Rural broadband has emerged as a major priority for both political parties as work-from-home and remote education became commonplace this year.
A Biden administration must decide how to spend nearly $5 billion in annual rural telecommunications subsidies more effectively. The Trump administration raised the profile of rural broadband with policies that helped millions of households gain high-speed service, but years-long controversies about broadband maps—which determine whether households are actually served—and the ineffectiveness of legacy subsidy programs remain.
The new administration could rehash these old debates, or it could do something different: convert the existing subsidies for broadband providers into a voucher program for rural households. My new research estimates that every rural household in the U.S. could receive between $5 and $45 per month to reduce their broadband expense.
FCC’s 25-Year-Old Fund Is Suffering
The Federal Communications Commission oversees a nearly 25-year-old fund that disburses $4.8 billion annually to broadband providers serving rural areas. It suffers from complexity and puzzling disparities between and within states.
For one thing, around $740 million in these subsidies flowed to providers in only five states in 2018. Together, those states have fewer than 1 million rural households. In contrast, less than $600 million went to rural providers in 15 states—including Florida, Pennsylvania, Ohio, and Michigan—with over 8 million rural households.
My colleague Michael Kotrous and I estimate that the funds going to Alaska amount to over $2,100 annually per rural household. This figure is only $210 in Texas, and it’s a pittance—about 75 cents annually—in Rhode Island.
Complex, conflicting subprograms are another problem. The FCC alone has 17 rural telecom subsidy subprograms. Each has unique formulas and eligibility requirements for providers.
Take one major subprogram created in 2016—the “Alternative Connect America Cost Model.” Economic modelers worked for 10 months to narrow down “twenty-eight topics related to economic and engineering assumptions and input values” into the initial cost model. Highly specific inputs—sometimes tailored to individual companies—drove the more than two years of development, 11 iterations, derivative models, and regulatory overhead. Furthermore, elements of this funding model are black boxes for researchers, preventing independent review.
Multiply this process across several programs, and it’s easy to see why it’s difficult to get rural broadband funding where it’s needed.
Vouchers Would Reduce Disparities
A broadband voucher program would reduce the disparities, and, unlike today’s programs, give every rural household a benefit. Our proposal recognizes that some states are more expensive to serve than others. For that reason, in states like Alaska, Montana, and Kansas, every rural household would get a $45 coupon to defray their broadband expenses.
Rural households in states with more population density, like Connecticut and Rhode Island, would get a monthly $5 coupon. That reduces the Alaska-Rhode Island disparity from 2700:1 to 9:1.
Further, a broadband voucher doesn’t favor one technology versus another. Though the Trump FCC improved matters, it remains the case that a relatively small number of providers participate in the existing programs because many rural providers are dissuaded by the paperwork burdens or excluded outright.
With a voucher in hand, consumers could simply choose the internet service that works best for them—whether it’s from a rural cable company, wireless provider, phone company, satellite company, or their cellular provider.
A voucher program would de-escalate the controversy in many states about whether to subsidize public and quasi-public broadband providers like municipal networks and electric co-ops. If a municipal provider or electric co-op succeeds in gaining a rural customers’ voucher, that’s a product of consumer choice, not regulators tilting the scales for public providers.
Finally, a voucher makes it easier for states to supplement federal support with their own programs. Imagine low-income parents in rural Texas seeking broadband so their children can attend school at home. They would qualify for the existing $9.25 federal Lifeline (low-income) subsidy, plus a $19 federal coupon in our rural plan. If the state created its own rural broadband voucher program, the family would have an even more substantial discount.
One common objection is that unlike direct subsidies, vouchers don’t induce providers to expand their networks into unserved areas. However, there are wireless providers that can quickly provide broadband in rural areas at one-tenth the cost of landline providers, and small wireless providers are largely left out of the existing rural programs.
The U.K.'s experience with rural broadband vouchers in the past few years has been instructive. Telecom regulators and providers encourage unserved customers to “pool” their vouchers together. The combined effect and promise of reliable payment induces providers to build to rural homes that previously had no provider.
This is not a red state/blue state issue. Lawmakers from each party recognize the problem of rural areas with few or no broadband options. Covid-19 made connectivity even more important for the economy and education. The new administration should avoid past debates and reimagine a modern rural broadband policy.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Brent Skorup is a senior research fellow at the Mercatus Center at George Mason University, member of the FCC’s Broadband Deployment Advisory Committee, a former member of the Arkansas broadband advisory committee, and a co-author (with Michael Kotrous) of the recent policy paper, “Narrowing the Rural Digital Divide with Consumer Vouchers.”
The opinions expressed here are the solely those of the author.