President Donald Trump’s plan to build “a stronger America” includes $50 billion for rural infrastructure, an unlimited amount of which can be used for broadband. This is too costly a proposal that could lead to more sinkhole taxpayer-funded broadband projects.
The White House released a few details about the plan last month. The $50 billion dedicated to rural America represents a quarter of the total federal funds in Trump’s infrastructure plan. Governors of each state — as determined by an as-of-yet unspecified formula — will get 80 percent of the money to spend as they wish. The other 20 percent of the funds will be provided to “selected states” that apply for Rural Performance Grants.
Some tech-focused websites such as Ars Technica are up in arms because the plan doesn’t dedicate any of the $50 billion to broadband. In the news release, Trump dubbed broadband expansion a priority, but it’s just one of several categories for which the money can be used.
Brent Skorup, senior research fellow in the technology policy program at Mercatus Center, said “states probably get more bang for their buck on transportation projects” and he’d expect most of the funds to go to those.
He’s curious, though, to see more details about the plan beyond the initial release.
“It would be a concern from my perspective if this was opened up to cities building their own broadband systems,” Skorup said.
There are countless horror stories of municipal broadband projects losing taxpayer money. The interactive map Broadband Boondoggles from the Taxpayers Protection Alliance Foundation shows hundreds of such projects across the U.S.
University of Pennsylvania Law School professor Christopher Yoo led a project examining the financial viability of government-owned networks, finding in a 2017 study that just two of the 20 networks examined are expected to generate enough revenue to recoup the costs of construction and operation. Eleven of the 20 have a negative cash flow, with most deeply in the red, and are expected to never turn a profit. The government broadband network in Powell, Wyoming, should turn a profit in 1,253 years — give or take.
Meanwhile, the expected useful life of such fiber networks is just 30-40 years. Yoo couldn’t determine the financial viability of another 60 government networks because their financials weren’t reported separately from their electric utility divisions, which implies co-mingling of funds between broadband and power.
Another concern is how states might allocate funds for broadband, making sure the money goes to the truly needy areas. In Minnesota, for example, a state task force set a standard that considers any area that doesn’t receive the Federal Communications Commission’s broadband standard of 25 megabits per second download speed and 3 mbps upload speed as unserved, rather than underserved.
Because Minnesota’s state broadband granting program now ties funding into that designation, truly unserved or underserved areas have more competition for the grants.
Skorup said if states end up using some of the money for broadband, it would be better put toward “middle mile” services such as for utility poles and fiber in public rights-of-way.
While Trump is pushing this infrastructure plan that could lead to a big boost in broadband funding, some members of the GOP would rather take a wait-and-see approach. They hope that de-regulation by the FCC, including ending the Title II designation for internet service providers, along with tax incentives, will spur broadband expansion.
“The real difference in philosophy appears to be that Republicans have a vision of encouraging a private company to do this through deregulation and tax breaks,” Harold Feld, senior vice president of the group Public Knowledge, told The Hill. “Democrats are saying, ‘We’ve got to build something and we’ve got to spend money to do it.'”
Democrats have lobbied for $40 billion in funding dedicated specifically to broadband. An FCC report released under former Democrat chairman Tom Wheeler during the Obama administration said that total would increase broadband availability from 86 percent to 98 percent of the U.S.
Speeds well below the FCC’s broadband standard are plenty adequate for such heavy bandwidth use such as streaming movies. Many consumers who don’t currently receive broadband speeds would barely notice the difference with a moderate speed boost. If the standard were not so high, less funding would be needed to meet it.
As part of his dedication to broadband expansion, Trump has wisely pushed for less-stringent regulations that are inhibiting its growth. This is especially true in his efforts to spur development of 5G wireless, which promises speeds of 1 gigabit per second and that may one day make fiber-based wireline internet obsolete.
FCC Chairman Ajit Pai praised that aspect of Trump’s plan in a statement released shortly after the White House’s revelation.
“Too often, regulatory barriers make it harder and more expensive to build out broadband than it needs to be — to the detriment of American consumers,” Pai said. “That’s why this plan is a welcome and strong call to action. I stand ready to work with the administration and Congress to turn this plan into a reality as we continue to bridge the digital divide and extend 5G digital opportunity to all Americans.”
Fewer regulations are good, but more spending can be bad.
The Trump administration should hold off on a large spending increase that could go toward broadband and instead try to spur private development with tax breaks and regulation reduction.
Johnny Kampis is an investigative reporter for the Taxpayers Protection Alliance Foundation. A version of his Op-Ed appeared on watchdog.org.
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