Oct. 9, 2024
Public Policy Proposal for Fixing the Rural Broadband Rollout Fiasco
Numerous published essays about the failure of the $42B broadband subsidy boondoggle point out that no actual new rural broadband connections have occurred. Proponents promise it is coming. It is a safe bet that it will never come, and the taxpayer funds will disappear down some rathole. The reason is classic crony capitalism. It all boils down to perverse incentives built into the subsidy programs that result in taxpayer dollars lost to fraud, waste and abuse.
I should know. I have been researching and publishing papers on this issue starting in the 1980s on a contract for the US Congress Office of Technology Assessment. I published an analysis of the last big broadband subsidy program called the American Reinvestment and Recovery Act of 2009 (ARRA). The money ended up going to bureaucrats, planners, lobbyists, lawyers and incumbent network operators with no actual results required of successful applicants.
As usual, the Congressional Budget Office (CBO) was given a legislative mandate to track the money to be sure promises made by grantees were kept but, as usual, in the end there was no accountability for failure to produce actual new broadband connections. The reason, as usual, is because there is a new administration with different priorities or the funds budgeted to track results and hold people accountable runs out (as happened with the ARRA).
The latest boondoggle called Broadband Equity Access and Deployment program (BEAD) is déjà vu all over again. Politicians never learn, the only difference in the story this time around is ARRA wasted $7B and the BEAD program is wasting $42B.
The Solution
What’s missing in many critical policy analyses of both ARRA and BEAD is a simple solution that avoids perverse incentives and instead aligns incentives to promote actual results and provide accountability measures. Simply put: subsidies are granted based on actual results not promises: no subsidies are granted unless they are directly tied to new household connections. The ARRA experience proves that the money invariably runs out before objectives are met.
Entities that apply for and receive subsidies based on grand plans for network expansion will have to prove that they indeed provided new household broadband connections in accordance with the promises they made, or the “planning” funds must be returned to treasury. Also, no specific technology is favored, wired or wireless.
The ARRA and BEAD subsidy schemes favored fiber-optics and disallowed satellite solutions even if the latter costs less. For example, even though Starlink satellite technology is clearly the least cost solution to provide broadband service in many, if not most, household locations in truly remote areas or rough terrain, the NTIA and FCC preempted this technology in favor of more costly and technically challenging fiber-optics lines.
All that is required for this solution to work is to keep track of how many individual household’s or small businesses in rural areas receive new broadband connections. The databases are available for tracking results and even the government should be capable of this. Truth be told, the private sector is likely a better option for tracking the money spent and holding grantees accountable after the fact.
Bruce L. Egan
Economist
X @brucegan
307 413-2782
About
Bruce L. Egan (began@wyoming.com)
is an economist and Research Fellow, Columbia Institute for Tele-Information (CITI), Columbia University, New York. He was appointed by the Governor of Wyoming to the Wyoming Telecommunications Council (2003-2007) to develop and implement a statewide universal broadband access policy. He was a founding Director (1999-2001) and Chairman of the Board of Election.com, an election services company, and co-founder and Director of Everest Communications, a broadband wireless start-up. He was adjunct professor in the Executive MBA Program at Columbia University Graduate School of Business (1996) and from 1996-1998 was Executive Vice President of INDETEC International, a consulting firm specializing in media and telecommunications. Mr. Egan has over 35 years of experience in economic and policy analysis of telecommunications in both industry and academia. Before joining CITI in 1988, he was an economist at Bellcore since 1983, and Chief Economist at Southwestern Bell Telephone Company from 1976 to 1983. Mr. Egan has published numerous articles in books and journals on telecommunications costing, pricing and public policy. He has been a consultant to several Fortune 500 companies, the U.S. Congress, European Community, United Nations, OECD and others. His research concentration is public policy and economics of technology adoption in telecommunications, and he has written two books on the subject titled, Information Superhighways Revisited: The Economics of Multimedia (Artech House, Norwood MA 1997) and Information Superhighways: The Economics of Advanced Communication Networks (1990). His latest publication is “Universal Rural Broadband - Economics and Policy”, Demand for Communications Services – Insights and Perspectives, (Springer 2014).
Let me lay out a few of the challenges that this suggestion presents, at a technical level: