President Joe Biden’s joint address to Congress reiterated his promise to bring high-speed internet to every person in the country. However, his proposed $100 billion investment in broadband infrastructure could fail to meet this important challenge if critical changes aren’t made.
The “digital divide” between those with and without access to broadband internet has been an issue for decades, and the COVID-19 pandemic has exacerbated the issue. Federal investments may be needed to reach the final 4.3 million households without broadband access, but this can’t be done without the private sector.
The prioritization for funding to networks “owned, operated by, or affiliated with local governments, non-profits, and co-operatives” ignores the fact that the private sector has held up remarkably well during the global pandemic. Similarly, preferential treatment for government-run broadband can create serious competition problems for consumers. Coupled with calls for “future proof” networks, this $100 billion investment could fail to make meaningful progress to close the digital divide.
It’s not clear why the president’s plan would prioritize government-run broadband. Private sector broadband companies have endured the biggest stress test imaginable, where over the course of just a few months, people transitioned nearly every facet of their lives to the digital space. Despite this, internet service providers have not just survived, but the average internet speeds actually increased during the pandemic, according to WhistleOut.
In contrast, European leaders were forced to ask YouTube and Netflix to reduce streaming quality to avoid breaking the internet, showing just how important private sector expertise and investment have been to keeping people online and connected. Not only have broadband reliability and speeds held up, but a report from USTelecom using Federal Communications Commission data shows the price of broadband has decreased over the past five years.
Chattanooga, Tennessee, is often held up as the shining example of the benefits of municipal broadband by advocates. However, on closer inspection, there are serious drawbacks that should concern taxpayers. Chattanooga received a $2,000-per-subscriber federal grant and millions more in subsidies. The subsidized nature of municipal broadband can lead to a competition problem. The percentage of people with access to two or more broadband service providers increased four times between 2015 and 2019, demonstrating robust and growing competition. However, a 2020 paper from the Phoenix Center found that “the asymmetric subsidized entry of a municipal system” is “anticompetitive in nature.”
Another anti-competitive feature of municipal broadband is the ability to operate at a loss. In Provo, Utah, for example, the deployment of a fiber-optic network was deployed in 2001. However, despite having thousands of subscribers, it was losing nearly $10 million per year. Provo eventually sold the fiber-optic network that it invested $39 million into for just $1 to Google in 2013, allowing a billion-dollar company to obtain a taxpayer-subsidized network for next to nothing. Competition benefits consumers, but a rush of federal funds to government-owned networks could result in less competitive pricing for consumers and even drive private sector options out.
Another key portion of Biden’s plan that threatens to waste taxpayer dollars is the prioritization of “future proof” networks. First, with the rapidly changing nature of technology, the term “future proof” is likely shortsighted. Commonly understood, “future proof” network refers to symmetrical upload/download speeds, such as the 100/100 Mbps standard proposed by some lawmakers, which would likely require a fiber-only approach. This represents major problems, especially for rural areas, and could artificially expand the “digital divide.”
The current definition of broadband is 25/3 Mbps. A 100/100 Mbps standard would be a drastic increase from the current definition and is far more than a semantic change. According to the Technology Policy Institute, a change from the current definition to the exuberant standard proposed would result in only 42% of people in the country having access to broadband, instead of more than 90% under the current definition. Faced with the choice, market incentives would likely steer broadband investments into more profitable areas rather than rural areas where deployment is less cost-effective.
Another major problem is that fiber networks are not feasible for many rural areas with more rugged terrain. Satellites and other emerging technologies have sought to find new creative solutions, but a fiber-only approach could close the door on future innovation. Biden is correct that infrastructure should be built in unserved and underserved areas, but a departure from a technology-neutral approach will divert critical funding from those most in need.
There is a role for the government in isolated rural areas, but based on the evidence, it is hard to come to the conclusion that government-owned broadband should be at the front of the line for federal funding. There are tangible, individual, and societal benefits to expanding access to broadband to more people, and lawmakers should focus on the avenue that best accomplishes this goal.
If the private sector or the government takes on the problem alone, the digital divide will likely remain prevalent. In some circumstances, a public-private partnership is the best path forward and the best use of taxpayer dollars. We should continue to put our best foot forward, and experts in the private sector have proven themselves to be better equipped than government bureaucrats to deliver faster, reliable, and cheaper broadband to more people.
Will Yepez is a policy and government affairs associate with the National Taxpayers Union, a nonprofit group dedicated to advocating for taxpayers at all levels of government.
