Biden infrastructure package ignores practical reforms to spur broadband deployment
Under the American Jobs Plan, the Biden administration would allocate $100 billion to build high-speed broadband. The proposal would distribute funding with a preference for municipal broadband initiatives and the construction of “future proof” infrastructure. It also seeks to reduce the cost of broadband internet to encourage adoption, though the means for cost mitigation remain unclear.
Unfortunately, this plan quickly becomes counterproductive. Municipal broadband projects often ignore the key challenge: the equilibrium number of firms. By adding an additional competitor that can cross-subsidize broadband provisions, municipal networks often disrupt the market and freeze private investment. Municipal broadband might make sense in communities that truly lack a business case for the deployment of private networks, but the plan would also make these communities more difficult to identify by distorting the definition of served.
“Future proof” networks has recently meant symmetrical speed and fiber networks. For example, some have called for a definition of broadband to mean speeds of 100 megabits per second (Mbps) both down and up, despite usage data highlighting that downstream traffic significantly outweighs that of upstream. The plan would essentially turn large portions of America into unserved areas, as most high-speed networks lack 100 Mbps upload speed. Worse, by focusing on giving every American home a fiber connection, the bill would prevent innovative new services from breaking into the market, regardless of whether they would be better suited for a particular deployment.
But there are steps regulators can take to spur broadband deployment.
Physical infrastructure constitutes only a portion of broadband deployment costs, much of which comes from things like the application and permitting process. While it is important for local governments to maintain rights-of-ways oversight and infrastructure installation, these processes often add significant costs to deployment. The Federal Communications Commission (FCC) has done significant work streamlining the process, but mostly for small 5G wireless facilities; broadband providers still face significant costs at state and local levels.
Unfortunately, the permitting process is only a portion of the issue. In a recent New York expansion, Charter Communications found that pole replacement costs accounted for about 25 percent of total network construction costs. These poles are owned primarily by electric utilities, and often must be upgraded to ensure that they can accommodate additional attachments while still complying with local regulations. Despite the fact that the pole owner receives the benefits from the replacement, the cost usually falls on the broadband provider.
The FCC addressed this issue, requiring that utilities share the cost of pole replacement in rural areas when attachments are not the sole reason for the upgrade. While helpful, the Commission’s jurisdiction only extends to investor-owned utilities. For many municipal and co-op- owned poles, broadband providers still face significant replacement costs. Worse, municipal and electric co-ops often charge significantly more than the regulated rates from the Commission for access to this vital infrastructure. If Congress does prioritize municipal broadband projects, it may mean private companies will face exorbitant costs to access the poles, functionally excluding them from the market.
Instead of subsidizing municipally run competitors who can access public rights-of-way and limit private deployment, Congress and state governments should focus on eliminating entry barriers: they should streamline the deployment process and extend the FCC replacement cost- sharing regime to all poles, especially those in rural areas where replacements often serve as a barrier to deployment. This will reduce the cost of deployment, maximizing the value of each subsidy dollar spent.
Broadband has never been more important for Americans across the country, but we must approach the problem thoughtfully to ensure we actually make broadband available to the entire country.
Image credit: Benedek Alpar
