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Biden's $100B Broadband Plan Faces Some Big Challenges

by Dan Grossman | Apr 12, 2021

The need for universal broadband access, and the “digital divide” which deprives substantial numbers of Americans of what has become a basic need, have become a cliché. This is one of the very few truly bipartisan public policy issues: officials on both sides of the aisle recognize it as a problem which affects their constituencies and understand that the government has a role in solving it.

To date, government funding has been fragmented and inadequate, a combination of operating subsidies from the Federal Communications Commission’s high-cost fund, loans and grants from the US Department of Agriculture, state grants and loans and local government debt financing. A large tranche of operating subsidies from the FCC – the Rural Digital Opportunities Fund (RDOF) – and a favorable climate for private investment in public broadband projects have enabled the pace of new rural and high-cost urban broadband deployments to pick up in 2021. The proposed $100 Billion in broadband funding in the American Jobs Act, if enacted and signed, will greatly accelerate the slow process of closing the broadband divide.

The promise of closing the broadband divide with the proposed American Jobs Act will have to withstand three major challenges:

  • The price tag is monumental, and to be paid in large part by raising taxes and in part by adding to the Federal debt. This makes it a partisan issue. Whether the American Jobs Act is enacted, and how much is included for broadband remains to be seen.
  • A feeding frenzy ensues whenever the Federal government places large sums of money on the table. Squabbling has already begun over whether the funding should effectively be restricted to FTTH, or whether fixed wireless and low-earth orbit satellites should also be eligible. Other interests are also looking to carve out some of the funding for themselves. Some part of the money will inevitably be wasted. Unqualified actors will receive funding, price tags will be inflated, projects will fail needlessly and there will even be some graft. At the same time, some communities will be unable to participate because of high bureaucratic hurdles. The details of the program will determine how efficient it is.
  • Labor and materials are both in short supply. Manufacturers of optical fiber and fiber optic cables have months-long production backlogs, even with new manufacturing facilities coming on-line. Prices have risen sharply as a result. The backlog puts schedules at risk, which in turn may lead to defaults on funding conditions. Skilled labor is also in short supply. In particular, there are severe shortages of fiber splicers and tower climbers. A portion of the funding will have to go into workforce development. Even as the unemployed from other industries are put to work, their productivity will be limited in skills that require years of experience to fully learn. Meanwhile, experienced workers will have to turn their hands from doing to teaching, further slowing progress. The labor shortage has driven up wages, harmed worker retention and caused schedule slips. This situation will take several years to resolve.

Despite these challenges, if the digital divide is to be closed, a large infusion of Federal money will be needed to do it.  The alternative is pockets of economically depressed rural and urban areas, isolated and disconnected from the national economy.

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