Joe Kane: Rural Broadband Infrastructure Should Fund People Wherever They Are

Future broadband funding should target those who need it, even if they live in cities or the suburbs.

Joe Kane: Rural Broadband Infrastructure Should Fund People Wherever They Are
The author of this Expert Opinion is Joe Kane, director of broadband and spectrum policy at the Information Technology and Innovation Foundation

Subsidies for rural broadband deployment enjoy unified political support. Endless rhetoric supports federal funding to make up the difference in areas where the upfront cost of broadband infrastructure is prohibitive. But now we’ve allocated hundreds of billions of dollars to rural broadband. To address the digital divide fully, the next focus should be to target broadband funding to those who need it, even if they live in cities or the suburbs.

It’s indeed more expensive to deploy broadband in rural areas than in densely-populated areas, but this reality has warped broadband policy: The Federal Communications Commission’s High-Cost fund spends over $4 billion per year to build out broadband infrastructure in hard-to-reach areas. All told, the Government Accountability Office estimates that the federal government spent $5.9 billion per year on rural broadband infrastructure between 2009 and 2017.

It’s time to face facts. A 2017 FCC study found getting high-speed broadband to 98 percent of homes and businesses would cost $40 billion. Since then, ISPs have increased their yearly capital expenditures by about $3 billion per year and existing subsidies have continued apace. Now, recent infrastructure legislation has added $65 billion more to the pot. It’s safe to say we’ve hit the $40 billion target and then some. If newly allocated funds are not enough to overcome the economic barriers to rural broadband infrastructure deployment, no amount of additional federal funding will likely do so, and it’s time to take the victories we’ve gotten and shift gears.

Money should focus on low-income individuals

The continued focus on rural subsidies is not just an issue for its expense and lack of completion. It necessitates a tradeoff that deprioritizes connectivity barriers non-rural individuals face. A recent federal grant for remote areas, for example, spent over $87,000 per household. That’s 126 percent of median household income and enough for an annuity that would pay $418 per month for life. That money could instead support many more low-income individuals who happen to live elsewhere while letting fast, low-latency service from low-earth-orbit satellites fix the most extreme rural connectivity problems without the need for subsidies.

The tendency to conflate “rural” and “in need” distorts reality: There are individuals of all income brackets in all types of areas. This distortion has perverse effects. The FCC’s High-Cost program is funded by fees levied on individuals’ phone bills. This “contribution factor” has skyrocketed in recent years—now up to one-third of individuals’ monthly bill.

This funding structure means that a relatively low-income urban dweller pays a higher bill to fund Internet service providers’ construction of infrastructure for rural landowners who might be significantly better off financially. With so much cash already committed, policymakers should stop using this blunt instrument that heaps billions of dollars onto certain swaths of land while shortchanging the digital divide that persists among individuals in other parts of the country.

While rural America shouldn’t be left to fend for itself, lower-income individuals in suburban and urban areas are no less deserving of broadband funding than their rural counterparts. Going forward, funding should go to those who need it, regardless of where they live.

The FCC should reduce the new high-cost spending

To start, the FCC should reduce new High-Cost spending by at least 75 percent and transfer some of that funding to programs that fund individual needs. The FCC already administers these types of programs. Lifeline and the Affordable Connectivity Program, for example, discount phone and broadband service for people with low incomes. These programs, combined with ISPs’ existing offerings to low-income Americans, could form the cornerstone of a more equitable broadband funding policy.

Furthermore, these programs should become more flexible. Polling shows that the largest barrier to broadband adoption is not its price, but non-adopters finding it irrelevant. Targeting this barrier to adoption should be the top priority of a policy to close the digital divide. Therefore, funding should be available for digital literacy efforts that demonstrate the value of the Internet to those who don’t think it’s for them. Allowing funds to defray the cost of Internet-connected devices would also advance the goal of closing the digital divide.

This proposed shift should still allow individuals’ benefits to be used for their Internet bill, which will, in turn, continue funding infrastructure because it justifies the cost of ISPs’ broadband buildout. The difference is that consumers would use that option only if ISPs can provide good service at the right price.

Instead of handwringing over who to tax to fund more subsidies to ISPs, policymakers should give consumers control. We continue to make tremendous progress toward closing the digital divide, including spending unprecedented amounts to get rural America up to speed. Adoption is now the key barrier to universal connectivity, and our policies should reflect this shift rather than continuing a lopsided distribution to rural areas.

Joe Kane is director of broadband and spectrum policy at the Information Technology and Innovation Foundation. This piece is exclusive to Broadband Breakfast.

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