A Lost Decade: Ten years ago, the federal government began to implement a broadband policy that put rural America at a structural economic disadvantage to the rest of the country. We can do better.

September 11, 2019

A Lost Decade: Ten years ago, the federal government began to implement a broadband policy that put rural America at a structural economic disadvantage to the rest of the country. We can do better.

It’s been over a decade since passage of the American Reinvestment and Recovery Act (ARRA), which in part allocated many millions of dollars to the FCC to write a national broadband plan. By the summer of 2009, dozens of consultants were beavering away in FCC offices. An FCC task force was created, leading to 36 public workshops, 9 field hearings, 31 public notices, 75,000 pages of public comments, and 131 online blog posts. The task force produced a 360-page report composed of 17 chapters containing 208 specific recommendations.

The National Broadband Plan’s Number 1 Goal by 2020: “At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second.”

Meanwhile, the US cable industry was upgrading their broadband networks to DOCSIS 3.0, then 3.1 and, without government assistance or national government plans, reached 100 million households with Gigabit service in 2019.

Mission accomplished on the number one goal, right?* Well…that goal was really more of a projection of current industry trends than government action, and an under-projection by an order of magnitude.

You have to look elsewhere in the report for goals in residential broadband where the federal government has some actual influence, which is to say in rural, high cost areas. What of the rural goals?

In Chapter 8, the plan sets out a 2020 goal for rural America: 4 Mbps download, 1 Mbps upload.In other words, the expert agency of the federal government expected 100 Mbps availability for the vast majority of the country. And it set a goal for rural America, where it had work to do, at just 4/1 Mbps.

The federal government set a goal that put rural America at a structural economic disadvantage to the rest of the country and has spent a decade largely compounding the error.

  • A 4/1 Mbps goal when the federal government projected 100 Mbps availability for the rest of the country.
  • Still 4/1 Mbps, at a time when Google in Kansas City and Co-Mo Connect in central Missouri were planning and then launching Gigabit service.
  • Still 4/1 Mbps, when private investment in rural America demonstrated that 30-40% of rural households will choose and pay for Gigabit service.
  • Then slow and partial adjustments by the federal government from 4/1 to 10/1 Mbps.
  • And now spending until after 2030 to reach 25/3 Mbps.

I don’t think rural America has another decade to lose. The most common excuse I have heard from policymakers over the past decade for the incrementalist approach and the consequential harm to rural America: It’s better than nothing.

I suppose if our country were spending nothing, “better than nothing” could sound reasonable. But we don’t spend nothing.

Over the past decade, the federal government has spent over $50 billion on various rural broadband initiatives. Among these plans and actual expenditures were:

  • $2.5 billion for service with speeds from 768 kbps down/200kbps up all the way to 4/1 Mbps (Broadband Initiative Program, 2009);
  • $115 million in Connect America Fund I for 4/1 Mbps (CAF I, 2012);
  • $9 billion in Connect America Fund II for 4/1 Mbps, later changed to $12.6 billion for 10/1 Mbps (CAF II offer to price cap carriers, 2015);
  • $12.7 billion to small telephone companies for services of 4/1, 10/1, 25/3 Mbps or service upon reasonable request (ACAM program, 2016);
  • $5.4 billion to small telephone companies for services of 4/1, 25/3 Mbps or service upon reasonable request (ACAM II program, 2019)

This spending has been just part of tens of billions spent on e-rate for schools and libraries, for broadband infrastructure to rural health care institutions, for telecom network programs such as high cost loop support, interstate access support, Connect America Fund intercarrier compensation, Connect America Fund broadband loop support, the Rural Broadband Experiment, CAF I, the CAF II Right of First Refusal program, the CAF II auction, ACAM I, ACAM II, Mobility Fund I, Mobility Fund II, RUS Community Connect grants, ReConnect grants, Farm bill programs, state broadband grant programs, and on and on and on.

The federal government has already spent more money on rural broadband than would have been necessary to build fiber optic networks to every rural home and business in the country.

During this same time period, the collection by the FCC for the funds to support many of these programs has risen from 11.3% of the nation’s interstate and international telecommunications revenue to 24.4%.

Instead of a “spend once” approach, the federal government’s incrementalist approach has spent the public’s money repeatedly in the same places for services that are usually outmoded before the money is spent. And now we will spend money again in the same places.

For here comes the Rural Digital Opportunity Fund (RDOF), a $20.4 billion expenditure to replace the services in the very areas where the FCC has spent and is spending $9.6 billion. The RDOF has the potential of bringing next generation networks to most of rural America. On the whole, the proposal is a vast improvement over most federal and state broadband programs. It follows the descending clock, reverse auction format that was run smoothly by the FCC last year.

There are a few important shortcomings to the current proposal that must be addressed or we will lose another decade.

First, the FCC doesn’t take into account revealed consumer preferences. Instead, the FCC applies arbitrary weights to speed tiers as if the speed tiers alone were a true reflection of consumer preference. If the FCC were to use the data in its possession, it could more accurately reflect consumer preferences in its weighting. In its desire to be technology neutral, the FCC ignores the very real technology choices consumers make and, in so doing, overpays for technology that consumers don’t want.

Every six months, the FCC collects data from every ISP on the type of technology and number of subscribers in each census tract in the country. The FCC publishes the results of this data on an aggregate basis, but it has also run regression analyses to reveal consumer preferences. I think it is past time that the FCC uses consumer preference in its decision making, or at least makes the data and its analyses public. If we keep spending public funds on networks and services disfavored by consumers, don’t be surprised when we have to invest again to reinvest in networks in the same places.

Second, the FCC doesn’t take into account the value to the public of long-term investment. The tiers established by the FCC have resulted in a weighting system that favors less expensive, short-term investment. Instead, the FCC should favor last mile technologies whose assets lives are longer than ten years.

When I was at the FCC, I proposed a weighting system that favored networks that would need no further government support after the 10-year funding period concluded. I thought there should be a strong preference in the auction either for bidders who would agree to take no further public support or for networks that would require no public support for additional upgrades. The top tier in the FCC’s RDOF proposal is a Gigabit-capable network. I think some preference should be given for next generation networks, i.e., 10 Gbps available to the premise. If that sounds over the top, think of the longevity of the funding – the RDOF will be given out into the 2030’s. 10 Gbps is here already, and it will be the industry standard before the spending is done.

Third, the FCC doesn’t take into account community preferences. The CAF II auction revealed important community preferences. The vast majority of member-owned organizations (e.g., rural electric and telephone cooperatives) bid at the Gigabit tier to build fiber-to-the-home networks. Similarly, the vast majority of Gigabit tier funds in the CAF II auction were won by community organizations building fiber-to-the-home networks.

Of late, plenty of people seem to have discovered rural cooperatives, though with little understanding of the nature of these organizations. (For example, cooperatives are not a “public option.”) As I’ve written elsewhere, the FCC could use the RDOF auction as a way to foster local initiative, local ownership and local control by recognizing those principles in the auction format. https://www.conexon.us/conexon-blog/the-rural-digital-opportunity-fund-a-proposal-to-include-local-community-support-in-the-rdof-auction/

Who should make decisions that affect the lives and livelihoods of rural communities – the people who live and work in those communities or three people working in an office building at 12th and D St, SW, Washington, DC?

The FCC is currently seeking comment on its RDOF proposal. Members of our Rural Electric Cooperative Consortium will be proposing that the FCC use the auction’s weighting to favor long-term infrastructure investment, as determined by, owned by, and operated by local rural communities. Please join us.

 * In Shakespeare’s Henry IV, Welsh rebel Glendower tells his co-conspirator Hotspur: “I can call spirits from the vasty deep.” Hotspur responds, “Why, so can I, or so can any man; But will they come when you do call for them?” William Shakespeare, Henry IV, pt. I, act 3, sc. 1, 52–58.

Conexon Blog
About Jonathan Chambers
Jonathan has worked for over thirty years at start-up telecommunications companies and in the U.S. Government. Prior to joining Conexon, Jonathan served as Chief of the Office of Strategic Planning for the Federal Communications Commission. Jonathan was part of the senior leadership at the FCC that reformed $12 billion in annual federal spending, including the rural and high cost fund, e-rate, telecommunications relay services and the lifeline programs. For the majority of his career, Jonathan has worked with companies building broadband networks. Jonathan left the FCC to help electric cooperatives bring fiber-to-the-home (FTTH) broadband to rural areas throughout the country.

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