By Daniel Lyons

President Joe Biden has announced the American Jobs Plan, a wish list of public infrastructure proposals carrying a whopping $2 trillion cumulative price tag. Even the high-level summary released by the White House yesterday contains intriguing details — for example, the plan embraces advanced nuclear power, which seems like a no-brainer given that fission is the most efficient and reliable source of carbon-free electricity, but this approval may surprise many renewables advocates. The plan also calls for $100 billion to “bring affordable, reliable, high-speed broadband to every American.” This is a noble, long-standing policy goal with bipartisan support, and the plan accurately frames the multifaceted problem of America’s digital divide. But the devil is in the details — and the few details released so far cast significant doubt on how Biden hopes to achieve this goal.

The Biden broadband initiative seems influenced by pending legislation on the topic, including the recently introduced Clyburn-Klobuchar broadband bill and the Leading Infrastructure for Tomorrow’s America Act, which I testified on in 2019. Like those bills, Biden’s plan correctly recognizes that America’s digital divide is a multifaceted problem. Closing the gap requires attention to both availability and affordability: subsidizing construction of networks in places where the business case does not support investment and providing assistance to low-income families that have access to broadband networks but cannot afford the monthly service and equipment needed to get online. Biden should be applauded for thinking comprehensively about the drivers of the broadband gap.

But the administration
raises more concerns than it answers about its solution to the problem. First,
the plan says it will prioritize “future proof” networks without explaining
what that means. Predicting the future of telecommunications networks is a
fool’s errand — ask the congressmen who so carefully planned the future of
local telephone competition in the 1996 Telecommunications Act. To the extent
that this language signifies a preference for fiber networks over other forms
of connectivity, that would be a mistake. Recent auctions have embraced a
technology-neutral approach to subsidizing unserved areas; indeed, small
wireless internet service providers have been some of the greatest success
stories in our efforts to connect rural areas. Picking winners and losers among
network models undermines the intermodal competition that pushes all
technologies forward and increases the chances of finding the most efficient
way of serving individual pockets of unserved customers.

The plan also seemingly
equates “unserved” and “underserved” areas, which present two very different
challenges for policymakers. Unserved areas lack any broadband access. By
comparison, underserved areas have an existing provider whose network
performance does not meet some (as-yet-undefined) benchmark. Subsidizing a new
company to compete directly against an unsubsidized competitor raises different
issues than does providing service where none currently exists, and it can
effectively punish companies that have invested private dollars to connect
hard-to-serve populations economically. Unserved areas should be the
administration’s priority.

The plan also ominously hints
at rate regulation as a solution to the affordability problem. Rather than
focusing on providing assistance to low-income households, the administration
suggests that “Americans pay too much for the internet” and commits to reducing
internet prices for all Americans. This may play well to voters, but the hidden
costs of price regulation are steep. As I recently discussed in a piece about the
Texas blackout,
political pressure to keep prices low can lead companies to forego investment
in resiliency and innovation.

Because of America’s light-touch regulation of broadband, companies invested billions of dollars in network capacity in recent years, which gave us the capacity we needed to meet the increased traffic due to the COVID-19 pandemic. In Europe, where regulators manage prices more carefully, networks had less capacity to absorb that traffic spike, leading to the embarrassing spectacle of EU officials begging Netflix and YouTube to downgrade the quality of their video streams to European consumers as lockdowns were imposed.

Finally, the plan
misunderstands its genealogy. It leans heavily into the 1936 Rural
Electrification Act (REA), which brought electricity to homes and farmhouses
across America, as its statutory progenitor. But few remember that the REA
provided loans, not grants. While repayment terms were generous, the fact that
borrowers had to repay helped assure that public funds were deployed
efficiently. This key control is lacking in today’s broadband buildout efforts,
which may explain why America faces a broadband gap despite spending countless
billions of dollars on buildout subsidies.

Connecting America is unquestionably
a noble aspiration, and the Biden administration should be commended for
treating the issue seriously. But we should engage in a more robust analysis of
the best ways to close the digital divide before committing such an
unprecedented amount of public funds to the cause.

The post Biden’s infrastructure plan: Implications for broadband appeared first on American Enterprise Institute – AEI.