Due to the COVID-19 pandemic, closing the “digital divide” has become a top priority for policymakers. The global pandemic has brought to light just how debilitating a lack of broadband access can be. As schools moved to online learning, tens of millions of students have struggled to gain access to the classroom due to the “homework gap.” Similarly, Americans’ day-to-day life has been redirected to the online space, whether it be employment, basic communication, or health care. With so much focus on this issue that has an outsized impact on low-income, rural, tribal, and racial minorities, there is a strong tailwind to get every American access to affordable and high-speed internet. While President Biden’s plan does home in on two important factors to closing the digital divide — the affordability and accessibility gaps — the outline of the plan presents real problems that could threaten innovation and fail to address the problem.
Price Tag:
If you’re having trouble figuring out how much Congress has spent over the last year and a half on broadband, you’re not alone. While infrastructure and connectivity are important issues, simply throwing money at the problem is the wrong approach. Here are just some (by no means all) of the broadband investments made by Congress during the coronavirus pandemic:
- Consolidated Appropriations Act (H.R. 133):
- $3.2 billion was allocated to the Emergency Broadband Connectivity Fund to help Americans purchase devices and afford internet service.
- $250 million for telehealth program
- $1 billion for the Tribal Broadband Connectivity Program
- CARES Act (H.R. 748):
- $200 million for telehealth program
- $150 billion for state and local governments that can be used for internet and broadband infrastructure
- American Rescue Plan (H.R. 1319)
- $7 billion to bolster broadband infrastructure and connectivity
- $350 billion for state and local governments to make investments in water, sewer, and broadband infrastructure
With such a massive investment being proposed, there is serious risk of subsidized overbuilding of existing infrastructure. The government must resist funding where the private sector is already providing service or is ready to. This is not to say appropriations from Congress are unnecessary. There is very likely a need for investments to reach unserved and underserved areas where market incentives make investments difficult. However, the $100 billion price tag seems to fit much more with President Biden’s promise to deliver a “big, bold” infrastructure plan rather than a number grounded in economic analysis and consumer need.
“Future-proof” infrastructure:
First, further specifics are needed to understand exactly what the Biden administration means by “future-proof infrastructure.” Attempting to predict the future of telecommunications would be nearly impossible, and you only need to look at SpaceX’s satellite Starlink as an example of how quickly innovation can take place. While we wait for the specific implications of this goal, a few assumptions can be made based on previous discussions around “future proof” networks.
When “future proof” broadband is discussed, symmetrical upload and download speed for consumers is usually the goal. As of 2015, the Federal Communications Commission (FCC) defines broadband as a minimum 25/3 Mbps (25 Mbps download, 3 Mbps upload). However, some lawmakers have called for symmetrical speeds at 100/100 Mbps. Consumers do not require symmetrical speeds to stay connected. As former FCC Commissioner Michael O’Rielly testified, the 100 Mbps does not reflect reality for now or anytime soon. The definition of broadband is not meant to be synonymous with the fastest option available, and it has not remained stagnant. In 1996, the FCC defined broadband speed was 200 Kbps/200Kbps, in 2010 it was updated to 4Mbps/1Mbps, and in 2015 it was updated to the current definition. The FCC should continue to update their definition as appropriate, but an arbitrary definition would be counterproductive to closing the digital divide.
Additionally, increasing the minimum definition for broadband would divert focus and resources away from those who need it most. If 100/100 Mbps or a symmetrical speed similar to this threshold was adopted as the minimum standard, more Americans living in urban areas that already have reliable broadband would become underserved. As the Technology Policy Institute notes, if the 100/100 Mbps standard is adopted, only 42 percent of American households would be considered as having access to broadband. Companies would be more likely to invest in these more profitable areas rather than focus on those who truly lack reliable access to high-speed internet. Closing the digital divide would become much more difficult if the definition of broadband is changed to this aspirational number.
By supporting “future proof” networks with symmetrical speeds, it is likely Biden’s plan is calling for fiber-only networks which could present a myriad of issues. First, this would be a departure from the previous technology-neutral approach to broadband infrastructure that Congress has used to subsidize broadband. An all-of-the-above approach to broadband deployment is necessary to reach the final unserved and underserved population, and a focus on fiber-only networks would threaten to hamper that goal. While “future proof” fiber deployment may look appealing on paper, it would present practical problems and make reaching rural areas even more difficult and could close the door on innovative solutions. While $100 billion for 100/100 Mbps is certainly catchy, the data does not support this being a viable avenue to close the digital divide.
Shift in profit incentives:
The Biden Administration’s plan says it “prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.” This would be a mistake and potentially be a poison pill for Republicans. Private-sector technology experts are better positioned than government bureaucrats on how to effectively provide internet services. The assumption that since every American does not have access to high-speed internet, the private sector has failed is wrong. Similarly, the view that government-controlled broadband will be more price effective is undermined by the facts.
The Phoenix Center’s analysis of the Open Technology Institute's report demonstrates that government-run networks do not actually provide lower costs for consumers. Sarah Oh of the Technology Policy Institute also found no economic benefit from municipal broadband. A preference for government-run broadband not only creates an unfair playing field for the private sector, but it also opens the door for wasteful overbuilding. Former FCC Commissioner ORielly points out that government-run broadband wastes taxpayer dollars because they typically build in areas that are already served by private companies. Government has a role in universal access to broadband, but preferential treatment of government-run broadband would threaten private-sector investment.
Price regulations:
History has shown that the best way to lower prices is not with heavy-handed price controls and regulation, but robust competition. Biden’s plan makes the argument that “Americans pay too much for the internet” when compared to other countries. However, this framing does not tell the whole story, and in fact, Americans’ access has held up remarkably well during an unprecedented stress test. Compare this to European countries, where leaders were forced to ask streaming providers to reduce the quality of their content to prevent the internet from breaking.
Price controls or price regulation can disincentivize networks from investing in their network’s resilience and choke off innovation. If policymakers truly want to close the digital divide and deploy 5G internet, price regulation would be a mistake. The private sector has stood up well to the challenge of keeping Americans connected while working to expand into underserved and unserved areas. Congress should allow competition and market incentives to find the natural equilibrium of the market and avoid heavy-handed intervention.
More details are needed, but the initial layout of Biden’s broadband proposal is worrying. Senate Minority Leader Mitch McConnell (R-KY) warned of this bill being a “Trojan Horse” for massive tax increases and more borrowed money. With only a fraction of the money being spent on what Americans typically view as infrastructure (e.g. roads, bridges, and buildings), it is easy to see why some are concerned. The digital divide is a complex issue and will require creative problem solving, and likely additional investment from Congress. However, $100 billion is probably too large, and the framework set forth in this plan threatens to derail private sector progress and waste taxpayer dollars. Congress should seize the opportunity this crisis has provided to close the digital divide. Departing from decades of pro-growth, light-touch policy would be a mistake.