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President Biden’s American Jobs Plan set out lofty goals for broadband infrastructure, including $100 billion to achieve 100% coverage for all Americans
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Some powerful stakeholder groups and Republican lawmakers have pushed back on the underlying policies proposed to meet the President’s goal for broadband coverage
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Substantial federal funding for publicly owned or operated broadband networks based on a narrow definition of “broadband” could have significant effects on commercial providers
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The Biden Administration and congressional Democrats are not likely to backdown on their shared bias for fiber broadband connectivity in infrastructure negotiations
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There is still a long road ahead for infrastructure talks to determine a topline number for the package, agree on what constitutes “infrastructure,” and how to pay for it all
President Biden’s American Jobs Plan (AJP) sets out lofty goals with respect to building “high-speed broadband infrastructure,” including reaching 100 percent coverage to all Americans, favoring broadband networks owned by local governments and non-profits, and reducing the price Americans pay to access the internet.
The Biden Administration has already secured congressional approval for some $100 billion to promote broadband access, affordability, and infrastructure. But existing programs come with a raft of limitations and, in many cases, promoting broadband represents only one of many different goals state and local governments may elect to pursue. In seeking approval of the AJP, the Biden Administration has sought to dedicate $100 billion exclusively to build broadband infrastructure in the United States. Therefore, the true test of President Biden’s broadband agenda for the United States may hinge on the fate of the AJP.
Some powerful stakeholder groups and lawmakers on Capitol Hill have already raised concerns about how the government would distribute funds and, more broadly, have questioned the underlying wisdom of the Administration’s push for broadband internet for all.
Chief among the critics’ concerns is the amount of spending required to support broadband deployment. Another issue is the threat of imposing rate regulation to address “overpriced internet service” from commercial providers. Tipping the scale to favor publicly owned and operated broadband networks in areas where private companies have heavily invested in building out internet service also has some commercial providers and congressional members weary. Finally, terms like “physical connection,” “future proof,” and “scalable” in existing and planned programs point towards the Administration’s strong preference for fiber networks and symmetrical internet speeds that could leave wireless, satellite, and cable providers at a significant competitive disadvantage relative to fiber-oriented broadband internet access service providers.
In an early preview of negotiations to come, Republicans in April unveiled their own infrastructure proposal that would provide $65 billion in additional spending for broadband infrastructure through the Federal Communications Commission (FCC) and National Telecommunications and Information Administration (NTIA). No other details were provided on how that funding would be administered by the FCC or NTIA.
On May 21, 2021, the President agreed to reduce the price tag of the AJP, lowering the amount dedicated to broadband infrastructure to meet the Republicans’ proposed $65 billion level. However, no concessions were made on the President’s underlying broadband policies — “reforms to ensure these investments create good jobs, promote greater competition, and close the digital divide.”
Six days after the President’s counteroffer, Republican senators released a second counteroffer at $928 billion, falling short of the $1 trillion minimum amount that President Biden said he will accept for the final bill. Funding for broadband remained at $65 billion in the Republicans’ second counteroffer — meaning both sides agree on a topline for that infrastructure category. Other provisions in the Republican proposal require the government to fund spending through user-fees, which fall broadly on all consumers, as opposed to the Democrats preferred approach of increasing taxes on corporations and the wealthy. The Republican proposal also seeks to pay for infrastructure by redirecting unspent COVID relief funds.
Public versus Private Broadband Networks
The partisan divide runs deeper than mere differences over the price tag for broadband spending and how to pay for it. In contrast to the Republicans’ preference to rely on commercial deployments, the Administration has expressed a preference for cooperative and municipally owned broadband networks. The existing State and Local Fiscal Recovery Fund, for example, is a $350 billion fund that provides states and localities with financial assistance to respond to the pandemic, replace lost public sector revenue, address public health and economic problems, and, if they choose, expand access to broadband services. In adopting its interim final rule for the broadband spending under this program, the Department of Treasury said it encouraged state and local grant recipients to “prioritize support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.”
This express preference for public-sector over private-sector broadband spending has started to worry commercial service providers about where the Administration might direct broadband infrastructure spending.
As a practical matter, of course, the concentration of skill and expertise in deploying broadband services found in the private sector — as well as a strong preference for timely deployment — likely leaves the Administration with no choice but to turn to the commercial sector as a partner in broadband service delivery. So while the Administration’s broadband proposals may be giving the internet service industry and their supporters in Congress heartburn, the practical effect of preferences for publicly held infrastructure is likely to be attenuated both due to the need for legislative compromise to pass the AJP into law and in light of the scale and speed of planned spending.
If Republicans can set aside their idea of a fee-funded broadband expansion program in favor of government spending and if Democrats can set aside their dream of an array of non-profit and municipal broadband networks connecting the country, some form of further broadband spending seems likely. If so and if the AJP or something like it passes, what are the real risks to businesses in this environment?
Overbuilding – Not Rate Regulation – Poses Commercial Risk
The Biden Administration has said its broadband infrastructure program seeks to “find a solution to reduce internet prices for all Americans, increase adoption in both rural and urban areas, hold providers accountable, and save taxpayer money.” The Administration has also made no secret of its belief that, in President Biden’s words, “Americans pay too much for the internet.”
Biden’s critics have said these types of statements mean “some sort of rate regulation for internet providers might be on the horizon.” But fears of rate regulation are misplaced.
The Biden administration has not proposed broadband rate regulation and probably never will. In the unlikely event the Biden administration were to propose direct price controls on broadband, the odds that any form of rate regulation could secure even a one-vote majority in the Senate — much less a bipartisan, filibuster-proof majority needed to pass legislation in today’s partisan environment — seem vanishingly small.
Furthermore, even the most zealous liberal interest groups tend to shy away from price controls. Rather than pursue rate regulation, left-leaning activists have advocated for “price transparency” — basically a “nutrition facts” label for broadband — as a tool to simplify “the maze of additional fees and hidden costs” that can frustrate comparison shopping based on the total price of internet service. Better labelling is, of course, a far cry from rate regulation.
The hand-wringing about rate regulation of broadband internet access services ignores the larger and far more consequential risk to commercial operators: overbuilding. With up to $200 billion in broadband spending available in the near-term, the consequences of publicly funded competition to privately funded networks are profound. Subsidizing broadband services in areas that commercial service providers serve or intend to serve not only wastes Federal funds on markets that do not need it, but also saps market incentives for facilities-based deployment for years to come.
To avoid these disruptions, the AJP broadband infrastructure spending seems likely to prioritize deployment in areas that do not already have much, if any, broadband service to begin with. This approach represents a logical starting point for any type of triage: begin with the most urgent needs and then address those facing less pressing concerns. The fight will come in the details. In this case, the reasonableness of tackling broadband deployment in unserved and underserved areas depends on what is — and what is not — defined as “broadband.”
If wireless, hybrid fiber-coax, or satellite broadband services are defined out of the broadband equation due to insufficient speeds or insufficiently symmetrical throughput, then these non-fiber services will face two distinct challenges. First, the incumbents’ service areas may not qualify as “served” under some aggressive definitions of broadband; therefore, the government may prioritize these operators’ geographic market areas for government-subsidized broadband service deployments despite the commercial broadband deployments there.
Second, the incumbents’ broadband service offerings may not qualify as “broadband”; therefore, the incumbents’ services would become ineligible for the subsidies their fiber-based competitors receive. As a result, arriving at the wrong definition of broadband could mean not only wasting taxpayer dollars on broadband spending in markets that already have it, but also upending consumer choice and operators’ investment-backed expectations by spending those dollars on one technology over another. These twin effects could profoundly change the market for broadband services in the United States.
Despite the uncertainty of details while negotiations press forward, look for strings to be attached to any recipient or beneficiary of federal funding for broadband buildout. It is common practice for recipients of federal funding to meet certain requirements as a condition of that funding. In the case of broadband these could include additional price transparency and reporting requirements or perhaps even rate caps for non-competitive markets that only have a single service provider.
Administration Bias for Fiber
The AJP puts a premium on building “future proof” broadband infrastructure. Many within the industry see this as a code for traditional fiber-optic cable. This perceived bias for fiber has sparked fierce lobbying by providers using different methods of connectivity, including wireless, cable TV, and satellite providers.
One of the leading critics of the Administration’s affinity for fiber is the Wireless Infrastructure Association, which includes AT&T and Verizon among its members. According to the WIA, the AJP risks undermining the much-celebrated U.S. lead in 5G investment and will harm rural residents seeking better service for their mobile devices. The Internet and Television Association (NCTA) also opposed the fiber-favored proposal arguing that the AJP erroneously suggests government is better suited than the private-sector to build and operate internet networks.
These organizations have several reasons for concern. First, many Democrats remain convinced that the only reliable connection to the internet is a physical connection to the internet. Others, such as former FCC staffer and influential member of the Biden transition team Paul de Sa have concluded that fiber is not only the better solution, but also the more cost effective one.
Second, House Majority Whip James Clyburn (D-SC-06) and Senator Amy Klobuchar (D-MN), two democratic party leaders who are particularly close to President Biden, recently introduced the Accessible, Affordable Internet for All Act, which is a fiber-friendly proposal that recommends raising minimum broadband speeds required to receive certain federal subsidies.
Third, in his address to a joint session of Congress last month, President Biden announced that Vice President Harris will lead the Administration’s effort on broadband expansion under the AJP. In addition to Harris recently favoring giving local governments the ability to run their own broadband networks, she has previously indicated a strong preference for fiber. Before being tapped by President Biden as his running-mate and when she was running her own presidential campaign — Harris pushed her “Broadband for the People” plan that called for major subsidies to build out fiber infrastructure in underserved and unserved communities.
Still, opponents to a fiber-favored strategy can find some support for their position in Congress. Last month, as Commerce Secretary Gina Raimondo and other Biden cabinet officials testified before the full Senate Appropriations Committee on the AJP, Senator Lisa Murkowski (R-AK) pushed back on the concept of a fiber solution to the digital divide. Senator Murkowski, representing a state with some of the most rural and disconnected communities, stated that increased cell towers and satellites would provide a better path for full connectivity than fiber connections. Secretary Raimondo later conceded in the hearing that closing the digital divide “will require an openness to embracing different technologies.”
Next Steps
The path to a final infrastructure package will be a slow burn of negotiations and political plays over the next several months. Republicans and Democrats have yet to agree on three overriding issues that will be critical to bipartisan passage — (1) a topline price tag acceptable to both sides, (2) a clear definition of what “infrastructure” and “broadband” means, and (3) how the U.S. Government will pay for the plan. While conversations will continue to find common ground in these areas, look for the finer points on broadband policies to be hotly debated as well.
Authored by Aaron Cutler, Trey Hanbury, James Wickett, and Kolo Rathburn.
