The Economic Standard: Close the Digital Divide with Private Investment and Competition

With this week’s presidential signing of the recently passed $1.2 trillion bipartisan infrastructure bill, the U.S. is poised to take a step to revitalizing our nation’s infrastructure with better and more resilient roads, bridges, ports, airports, high-speed broadband, and more. While the bill has been promoted as a necessary investment to repair the nation’s infrastructure, if we want to deliver quality high-speed internet access to the roughly 19 million consumers without broadband services – 14.5 million of whom live in rural America – policymakers need to encourage increased investment, innovation and competition from the private sector.

The infrastructure bill allocates approximately $42 billion to the “Broadband Equity, Access, and Deployment Program,” which includes nearly $4 billion to cover various administrative costs but leaves the remaining funds for grants to eligible entities to construct rural broadband infrastructure. Unfortunately, this spending will fall far short of what is needed. Just last month, Ericsson estimated  the total cost of closing the digital divide in America could run as high as $240 billion.

Moreover, government funds for broadband are often not well spent. A report by the American Consumer Institute found, in case after case, that government spending and provision of broadband services often came at twice the costs compared to private sector spending, frequently falling short of initial deployment plans and requiring taxpayer bailouts.

While government investments can provide a partial infusion of capital to help build infrastructure, only the private sector can sustain it over the long term. According to USTelecom, the private sector invested nearly $80 billion in broadband infrastructure in 2020 and amassed nearly $2 trillion in investment since the Telecommunications Act of 1996 was signed into law. In essence, private capital plays a very more important and effective role in providing higher quality services at lower prices.

Maybe the broader question is not what the government can do for you, but how the private sector can be encouraged to increase its broadband investment?

For starters, the government needs to promote innovation and investments into new technologies. Universal coverage will require the creative usage of a new, efficient, and competitive wireless technologies such as low-orbiting satellites, 5G small cell wireless infrastructure, and TV white space technology, as well as the continued deployment of terrestrial fiber facilities. This means encouraging competition among giant providers, whether that be gigabit speed service from Comcast or Elon Musk’s SpaceX Starlink Satellites. This rivalry will encourage a more ubiquitous investment, as well as more competitive pricing.

In another positive sign for competition and investment, Windstream, a regional broadband provider based in Little Rock, Arkansas and Uniti, a company with an extensive fiber network that covers much of rural America, are reportedly considering joining forces to reduce inefficiencies, and redirect resources into a large expansion of rural broadband. The proposal would expand high-speed internet to as many as one million more households in rural America, which – in addition to helping close the digital divide – would also add hundreds of new jobs.

These regional efforts would increase competition in rural areas and should be encouraged. Providing more choice to consumers will spur faster internet speeds, lower prices, and better service for communities that lack a quality connection to the internet. This is undoubtedly in the best interest of consumers and the rural communities in which they call home.

Another important way to encourage broadband competition and investment is to maintain “light-touch” regulations. When the FCC reclassified broadband services from an information service to a heavy regulated utility-like service, industry investment fell by $5.6 billion, only to rebound when the FCC reversed its decision. Because broadband investments represent long term decisions, regulators need to give the private sector the confidence that procompetitive light touch regulations will remain in effect.

The internet has become essential in educating our children, shopping for basic goods and services, connecting with our families, and even receiving healthcare in remote communities. The pandemic has only made the depth and stakes of our nation’s digital divide more apparent. While the new federal investments should be welcomed, we will only truly bridge the digital divide if we seek solutions that provide consumers with more choices for high-speed internet. That means encouraging private investment, innovation, and competition.

This commentary was published in The Economic Standard.

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