On December 7, 2022, amidst historic levels of money flowing into broadband programs and a comprehensive mapping of internet connectivity across the country, AEI hosted a panel to discuss how we might do a better job as a nation this time around in creating measurable success, accounting for the tax dollars spent, and tracking the outcomes.

The panel of experts featured Michelle P. Connolly, a professor of the practice of economics at Duke University; James Prieger, a professor of public policy at Pepperdine University; Anna Read of the Pew Charitable Trusts; and Scott Wallsten, president of the Technology Policy Institute.

Below is an edited and abridged transcript of key highlights from the panel. You can re-watch the full event on AEI.org and read the full transcript here.

Mark Jamison: We have seen programs similar to what is being done now with the National Telecommunications and Information Administration (NTIA), the Treasury, and the Department of Agriculture. Tell us what you’ve learned through your research and the research you’ve reviewed about how these previously fared.

James Prieger: So the goal of NTIA’s Broadband Technology Opportunities Program (BTOP), for example, was to increase broadband access and adoption among populations that were considered underrepresented, particularly minorities and low-income households. There are three good empirical papers that have analyzed this program, one of which Janice Hauge, from the University of North Texas, and I worked on together. Let me just start briefly with describing what we found.

It appeared that at least the money was spent in counties with a high fraction of the target population, so those with low income or minority residents. So that was good. But you don’t want to just spend money—you want to get something for the money. What we examined was county-level data on fixed broadband access per household, comparing before and after, and controlling for trends in broadband access and usage that would have happened anyway. We looked at how the BTOP money that was spent related to outcomes that we were interested in, such as broadband access by the households. So without getting into econometric details, we did attempt to use methods that were designed to elicit causal effects in program analysis.

And the interesting thing that we found is that after controlling for trends we actually did not find any consistent impact of this funding on broadband usage. In some places, it seemed to be positively associated. In other places, it was negatively associated. In most places, it was just a statistical pile of spaghetti where you couldn’t find anything significant at all.

In rereading what Janice and I wrote now seven years ago, we reflected that the the NTIA ended up chosing a very limited interpretation of what accountability meant in practice. So people had to basically report that they spent the money wisely, but they did not require of grantees any sort of true program evaluation.

Mark Jamison: Thanks James—great insight. Michelle, could you talk about problem areas in current programs?

Michelle P. Connolly: One of the major problems within the new programs is that while they do mention things like reporting requirements, they’re really not clear about what kind of reporting is necessary. And so that’s exactly in line with what Jim was saying in terms of the BTOP program.

Related are issues within selection criteria. Given that unserved areas are often rural or mountainous, fiber is not the most efficient technology for reaching these households. But NTIA favors fiber above all other technologies, so immediately, we have a certain loss of or waste of money.

The other thing I want to mention is the laws in place that attempt to address anti-competitive concerns. A clear one is that if a municipality is providing internet service, it is also regulating any other internet service providers in their footprint. So there’s a regulatory conflict of interest. Additionally, both municipalities and cooperative internet service providers are insulated from regular market forces in the sense that they may have access to income from other areas and aren’t going to necessarily respond in terms of entering or exiting based on market forces. And the next thing has to do with the networks where internet service providers generally have to attach to utility poles that are within the footprint of a municipality or an area, and if the municipality or the cooperative provide electrical or telephone service, they usually own those poles, and they are exempt from federal rate regulation as to how much they can charge to allow a communications provider to attach to their pole.

So, the suggestion in the NTIA’s program that states should encourage local governments or electric cooperatives to provide broadband appear quite misguided.

Mark Jamison: Scott, your research has focused on what kind of processes we should use to ensure that whoever’s receiving broadband money is the least-cost provider for what’s being provided. Can you talk about some lessons from that research?

Scott Wallsten: We want some way to discover what the actual cost of providing broadband is, and it turns out that the best way is through what are called reverse auctions. That phrase kind of turns people off, but basically, it’s competitive bidding. Governments do this for everything. When they want to buy reams of paper, they say, “Who can give it to us for the least money?” That’s basically what’s happening with a reverse auction. It is not a new idea. It started in Peru, which showed that when you have companies compete for subsidies to serve unserved areas, you learn who can provide service for the least amount of money. The cost savings results in far more areas being served than would have otherwise.

It may not be realistic to think that every state is going to be able to build a reverse auction. So it’d be great to find ways that states can work together, that NTIA, more particularly, but more specifically, the FCC could help states.

Now, we also know that there’re significant costs for just running these programs, which is another way to compare it to the BTOP program. Just the amount of money Congress allowed for administrative expenses is just about the same size as the entire BTOP program, which is another interesting comparison. Money is there for evaluation if they want to do it. We don’t need glossy reports by a consulting firms just telling the government what it wants to hear. They could give money to local universities. Even a small amount of money would get graduate students all over the place doing different evaluations of these programs. We would learn so much and for so little money compared to what we’re now spending.

Mark Jamison: Anna, what comes to mind for you in considering funding approaches?

Anna Read: The NTIA’s Broadband Equity, Access, and Deployment (BEAD) Program is a matching grant program. So it incentivizes using the least commitment of federal funding for a given award possible. When we’ve looked at state programs, a number of states have used those matching grant programs, granted the amount of funding coming through state programs is significantly smaller than what any state will see with the federal funding. But many of those states are funding projects that come in with a much lower match than the required match percentage. If you have a 50/50 grant, they’re funding 80 percent of the project. And not every state again, but many states do have very clear and transparent grant scoring processes that incentivize the greatest jump in level of service for the lowest cost.

Mark Jamison: Thank you, Michelle, Jim, Anna, and Scott, for your insights. They’ve been excellent. The battle to modernize broadband and to protect taxpayers never ends. In fact, one thing we didn’t get to talk about was, how do we maintain momentum and attention? One of our problems in the past was that once the money is spent, people move on to something else, and accountability and reporting fall by the wayside. I’d like to thank everyone for being with us today.

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