Thursday, January 29, 2009

The Right Kind of Broadband Stimulus

In my view, the spending side of the House-passed stimulus bill is too large. Be that as it may, appropriating some funds targeted for furthering broadband deployment is a more worthwhile use of the public funds than many of the other targeted appropriations.

Still, with respect to broadband the bill could and should be improved, including in these ways:

  • Funds should only be allocated for build-outs in unserved areas, rather than for underserved areas as well. We know that about 90-92% of homes already are passed by a broadband provider. The focus should be on the remaining 8-10% that do not have access to any service (except satellite broadband). Under the bill, the FCC is tasked with defining an "unserved" area within 45 days. This is likely to be a very messy and contentious process.
  • The bill requires that NTIA ensure that grant recipients operate on an "open access" basis. The term "open access" is to be defined by the FCC not later than 45 days after enactment of the bill. Without belaboring the point, the stimulus bill is no place to effect what may be a far-reaching change in broadband policy. In effect, any definition of "open access" adopted by the FCC almost certainly will move broadband policy further in the direction of the traditional legacy common carrier regulation that prevailed in the last century. The "open access" label is no doubt appealing. But adopting open access as a mandatory condition, and then going through the process of defining what it means, and then going through the further process of implementing and enforcing whatever the regulator decides it means on any given day, inevitably will lead to a regulatory straightjacketing that will discourage investment and innovation. To put it plainly, "closed access" regimes, or what we frequently call proprietary systems, often spur innovation and investment in ways that mandated open regimes cannot. This is because the protection of property rights in proprietary regimes offers the prospect for realization of economic efficiencies that otherwise cannot be captured. In any event, having the FCC devise an open access rule in 45 days is no way to address the very significant issues involved. If our nation's policymakers think the government should impose open access mandates, the issue is consequential enough it should be considered outside of the appropriations process.
  • The recent report from the Pew Internet & American Life Project, authored by John Horrigan, once again focused attention on the fact that there are a number of reasons why Americans don't subscribe to broadband service even when it is available. While by no means the predominant reason, for a significant number of Americans price is a factor. Thus, as FSF Research Assistant Tristan Hardy suggested in his recent blog, it may make sense to direct some public funds to expand the Lifeline/Linkup programs to include support for broadband for low-income Americans who meet certain low income means-based criteria.

As the stimulus bill moves through the legislative process. it should be improved in these ways.