The negotiations around President Biden’s Broadband Infrastructure Bill are in full swing. We have at least 10 broadband bills, the White House American Jobs Act Fact Sheet, an article by former FCC Chairman Wheeler and Commissioner Carr’s proposal on the table to look at.
With so many plans, five introduced by Democrats and five by Republicans, we should be able to find some common ground. Let's look at what some of the main plans offer:
The White House staff proposal calls for 100% “future proof” coverage, meaning fiber coverage everywhere in the United States. The problem here is in the details. Even today, we have less than 100% electricity coverage in the United States and have managed to connect less than 80% of American homes to the sewage system. In New England, the majority of new single-family homes that are being constructed do not have a public sewage connection.
Preservation and nature protection regulations aside, the cost of physically connecting people with fiber-based internet increases exponentially to $100,000 and more, as it requires laying a fiber cable to remote houses in the Rocky Mountains or in the wilderness of Alaska. If these plans go into effect, we will have frequent reports in newspapers and on cable news shows on how the government spent more than $1 million to connect remote cabins with one person living there as examples of government waste.
The proposal also calls for preferential support for government-owned or affiliated, non-profit, and cooperative-owned broadband networks. Such a policy conveniently ignores the evidence that government-owned entities cannot build these networks at a lower cost than for-profit providers. Also, empirically, non-profit or government-owned networks do not drive broadband adoption to a higher rate than privately owned networks.
Former FCC Chairman Wheeler provides a counterproposal laying out a traditional funding mechanism of subsidizing unserved markets and subsidizing the connectivity prices for low income Americans. This is what we’ve traditionally had in exchange for Title II regulation and is a government-regulated low cost offer that needs to serve all connectivity needs. In all likelihood, this would perpetuate the funding of broadband fixed internet subsidies through charges on wireless customers' phone bills.
The first proposal actually came from Representative Clyburn and Senator Klobuchar and is probably still the best one as a basis for compromise. It proposed an $80 billion broadband deployment plan, plus $5 billion low-interest financing of broadband deployment. It also sets almost $10 billion aside for internet affordability and adoption.
When I looked at these three proposals, it seemed to me that it was much more Democrats negotiating with Democrats than with Republicans.
A few days later, Commissioner Carr proposed to fund the broadband buildout by levying a 0.009% charge on the revenues of big tech companies. Such a charge would raise as much as the Universal Service Fund gets from phone customers and allow us to build out broadband and make the internet more affordable for low income Americans. Commissioner Carr has the public behind his proposal as one of our surveys shows 71% support for internet companies to contribute to make the internet more affordable.
Where does that leave us? When looking more closely at the FCC’s Paul de Sa study, we can see that while it costs $80 billion to raise coverage from 86% to 100% of Americans with broadband, it costs only $40 billion to cover 98%. This frees up budget room to come in at the $65 billion price tag that Republicans are proposing to not only bring broadband to the vast majority of rural Americans but also to Americans in urban areas who cannot connect to broadband for connectivity or affordability reasons. By including internet companies into the funding mechanism for broadband internet, we will have a sustainable funding mechanism. The 0.009% fee doesn’t change in a meaningful way if we introduce a revenue floor of $100 million to protect small companies. As internet revenues are projected to increase, more revenues will become available that will allow us to close the remaining 2% population coverage.
With such a compromise, we are substantially closing the digital divide by narrowing or eliminating the connectivity and affordability gap and putting the funding on a solid foundation for the foreseeable future. Both parties save face and deliver on their promises to their constituencies.
Roger Entner is the founder and analyst at Recon Analytics. He received an honorary doctor of science degree from Heriot-Watt University. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications. Follow Roger on Twitter @rogerentner.
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