Broadband services have become an integral part of life in the twenty-first century, from keeping in touch with friends and family to finding a job. Most people in the U.S. already have broadband access, but unfortunately, not all. Programs do exist to help bring broadband connections to those wanting them, however many misdirect their resources to people who already have access.
The Broadband Equity, Access, and Deployment (BEAD) program and other government programs grant funds to provide broadband access to people without it. Unfortunately, there are an increasing number of cases where municipalities attempt to own and build out broadband networks to serve areas already served by internet service providers – effectively diverting funds away from unserved communities.
A recent report published by the Taxpayers Protection Alliance examines how funds are diverted away from those without broadband access. For example, several cities that already have broadband access are utilizing or planning new government-backed competitors in the market for broadband, often through local and federal grants. The city of Dallas has broadband coverage rates of over 90 percent but is considering spending $82 million on a citywide network instead of focusing resources on the limited number of people without broadband. Detroit is planning a $900 million citywide fiberoptic network, owned by the city, despite 88 percent of the population already having multiple broadband choices.
Some government-owned broadband networks examined in the report are designed in a way that does not serve the neediest people. The plan already enacted in Bloomington, Indiana allows a government-owned network there to skip places that would be expensive to serve, while cream-skimming easy-to-serve markets instead of providing ubiquitous coverage. Providing broadband access in unserved high-cost areas is exactly where these programs were intended to help.
Another new proposal from two counties in New Jersey would define an underserved community as anyone with a download speed lower than 100 Mbps – 4 times what is needed to stream an HD movie and well more than is needed for everything from social media to searching for a job. This redirects resources to many people who already have adequate broadband access away from the neediest.
Government-owned networks are entirely unnecessary and generally ineffective in giving consumers greater access to broadband services. For example, the Tax Payers Protection Alliance report notes that the proposal in Decatur, Alabama would require 30 to 35 percent of the market to be financially feasible. Spectrum and AT&T already have 99 percent and 95 percent coverage in Decatur, in addition to coverage by multiple wireless broadband and satellite providers. By adding a government-owned competitor, the incentive of existing providers to invest and upgrade in their networks is reduced. Not only does this defeat the purpose of the BEAD program to serve the unserved, but it devalues all of the prior private investments built out to serve everyone, leaving consumers worse off.
Other examples show government overspending, even when focusing on the unserved community. Waterloo, Indiana is implementing a $115.5 million city-owned broadband system to address the two percent of the city without service. Of that group, one-fifth chose not to have service because their smartphone was enough, they had broadband access elsewhere, or they just didn’t want it. The most common reason given for not having broadband access, two-fifths, was price, which can be addressed more easily and for less money through low-income families, rather than overbuilding networks.
Government-owned networks are a bad deal for consumers and taxpayers. Moreover, there is significant empirical evidence showing that many of these government-owned networks go bankrupt or recover their higher costs by raising taxes, bonds, and other utility bills. In the end, consumers and taxpayers pay more for less.
Instead of funding government-owned networks to compete with existing private broadband providers, BEAD funding should be used to encourage experienced private investors to buildout services to people who need it the most, and for those who need some assistance paying for services.
Government-owned networks are grossly inefficient and their use of government funding is wasteful. Consumers and taxpayers deserve better.
Steve Pociask and Justin Leventhal are with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.