NSR Policy: Week One of Trump 2; What to Expect for BEAD, Spectrum, Immigration and Other Topics

What’s New: We began the year with a note previewing what we believe will be the most consequential year in telecom and media policy since the mid-1990’s. (LINK) That year starts in earnest next week with Trump formally becoming President. In this note we quickly summarize what we think will happen next week that will matter (and some things that will appear to matter but will not) to investors in the telecom and media sector. These include announcements related to the BEAD program (with the news likely to be negative for terrestrial wireline providers), spectrum (with the rhetoric likely to be positive for mobile wireless carriers but turning the rhetoric into reality in the near term to be challenging); immigration (with announcements translated to wireless growth being problematic for carriers); media (where despite a last minute effort by the outgoing Chair to affect the FCC’s ability to engage in—for lack of a better term—“content moderation,” the new Chair will continue his efforts to apply standards to media transactions that reflect his view that some broadcasters have used their broadcast licenses illegally; and USF, where T started its campaign to prevent states from adopting a New York style low-income broadband mandate by ending a fixed wireless service in New York (something unlikely to affect the company’s economics but something that the company can point to in its efforts to prevent other states from doing the same.

BEAD

Executive Action and State Reaction. There are reports that Trump will quickly issue approximately 100 Executive Orders. If so, we would not be surprised to see one of them dealing with the BEAD program. Among the potential elements could be:

An end to the fiber preference (almost certain but not material to in terms of state decisions which are driven by budgets).
The elimination of a variety of requirements/recommendations[1] relating to elements such as labor and climate (also almost certain but marginal in terms of upside for carriers).
An end to the low-cost service offering mandate (a plus for terrestrial wireline carriers but a bigger plus for satellite service providers).
A mandate to stop work until NTIA issues new rules (widely rumored in DC[2] but we have our doubts as slowing down aid to rural America is not optically a plus for the new Administration. For one thing several red states, including Montana, Wyoming, and Georgia, have launched their programs and are in the middle of either accepting or evaluating applications. A stop work would complicate the program for them. It would also create significant uncertainty for ISPs who are potential bidders.).
An end to the Buy America requirements (would marginally lower the costs for carriers but seems at odds with the likely Trump tariffs).
An end to spending on digital equity (though this could hurt carriers in multiple ways including lowering funding for job training, an issue as the workforce issues remains a gating factor for deployment).
Rescinding the guidance of spending for satellite services to revise to make more favorable to satellite broadband providers (likely and negative for terrestrial wireline providers.
A limit on spending on non-deployment investments[3]; and
The most important variable for investors—a federal reduction in the high-cost threshold at which states cannot spend more than the amount for an unserved or underserved location. That would have the impact of shifting funding from wireline terrestrial providers to fixed wireless and satellite providers.
Once the Trump Administration lays out its plans, we will evaluate, based on state reactions, whether there are legal and political reactions that will limit the impact of the new rules. In particular, we will be watching to see whether there are Republican Governors willing to take on Trump (and Musk) for narrowing their options for how to spend the money and potentially reducing the amount of funds they are allowed to spend.

Commerce Confirmation Hearing. The confirmation hearing for Secretary of Commerce Howard Lutnick has not yet been set, apparently due to the paperwork not being completed.

We expect it to happen soon and for him to be easily confirmed.
For our purposes, we will be watching to see if the any Trump Administration announcements on the future of BEAD create any push back during the hearing.

Naming of NTIA Administrator. We expect the Trump Administration to name an NTIA Administrator in the next several weeks.

With all due respect to whoever is named, we doubt it will be investor relevant.
Given the previous statements by Trump on BEAD (LINK), Musk’s interests in the program, and the statements by Carr, we expect the new Administrator to follow orders, rather than chart a new course based on their personal background and policy preferences.

Spectrum

House Hearing

The Subcommittee on Communications and Technology has scheduled a hearing on Thursday, January 23, 2025, at 10:00 a.m. The hearing is entitled “Strengthening American Leadership in Wireless Technology.” Witnesses have not yet been announced.
We expect it to be aspirational, rather than decisional. That is, we expect the House Republicans to both criticize the Biden Administration spectrum record and to promise that they will do better, without specifying exactly what they will do.
We do not expect it to result in a new direction or actual legislation as we still expect spectrum to be addressed in the reconciliation bill (currently designed to be completed and signed by Memorial Day) as a mechanism to provide pay-fors for tax cuts.
We also do not expect members or witnesses to explain how to overcome the current objections of the Defense Department to auctioning the spectrum most sought after by the mobile carriers. We could be wrong but in the last four years of watching this issue play out, we have not seen such testimony and we have not seen any changes in the last few months.

Immigration. As our colleague Jonathan Chaplin recently pointed out in addressing wireless controversies, close to 90% of excess adds in wireless over the last two years may be due to excess immigration.

We expect the Trump administration to both engage in increased deportation and adopt policies that will decrease immigration. As Chaplin noted, “taken together, changes in immigration policy could have a profound impact on subscriber growth.”
But the order of magnitude will matter and while we will not be able to discern with precision the ultimate numbers in the early weeks, it is likely that the news flow will make the numbers look higher than they will be.
The reason is that the part of the initial Trump strategy will involve scaring undocumented persons to self-deport. As a founder of the National Immigration Forum who worked on the Immigration Reform and Control Act of 1986 told a journalist, “fear is the point. The strategy is to squeeze and threaten. The administration can be tied in knots on policies and practices, as opposed to just scaring the shit out of so many people.”
We will be returning to this topic but think the initial weeks will not be an accurate indicator of what the ultimate result will be.

Media. On her way out the door, Chairman Rosenworcel had her media bureau dismiss four complaints against broadcasters, arguing that the FCC should do so to protect the First Amendment.

Some have asked whether the move will protect broadcasters against what incoming Chair Carr has said related to his concerns that some broadcasters are not living up to their commitments to serve the public interest.
The answer is no. It will be inconsequential to Carr’s actions.
Three of the petitions were filed by pro-Trump forces. To the extent Carr wants to bring those back he can do so by having the Commission vote to overturn the bureau action.
The fourth argues that the court decision related to the Murdoch’s action in publicizing false claims in the context of the 2020 election demonstrate they don’t have the character to hold a broadcast license.[4] Rosenworcel did Carr a favor in having the bureau dismiss it as now the petitioners will have to wait for Carr to act—which he will not have to do—to be able to appeal to a court.
In short, the bureau actions will have no precedential value or consequence in terms of how Carr acts on media issues.

FCC.

New Commissioners. Trump has named Olivia Trusty, an aide to Senator Wicker as a new Commissioner.

She will be easily confirmed.
She will be a safe vote for incoming Chairman Carr.
This will provide Carr a majority, though again most of what he wants to do does not require a majority at the FCC. (LINK)

RDOF. Under the terms of the RDOF auction, carriers receiving funding were required to deploy 40% of its authorized RDOF locations by the end the third full calendar year of their funding.[5] For many, that was at the end of December 2024. A number have not done so.[6]

Of note was Cox, the largest private broadband provider, which only reached 71% of its milestone in Louisiana, 83% in Nebraska and 96% in Arizona.
This will be an early test of how Carr will address deployment enforcement issues.
It is also an early indicator of how RDOF recipients are doing in meeting their obligations, which may also provide a guide to how BEAD recipients will do in meeting their deployment targets.
It will also set an example for how states will address their own enforcement issues with BEAD deployments.

USF. We do not expect the FCC to do anything serious on USF reform until after the Supreme Court has ruled on the appeal of the Fifth Circuit opinion ruling the current framework illegal.

But the positioning of the different interests will commence.
This week New York began enforcing its mandate for ISPs in the state to offer low-income persons a low-cost option.
T responded by announcing that it would end providing AT&T Internet Air, its fixed-wireless service, to New York residents.
We do not think it is material to T’s economics as we think the number of subscribers in New York is low. The service was pitched as a replacement for copper-based broadband where T does not plan to build fiber, but T does not offer mass market wireline broadband services in New York.
Rather, we see T’s decision as part of a strategy to argue to states where they do offer a landline service not to adopt a New York type solution to low-income affordability.

[1] We say requirements/recommendations because we have been of the view that nothing NTIA had set as a requirement would have bound any state that sought a waiver.

[2] In the movie The Player, one character tells another, “It is Hollywood. The rumors are always true.” DC feels a lot like that these days. But we have our doubts about this one.

[3] It would be interesting if the Trump Administration did this considering that very red Louisiana is spending $500 million on non-deployment projects, but it is not outside the realm of the possible. The Governor’s press release stated that the money was being spent to “help address some of the state’s most pressing gaps in areas like education, workforce development, economic development, agriculture and healthcare. These investments, which include initiatives such as telehealth expansion and scaling digital K-12 programming, represent some of the most innovative uses of this funding in the country.” But we have not seen evidence that the Trump team thinks such spending is justified.

[4] Noted First Amendment Lawyer and Scholar Floyd Abrams stated in his filing with the Commission in support of the petition that given the facts of the case, the First Amendment is no bar to Commission action.

[5] The FCC rule states “All recipients of Rural Digital Opportunity Fund support must complete deployment to 40 percent of the required number of locations as determined by the Connect America Cost Model by the end of the third year, to 60 percent by the end of the fourth year, and to 80 percent by the end of the fifth year.”

[6] See, for example, this notification letter.