By Daniel Lyons

After serving as a running joke inside the Beltway for several years, “Infrastructure Week” took a step closer to fruition on Tuesday with the Senate passage of the Infrastructure Investment and Jobs Act. Included among the act’s $1 trillion in spending was $42.45 billion for broadband networks, which, if passed, would reflect the government’s most significant commitment to date to addressing America’s broadband availability gap. Closing the digital divide is an important goal, and there is much to like about the act’s approach. But other provisions raise significant concerns, while still others punt important questions to state and federal regulators.

The plan

The act appropriates funds for the National Telecommunications and Information Administration (NTIA) to administer as grants to state regulators to distribute for broadband build-out projects. Recipients of state grants must provide minimum speeds of 100 megabits per second (Mbps) for downloads and 20 Mbps for uploads, serve all customers in the project area on request, and must meet reliability metrics and offer a low-cost tier of service to eligible consumers. (I should note this is just one part of the act’s multipronged approach to broadband issues.)

The good

In many ways, the act reflects some helpful improvements over President Joe Biden’s vague infrastructure plan. Under the bill, states must first build in unserved areas (defined as those which lack access to 25 Mbps download speeds). Only after a state certifies it will ensure coverage to all unserved locations can it award grants for deployment in underserved areas (defined as those that are not unserved but lack access to 100 Mbps download/20 Mbps upload speeds). As I’ve written before, it’s questionable whether the government should subsidize projects in underserved areas at all. But the act appropriately recognizes that whatever the wisdom of such projects, they should take a back seat to proposals that bring access to people who lack any broadband whatsoever.

As a longtime proponent of regulatory federalism, I also appreciate Congress’ decision to funnel these grants through the states. State regulators have local knowledge and are often in a better position than their federal counterparts to understand the challenges to deployment in a particular area. Many states currently administer their own state-level universal service programs. Administering these grants at the state level can leverage existing experience and complement ongoing state initiatives. The Federal Communications Commission (FCC) has recognized this wisdom: In January 2017, the agency granted a waiver that allowed New York to administer its Connect America Fund Phase II funds in coordination with the state’s own New NY Broadband Program. State officials are closer to the constituents they regulate and therefore are more likely to respond to local concerns, suggesting they are more motivated to monitor compliance with build-out projects and move quickly to completion.

The bad

While I applaud making states the locus of fund distribution, I question the choice of NTIA rather than the FCC as the locus of oversight. Although NTIA and other agencies have administered some broadband build-out programs, the FCC is unquestionably the federal government’s expert on network deployment. As a subdivision of the Department of Commerce, NTIA is controlled directly by the executive branch, unlike the FCC, which is an independent agency. NTIA oversight thus involves a greater risk of politics intervening in funding decisions that should be made apolitically.

Also, unlike prior broadband bills, the act declines to require funds be distributed through a reverse auction mechanism. FCC experience has shown reverse auctions are the best way to ensure taxpayers get the best bang for their buck. During Phase II of the Connect America Fund, reverse auctions sparked competition that drove efficiency: Areas the agency estimated would cost $5 billion to serve were ultimately covered by a $1.5 billion subsidy.

The uncertain

The requirement that
subsidy recipients offer a low-cost service tier is potentially significant. It
recognizes that affordability is also a potentially
significant barrier to closing the digital divide. Unfortunately, the act fails
to provide benchmarks about this requirement. Instead, states must determine
the appropriate level of service and the universe of eligible recipients,
subject to NTIA approval. This may leave room for states to tailor requirements
to the needs of their local populations — or it may lead to under-provisioning
in some areas and rent seeking in others.

The 2010 National Broadband Plan estimated it would cost $24 billion to close the broadband availability gap. In the years since, numerous federal and state agencies have spent far more than this on broadband deployment. Most recently, the FCC launched a monster $20.4 billion Rural Digital Opportunity Fund. The infrastructure bill adds double that amount to existing spending — which should at least raise the question of when this work will finally be done.

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