May 12, 2021 | Reprinted from Surface Transportation Innovations with permission of the author, Robert W. Poole, Jr.-Searle Freedom Trust Transportation Fellow and Director of Transportation Policy at the Reason Foundation.

While many critics fault President Biden’s American Jobs Plan for funding all kinds of programs that are not physical infrastructure, broadband has become basic infrastructure, much as electricity did in the first half of the 20th century. The Biden plan is modeled after the New Deal’s Rural Electrification Program, which provided federal funding to foster government-run or co-op electric utility providers, many of which still operate in rural areas. And that is a primary problem with the proposal. A growing array of critical comments point out three fundamental concerns with the plan, as follows:

1. By seeking to “future-proof” rural broadband, the proposal essentially requires (a) fiber optics only, and (b) “symmetrical” upload and download speeds, typically 100 MB per second for both downloads and uploads.
2. It prioritizes broadband that would be government or co-op-owned and implies a monopoly provider.
3. By referring to high prices and downplaying competition, it suggests future price regulation in what is now a competitive market.

In low-density rural areas, fiber optics is generally the most costly option, compared with wireless or satellite broadband. And insisting on symmetrical 100/100 uploads and downloads would be overkill for the vast majority of customers, who need much faster speeds to download than to upload data. Today only 4.3 million U.S. households lack 25 Mbps download/3 Mbps upload (25/3) internet access. Were the Biden plan adopted and 100/100 became the standard, more than 64 million households would be defined as underserved (although many have access to such service, but choose not to pay a lot more for that high-end option).

In a recent commentary, technology expert Andrea O’Sullivan pointed out that government-run internet services have not resulted in lower costs and sometimes led to higher costs. She explains:

“It is because government-run internet providers don’t feel pressure to turn a profit that costs and service suffer. One reason is implied in the fact sheet itself: the network is run for the benefit of employees and incumbents rather than the community it is supposed to serve. These government-run networks tend to end up as a hand-out for the people lucky enough to get the largesse, not the community as a whole.”

The potential of entrenching municipal or co-op broadband utility monopolies comes at a time when competition to provide rural broadband is increasing. SpaceX, as of last month had 1,355 of its planned 12,000 Starlink satellites in orbit, while OneWeb has 146 of a planned 300 of its broadband satellites in space. Amazon, last month, purchased nine rocket launches from United Launch Alliance for the first nine batches of its 3,200-satellite Kuiper network. The Starlink system has been in beta testing with about 10,000 mostly rural U.S. users for a number of months. CNBC reported mostly rave reviews from those customers, praising the superior service they are getting for $99/month. Users reported download speeds of between 60 and 150 Mbps, with some reporting peak speeds near 200 Mbps.

With at least three satellite broadband companies competing with each other within the next few years and also competing with fiber, wireless, and in some cases cable, it seems a bizarre time to spend $100 billion of federal taxpayers’ money on a program that would fund very costly fiber-optics and work toward a regulated monopoly model rather than a competitive market. Let’s hope Congress gets some heavy-duty briefings on what is really going on in this market before it makes a very costly mistake.