Pressure mounts for NTIA to waive IIJA 'Buy American' rule for ISPs

A key provision in the recently passed U.S. Infrastructure Investment and Jobs ACT (IIJA) calls for funding for broadband and other projects go toward those which use products and materials containing primarily domestic-made components. But a growing number of broadband groups and vendors have told the National Telecommunications and Information Administration (NTIA) that’s just not realistic.

Back in January, the NTIA put out a call for comment on how it should implement the broadband grant programs through which more than $48 billion in federal funding will flow. Several prominent broadband groups, including USTelecom, NCTA – The Internet and Television Association, NTCA – The Rural Broadband Association and the Telecommunications Industry Association, quickly chimed in and flagged the so called “Buy American” clause as a problem. They pressed the NTIA to waive the requirement.

That request has since been seconded by an array of additional parties, including the likes of Cisco, Dell Technologies, Hewlett Packard Enterprise, Intel, Samsung, WISPA, the U.S. Chamber of Commerce, INCOMPAS, the Telecommunications Law Professionals and the Schools, Health & Libraries Broadband Coalition.

The IIJA requires products used for broadband deployments to contain at least 55% domestic content. But as Cisco noted, though broadband equipment including switching, routing, transport and access gear is “largely developed and designed in the U.S., it is not manufactured in America by and large.” Indeed, Dell’Oro Group VP Jeff Heynen told Fierce that according to Federal Communications Commission filings, the “vast majority” of manufacturing for CPE such as cable modems and optical network terminals (ONTs) is done in Taiwan.

That means “it will not be possible for NTIA, eligible entities and subgrantees to procure the broadband equipment they need to build the networks envisioned in the IIJA on the timelines that the law requires while meeting the 55% domestic content threshold,” Cisco wrote.

Meanwhile, fiber supplier OFS Fitel pointed out that there was a surge in demand for broadband products even before the IIJA passed in November 2021 stemming from private investments and earlier federal funding programs including the Rural Digital Opportunity Fund (RDOF). That increase has already resulted in “greatly extended delivery intervals” for optical cable.

While delivery timelines were primarily extended by Covid-related supply chain disruptions, OFS noted it’s not clear when these will be fully resolved. It warned that “if sourcing options are restricted as stipulated in the IIJAs domestic preference requirements, OFS believes a shortage of optical cable and optical connectivity will likely persist over the next five years due to the additional demand from the BEAD funding, in addition to ongoing record levels of optical fiber network investment.”

In a separate filing, Intel noted its CPUs do not qualify as domestic products under the Buy American guidelines even though “a majority of the value of the CPU is manufactured in the United States.” While the company said it is working to increase its fabrication capacity with new facilities in Ohio, it pointed out that “procurement rules prevent domestic semiconductor wafers from qualifying as U.S. origin when they undergo the final stage of assembly outside of the U.S.”

“Requiring case-by-case waivers for every individual purchase needed to implement broadband will significantly delay critical projects and potentially overwhelm federal officials with requests,” Intel argued.

It should be noted a number of entities including ADTRAN and the Communications Workers of America pressed the NTIA to adhere to the Buy American requirements as outlined in the bill. The latter in particular claimed a broad waiver of the rule would amount to a “get-out-of-reshoring-free” card for telecom companies.

But Heynen told Fierce he expects waivers to be granted in some form. The NTIA is expected to release its rules for the grant programs within the next month.

“In this environment of having limited supplies and supply chain being challenged anyway, it’s almost impossible to limit that supply chain to a handful of companies that source 55% of their components from American companies,” he concluded. “I think the need and the desire to get these projects underway and to fulfill the timeline requirements that they have almost demands that some of these waivers be granted.”