A Market-Orientated Approach Is The Best Way To Close The Digital Divide

Senators Rob Portman (R-OH), Michael Bennet (D-CO), and Angus King (I-ME) recently introduced the Broadband Reform and Investment to Drive Growth in the Economy (BRIDGE) Act of 2021 (S. 2071). This well-intentioned legislation would provide $40 billion in funding to states, Tribal governments, U.S. territories, and the District of Columbia to bolster broadband access and attempt to close the digital divide. The digital divide is receiving much-needed attention, but this bill would fail to achieve this important goal and would misallocate taxpayer dollars in the process.

First, it is encouraging to see a bipartisan focus on the digital divide -- an issue that disproportionately affects rural areas, tribal lands, and low-income communities. The benefits for bringing Americans online include increased access to employment, education, and health care. The pandemic highlighted why it's critical to continually work to ensure more Americans have access to reliable high-speed internet. However, simply throwing more money at the problem is unlikely to fully close the divide. It is positive to see this legislation take a more fiscally sound approach than the Biden administration’s plan to spend $100 billion, but with numerous states reporting budget surpluses and money from COVID-19 stimulus packages still unspent, some additional restraint is needed. Another constructive inclusion is a requirement that would task the Federal Communication Commission (FCC) with issuing a report to Congress on recommendations on further actions the FCC or Congress can take to achieve universal service. The Universal Service Fund (USF) has limped along, but it is in a dire state. Congress and the FCC should prioritize updating the broken funding model and consider key reforms.

Despite some positive inclusions, this legislation suffers from many key pitfalls. The legislation requires, in most cases, that funding for new networks is used to build “future-proof” networks. This requires a fiber-only approach which is not feasible for some isolated areas with rugged terrain and departs from the technology-neutral approach. As just one example, satellites are being used as an innovative way to provide broadband access for remote areas. Lawmakers should not shut out new technologies like this that could help bridge the gap. Consumers should be skeptical of whether lawmakers can really promise to “future-proof” broadband networks in a rapidly evolving market.

Another troubling aspect of the bill is the nod to rate regulations. The BRIDGE Act would require funding recipients to provide a low-income option with a rate set by the Federal Communications Commission and Department of Commerce. Lawmakers should stay far away from imposing rate regulations. The goal of making broadband more affordable is laudable, but setting rates is the wrong way to achieve this. Rate regulations disincentivize private sector investment and stifle innovation. Similarly, rate regulations will not do more to increase affordability than what is already happening in the free market. A report from USTelecom shows that broadband prices were trending down from 2015 to 2020, and while lawmakers would like to speed this process up, reducing onerous regulations would be a better alternative to setting rates. Similarly, private sector broadband providers are already offering low-cost plans for consumers. AT&T, Comcast, Verizon, and others provide plans for low-income consumers in the range of $10 to $20 per month.

This legislation would also prevent state and local governments from prohibiting or substantially inhibiting a government-run network from providing broadband service. This is federal overreach and state and local governments should be allowed to craft policies that serve the best interest of their constituencies. There are good reasons why states may ban or place guardrails on municipal broadband networks. The government regulates the private sector broadband networks, and attempting to create competition by allowing the regulator to compete with private networks creates an unequal playing field. Municipal broadband networks also do not have a good record for delivering broadband services better than private networks. Subsidized entry and the ability to operate at a loss make it nearly impossible for the private sector to compete fairly with a government-owned network. This is not to say municipal broadband is inherently bad. There may be cases where it is the only way to reach an unserved insular area where there is little incentive for the private sector to invest. However, states retain the right to decide to what degree municipal broadband networks are necessary or in the best interest of their residents.

Progress is being made to close the digital divide, but there is still work to be done. Congress has a role to play in helping unserved communities obtain broadband access, but it must be done in a fiscally responsible manner. Taxpayer dollars should be directed to unserved areas that are most in need, and imposing exorbitant standards for broadband service will not bring more Americans online. The investments made by the private sector have created a more resilient network. With prices trending down and speeds increasing, a market-oriented approach is the best way to reach the goal of universal service.