferred that these West Virginia businesses submitted irresponsible proposals. They have long track records of service and solid reputations behind them.
ZiTel, conversely, had approximately 18,500 FCC locations and proposed expanding by just over 49,000.
Illinois’ Shawnee Communications received $784 million. It had about 15,000 locations and submitted a proposal to extend that to 139,217. Shawnee received more funds than Starlink, Spectrum, Verizon, and Frontier.
Analyzing performance showed that companies that had a smaller expansion ratio “may find it more manageable to build BEAD-funded networks” and “conversely, ISPs with a higher expansion ratio may encounter difficulty in expanding their service territory at such a large scale because they lack the bona fides of more established providers.”
Issues emerged with ZiTel first due to an apparent lack of knowledge and/or capability concerning legal compliance with grant guidelines. Other challenges faced by smaller firms comes with the fluctuating costs of inputs from labor to supplies.
United States Senator Shelley Moore Capito sponsored S.98, entitled the Rural Protection Broadband Act of 2025. This bill established a “vetting process for prospective high cost universal service fund applicants.”
The bill’s text goes on to read that applicants provide a “proposal containing sufficient detail and documentation for the Commission to ascertain that the applicant possesses the technical, financial, and operational capabilities, and has a reasonable business plan, to deploy the proposed network and deliver services with the relevant performance characteristics and requirements defined by the Commission and as pledged by the applicant.”
That will be measured against “reasonable and well-established . . . standards” and also “the applicant’s history of complying with requirements in Commission and other government broadband deployment funding programs.”
Penalties of at least $9,000 per instance shall be applied to “pre-authorization defaults.”
Representative Erin Houchin (R-Indiana) praised Sen. Capito and stated that passage would help expand broadband service to rural areas. She called lack of reliable service “a barrier to opportunity.”
“We have an obligation to make sure those dollars reach those communities they’re meant to serve,” stated Rep Houchin, who then added that the legislation will ensure that “providers that are receiving them (awards) are capable of getting the job done.”
