Public funding alone not enough to expand rural broadband

The Federal Communications Commission (FCC) estimates that nearly one-fourth of the rural population —14.5 million people — lack access to broadband services. In tribal areas, nearly one-third of the population lacks access. Even in areas where broadband is available, approximately 100 million Americans still do not subscribe to services. The problem, often referred to as the digital divide or broadband gap, has seen renewed policy interest from governors and legislators since the world has turned more to virtual learning and business during the pandemic. One way policymakers have attempted to connect rural America is through public grants or dedicated funds. Just in 2021, proposals at the state level to expand broadband have included:

• Illinois state matching grants - $50 million in state matching grants will be awarded this year toward making progress on the state’s goal of universal broadband access in 2024.
• Tennessee capital injection - $200 million outlined in governor’s State-of-the-State address to help state achieve universal access broadband target.
• Georgia rural broadband grants - $20 million this year and $10 million each subsequent year included in budget as state moves to boost access to broadband in rural areas.

While these types of solutions are important to closing the digital divide, there are questions as to whether public funding alone is sufficient to expand rural broadband.

The Coronavirus Aid, Relief, and Economic Security Act (CARES) deployed a number of different public grant programs aimed at funding broadband infrastructure development, public-private partnerships, and making broadband expansion affordable for consumers. Furthermore, the American Rescue Plan created a $7.2 billion Emergency Connectivity Fund to reimburse schools and libraries for internet access and connected devices. These efforts are part of a larger push to connect rural America and close the digital divide. While their focus may be correct, is their solution?

Last Wednesday at a Senate hearing titled Recent Federal Action to Expand Broadband: Are We Making Progress?, Chairwoman Sen. Maria Cantwell (D-WA) read in her opening statement, “As we’ve faced a pandemic, the internet has become the place to go to work, to attend school, to see friends, to help visit the doctors, and do many of the day-to-day things that we've all had to do in our lives.”

Former FCC chairman Michael P. O’Rielly pointed out a disconnect between FCC policy and recent federal efforts to fund broadband expansion. “I have…concerns that recent federal investment efforts could undermine Commission efforts to promote efficient subsidies,” he said in his opening testimony. O’Rielly also noted some of the additional concerns related to broad public funding for broadband buildout and suggested that a focus on speed thresholds could contradict the goal of simply expanding broadband.

At another hearing one month earlier in the House Subcommittee on Communications and Technology, Rep. Frank Pallone (D-NJ) urged Congress to step up its efforts to connect rural America, especially given many employers preference for online job applications and online vaccine registration appointments.

Bipartisan legislation helped provide short-term assistance to connect more households. Under the Emergency Broadband Benefit program, created from legislation passed at the end of the last congressional session, eligible households will receive a discount of up to $50 per month towards broadband service and up to $75 per month for households on Tribal lands. The program provides short-term relief to families but does not address some of the underlying problems of the digital divide. The program is set to end after the COVID-19 emergency period or when the amount in the Emergency Broadband Connectivity Fund is exhausted, whichever comes first.

Public grants have been the method of choice for policymakers looking to expand rural broadband and connect rural America. While research measuring the effectiveness of public broadband grants is in the early stages, preliminary evidence suggests that public grants may not be sufficient to close the digital divide.

Researchers Todd Schmit and Roberta Severson from Cornell University studied the feasibility of establishing a rural broadband cooperative in Franklin County, a rural county in northern New York, which received funding for a feasibility study from the U.S. Department of Agriculture’s Rural Business Development Program. They found that even with federal subsidies to cover the construction costs, the co-op would need to charge $231 per month for its high-speed service option, a figure 131percent above market rates.

The researchers also studied the feasibility of an existing rural electric or telecommunications co-op expanding into broadband. In this scenario, they found the high-speed price improved to $144 a month, a figure still well above market rates. In a Cornell story describing the research findings, Schmit advocated for more than just building the systems for broadband and called for a more comprehensive approach that recognizes the importance of getting equal access to the technologies.

Schmit and Severson are not the only ones doubting the sufficiency of public grants to close the digital divide. Marty Newell of the Center for Rural Strategies suggests that policy solutions must be place-based and unique to each location. “The problem of rural broadband is that there are no one-off solutions. What works in Franklin County New York will likely not work in Letcher County Kentucky. We need local imagination and local innovation.”

The problem in dispensing large federal grants to address broadband expansion boils down to who builds out the infrastructure and who diffuses the cost.

Nearly every state now has a state-run broadband office to centralize broadband expansion efforts and many have set up dedicated funds. These offices are designed to localize broadband solutions, removing some of the difficulties with one-off federal solutions.

Even once the question of who will build it is sorted out, the question of how to diffuse the cost remains. A study commissioned by NCTA - The Rural Broadband Association pointed out the difficulties in using government subsidies to diffuse the cost of building out rural broadband networks. For any rural broadband investment to be successful, the government subsidy must not only cover the initial capital investment, including funding for physical assets such as conduit, poles, or fiber optic cables, but also the maintenance and operations costs on a per location basis.  

There are additional factors suggesting that public funding may not effectively solve the problem of rural broadband expansion. Keith Mueller, director of the RUPRI Center for Rural Health Policy at the University of Iowa, notes the difficulties in addressing local concerns when expanding rural broadband. “There may never be 100 percent acceptance of broadband. But maybe that isn’t the goal,” he said in an interview with SSTI. “Once we recognize the cross-cutting nature of broadband policy and its effect on all aspects of rural policy, particularly in rural health, we can adopt local solutions through trusted community leaders that will tone down some of the cultural tensions that exist between big government solutions and local community independence.”

Highlighting a similar issue, a report by Brookings underscored some of the additional problems that prevent the adoption of broadband expansion in rural regions. Even if public funding reaches its intended target, construction of broadband infrastructure is subsidized, and local communities have a viable path forward for expanding their broadband services, it is not guaranteed that the local community will support broadband expansion efforts. There may still be pushback from residents hesitant to expand technology services in their area.

While public funding is certainly a part of the rural broadband expansion equation, it is not sufficient in itself to address the problem. The Information Technology and Innovation Foundation (ITIF) notes in a recent report that despite years of effort and tens of billions of dollars in subsidies, the U.S. still faces a stubborn rural-urban broadband gap. Their solution is a large, one-time capital injection to buildout rural broadband infrastructure.

What’s clear is that public grants and dedicated funds are not alone capable of expanding rural broadband. In the coming months, SSTI will examine these issues in more detail as part of our ongoing Rural Broadband Series.