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Prioritization of Municipal Broadband Leaves Unserved Communities Behind

On May 6, the House Subcommittee on Communications and Technology of the Committee on Energy and Commerce held a hearing titled “Broadband Equity: Addressing Disparities in Access and Affordability.” Investing in granular broadband maps and new programs to help get Americans online are important steps, but there is still work to do to close the digital divide. To continue the progression towards 100 percent connectivity, lawmakers should be wary of major pitfalls that threaten to divert critical funding from those most in need. As Chairman Frank Pallone, Jr. (D-NJ) correctly notes, the digital divide disproportionately affects rural, tribal, and low-income populations. Unfortunately, the Biden Administration's prioritization of government-run broadband, hints of price control, and focus on “future proof” networks would result in massive government intrusion into the market without meaningful assistance for those most in need.

During the COVID-19 pandemic, broadband usage increased 40 percent and will likely continue to increase. During this time, stay-at-home orders, closures of businesses and schools, and increased isolation funneled more of our lives to the internet. Telehealth replaced doctor visits, laptops replaced classrooms, and webcams replaced meetings, but despite this massive transition happening over a short period of time, the internet service held up extremely well, due primarily to robust investment by the private sector. Broadband providers in the U.S. invest over three times as much as our European counterparts in infrastructure, and this has resulted in Americans maintaining access to high-quality broadband even as usage spiked. In contrast, European leaders were forced to ask Netflix and YouTube to reduce streaming quality in order to not break the internet.

The resiliency of America’s network is a result of a competitive market. From 2015 to 2019, the percentage of Americans with access to three or more providers increased 16 times. Profit incentives in the market aren’t just leading to more investments, broadband is also getting faster and cheaper. A USTelecom report shows that from 2015 to 2020, the price of internet has decreased substantially. Coupled with this drop in price is an increase in internet speed, with the most popular tier of broadband service seeing a 20 percent drop in price and a 15 percent increase in speeds. While there is still work to be done, the future of broadband is trending in the right direction for consumers.

So, why change course now and put government-owned broadband at the front of the line to receive federal funds? While progressives may view government as the best vehicle to deliver equity, the marred history of municipal broadband tells a very different story. Some claim municipal government broadband will increase competition, but since the government acts as a regulator, it is impossible for government-run broadband to compete with the private sector on a level playing field. A city would be responsible for running a broadband network and also regulating its competitors. Lawrence Spiwak from the Phoenix Center notes that municipal broadband is almost always subsidized entry and covers capital costs and losses with tax dollars, leading to predatory pricing, and is not pro-competitive.

The proposal from the White House gives a nod to price regulations as part of the goal to make broadband more affordable. Of course policymakers want faster, cheaper, and more accessible broadband - after all, who doesn’t? However, the prioritization of government-run broadband runs counter to this important goal. A 2020 analysis found that average prices are about 13 percent higher in cities with a municipal provider than in cities without a government-run network. While some of the topline numbers from municipal broadband providers are held up by advocates, a captive customer base can make these benchmarks deceiving. For example, the Information Technology and Innovation Foundation points out that while a report claimed Ammon, Idaho has the lowest prices for broadband ($9.99/month), once the monthly utility and construction fees charged by the municipalities are factored in, the price for consumers nearly quadruples. Residents who want to connect to the fiber network in Ammon must also pay an upfront cost of $3,200-$3,600. Increased competition is already resulting in lowering costs for consumers. Price controls could drive out private sector competition and lead to less investment in building reliable infrastructure.

Former Democratic Federal Communications Commission (FCC) Commissioner Tom Wheeler said in an interview that “We ought to be building it in a future-proof manner -- which means fiber.” A fiber-only approach would have two major drawbacks for consumers - especially those in rural areas. First, if a symmetrical speed like 100/100 Mbps is adopted, more Americans living in urban areas would become underserved due to an arbitrary change in definition. This would likely result in more federal funding being spent on upgrading connections for those who already have access to broadband rather than focusing on those living without any broadband access. The focus on closing the digital divide should remain on those without access, and subsidized overbuilding in urban areas could mean billions of dollars spent without reaching the final 21 million Americans living without internet access. Second, fiber is expensive and laying fiber-optic cable in rugged terrain is difficult. Emerging technologies are attempting to find creative solutions to reach Americans living in sparsely populated areas with difficult terrain, but a departure from the technology-neutral approach would disincentive further investment in finding cost-effective ways to get these Americans connected. If the goal is truly equity, as the hearing title states, then the prioritization of resources should be focused on increasing connectivity rather than funneling taxpayer money to upgrade infrastructure in urban and well-served areas.

There is bipartisan momentum to finally close the digital divide, but it would be a mistake to ignore the track record of the private sector and government-run broadband providers. While the buildout of broadband infrastructure in rural areas will likely require subsidies, clumsy and heavy-handed intervention by the government can aggravate the problem. In reaching low-income communities who are underserved or unserved, lawmakers should also prioritize reforming the broken Universal Service Fund as an important piece of closing the digital divide. The private sector has held up well during this stress test, and Congress should not turn its back on them to the detriment of the consumer.