Broadband Infrastructure Money at Risk of Creating More GON’s

As part of the massive new infrastructure bill proposed in November, Congress has promised to allocate $65 billion to broadband expansion and improvement. The vast majority of this amount, $42.45 billion, is set to go towards a new program called Broadband Equity, Access and Development (BEAD), which lawmakers say will channel money to underserved areas through state grants. Unfortunately, in practice this may mean creating a series of new government-owned networks (GONs). This is a problem because it means the vast majority of the allotted funds will go towards helping wasteful municipal broadband providers crowd out private proprietary providers, including wireless providers.

Lawmakers say the program will work by granting all 50 states an initial allocation of $100 million to spend on improving coverage, with the opportunity to receive more money in the future. Areas of priority will be those that lack coverage or are considered underserved. The Federal Communications Commission (FCC) defines underserved areas as any place that lacks access to broadband service offering download speeds of 25 megabits per second (Mbps) and upload speeds of 3 Mbps.

The National Telecommunication and Information Administration (NTIA) has been tasked with establishing the program and laying out guidelines. After submitting a 5-year action plan, states will then be free to open up grant opportunities to a range of stakeholders including local governments, utilities, public-private partnerships, and private entities, among others.

However, there is reason to be skeptical that this grant money will be used unwisely. History suggests that the government frequently privileges GONs at the expense of private broadband, despite the fact that GONs consistently provide costly and mediocre service at a higher cost to consumers. Proponents of GONs insist that existing providers underserve their communities and that a public option is needed in order to promote competition and provide low cost options to Americans.

If money is funneled to GONs, this would ignore the important efforts that private providers have made towards building out network infrastructure that benefit all consumers. Between 1996-2019 alone, private broadband invested more than $1.7 trillion in network infrastructure. That level of investment is simply not possible for most GONs who have a hard-enough time maintaining existing infrastructure.

Private broadband has the resources to make these investments by funding upkeep and making necessary upgrades. These resources also mean private broadband is the most well equipped to expand and upgrade networks into hard to reach places and improve access for lower income Americans. In addition, private broadband has the ability to offer reliable service at more affordable prices. And unlike GONs, costs are not hidden in municipal service fees such as electric and water surcharges, and community bonds, as is often the case.

The truth is competition is fostered best by a free market where private insurers can operate on an even playing field. Allowing GONs to compete for state grant money tilts that playing field in favor of municipal broadband, which is not subject to market forces and relies on public tax dollars for operation, and creates future liabilities for taxpayers and consumers. This opens the door to a wide range of potential dangers that the private market would simply avoid.

Moving forward, lawmakers should encourage the NTIA to prioritize grants to private insurers and those entities with a proven track record. Only then can the United States make a meaningful investment in broadband infrastructure that is free from government waste and effectively bridges the digital divide.

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