Tuesday, December 01, 2009

An A+ for Careful Targeting

The announcement by the National Cable & Telecommunications Association that is initiating what it calls its "Adoption Plus (A+)" program to increase digital literacy and broadband adoption for millions of low-income middle school students is welcome news. The two-year A+ pilot program combines digital literacy training with discounted home computers and discounted broadband service for qualifying low-income households. The details of the program are here in the NCTA press release.

The pilot program is called a public-private partnership because the federal government may choose to provide additional subsidies (presumably with already appropriated federal stimulus funds) for further discounts off of the price of the computers and school districts will be involved in implementing the digital literacy training. The federal government is also going to assess the effectiveness of the pilot program. NCTA says the value of the discounted broadband services provided by its participating member cable operators could reach $572 million over two years, depending on the extent of the low-income household participation.

It is always possible that the execution won't match the announcement's promise, at least in full. Nevertheless, NCTA should be commended for devising a carefully targeted program likely to have a positive impact. The focus on low-income households without computers targets assistance to a demographic group that lags in broadband adoption.

(The NCTA press release states the proposal is the product of discussions with FCC Chairman Julius Genachowski and Omnibus Broadband Initiative Executive Director Blair Levin, and that it was developed with their "encouragement." Assuming, as I do without any indications to the contrary, that the "encouragement" to which NCTA refers did not cross the line and become coercive – always a legitimate concern when a regulator encourages a regulated party to undertake a voluntary action – then these FCC officials deserve credit too.)

There is a lesson in design here too for the FCC. As my colleague Deborah Tate, FSF's Distinguished Adjunct Senior Fellow, proposed in August in a commentary piece, "the Lifeline/Linkup programs, which thus far have been somewhat underutilized, could be expanded to provide discounts for installation and monthly charges for today's broadband services just as they have for old-fashioned telephone services." In other words, the way to address universal service is by careful targeting of subsidies, not by making available broad subsidies in an unfocused manner that necessarily is wasteful of scarce resources.

The fact of the matter, as I have written many, many times in this space over the last several years, is that the FCC has been derelict in its responsibilities by not having done more to reform the broken universal service regime. With the universal service tax on every interstate and international telephone call reportedly set to jump from 12% to 14% in the first quarter of next year, it is imperative that the FCC – and Congress for that matter – face up to the responsibility to reform a system designed for a bygone era. The already bloated existing regime should not be expanded in an unfocused manner generally to include broadband services. Rather, as former Commissioner Tate has suggested, the FCC should alter the Lifeline/Linkup programs to allow subsidies for qualified low income households.

Cable's A+ pilot program, with its careful targeting of private resources, provides a good template for the way any complementary federal subsidy programs should be designed.