By: Noah Vehafric
President Biden announced his “American Jobs Plan” – a two trillion dollar spending package meant to target all sorts of infrastructural issues. Here at Digital Liberty we are taking the magnifying glass to see how the President’s Plan will impact technology and broadband.
Biden’s plan “prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and cooperatives”. The evidence on municipal broadband has been very clear. It is not an effective, let alone an efficient, way to expand broadband. Funneling billions of dollars into municipalities who have no market incentive to provide adequate service is just a way aggrandize local politics without actually helping Americans stuck on the wrong side of the digital divide.
The Problems of Municipal Broadband
Too often cities believed they could effectively operate a municipal network and have learned the hard way. As Digital Liberty Executive Director Katie McAuliffe explained:
“building and operating broadband networks is expensive and complex. They need to be rebuilt and updated almost continually to stay ahead of the breakneck pace of innovation in this space and the constantly spiraling demand for higher and higher speeds online”
Municipalities are able to charge below-market rates because they also receive funding on the back end through taxes, because of this, it is almost impossible to generate any sort of profit from these investments. In one case, the City of Provo in Utah spent $39 million to build a municipal broadband network but was hemorrhaging so much money they had to sell it Google for just $1. And recently KentuckWired, a statewide broadband network spent 50% of its funding while being less than 1/3rd complete.
The undercharging done by municipal broadband (which would be illegal if a private company did it) crowds out private sector investment, leading to lower overall service in the community. This phenomenon has been well documented by economists like George Ford of the Phoenix Center where he found that “even a small probability of municipal entry can prevent private sector entry, thus artificially generating monopoly conditions in the marketplace.”
There seems like an easy fix, right? Just charge at market rates for broadband! Well that would defeat the entire purpose of municipal broadband – trying to expand service to those who lack access or cannot afford service as is.
The Free Market is Already Working to Close the Digital Divide
Back in February, Comcast gave an update to its Lift Zone Program where it’s on track to launch over 1000 locations across the country where community centers will be WiFi enabled so students and others can have access to the internet.
At the same time, Charter Communications also announced it was going to invest a total of $5 billion dollars to expand broadband access to over 1 million customers; creating thousands of jobs in the process.
Just today, AT&T announced what they will be doing to close the digital divide: investing $2 billion dollars over the next 3 years to providing low-cost service to households and schools in need. They also will be creating 20 “Connected Learning Centers” for students who live in areas without connectivity.
Starlink has also been making incredible progress providing low latency broadband from low-earth orbit satellites. This technology could provide broadband anywhere in the world. Native Americans and first responders have already been using this technology to assist in their work.
The wireless industry has also been investing close to $30 billion every year to expand its networks and adopt new 5G technologies. 5G used in lower frequencies like 600 MHz can travel farther in rural areas. This could be a much cheaper option than laying thousands of miles of fiber.
Prioritizing broadband funding to municipalities and cooperatives who have no incentive to use that money effectively won’t close the digital divide. It’s going to waste taxpayer money while frustrating those who are still caught on the wrong side of the divide waiting to be connected.
Photo Credit: Digital Liberty (edited)
This is an updated version of an article originally published on April 8th, 2021