Tuesday, November 17, 2020

A Troubling Allegation of Taxpayer-Funded Broadband Overbuilding

With a recent tweet (see below), FCC Commissioner Michael O'Rielly focused attention on a family-owned ISP's claim that government subsidies have been allocated to overbuild its existing broadband service footprint. The expansion of network infrastructure to areas in fact unserved is a worthy goal, one likely to receive increased attention in the months ahead. But sound policy should foster, not threaten, the central role that private investment performs in the deployment of high-speed Internet access to all Americans.

Late last week, the FCC released updated broadband deployment data based upon Form 477 filings. The number of unserved Americans decreased by 46 percent from 2016 to 2019, to 14.5 million. That is largely the result of private investment by broadband providers totaling $1.7 trillion between 1996 and 2018 – including $80 billion in 2018 alone.

As Free State Foundation scholars have argued time and again, however, the use of taxpayer dollars to subsidize networks that compete with privately funded providers undermines future investment incentives and threatens the continued expansion of access to unserved areas.

In a post written for the ACA Connects blog, Robert Jacobson, co-owner (with his wife and son) of Tongue River Communications in Ranchester, Wyoming, describes a concerning instance of the use of CARES Act funding to construct competing network facilities where it already provides service satisfying – indeed, exceeding – the FCCs definition of "broadband (25/3 Mbps).

According to Mr. Jacobson, these subsidies "could put Tongue River Communications on the brink of ruin in no time at all."

While I can't vouch for the veracity of his allegations, to the extent that they are accurate, they serve as a compelling example why government intervention must be limited to those areas where the economics have proven too challenging for private industry. Broadband service providers, large and small, have connected the vast majority of Americans. Government policies should encourage them to continue those efforts.