Bandwidth Hawk
The BEAD program and other federal funding sources are under a renewed budget attack. It’s another reason for managers of small carriers to allocate scarce time to educating politicians.
By: Steven S. Ross, Broadband Communities
A recent report by the Information Technology and Innovation Foundation (ITIF) criticizing community-owned broadband systems should be seen as a major salvo in the competitive war between major national internet service providers and more than a thousand regional carriers — mostly cooperatives and other private companies and public-private partnerships – and not merely the small but growing number of community-owned systems the report focused upon.
ITIF is a “nonpartisan” 501(c)(3) organization that spends about $7.5 million a year, mainly to defend the interests of the nation’s largest tech companies. Through the Broadband Equity, Access, and Deployment (BEAD) Program, Congress provided over $42 billion in federal funds for broadband access in unserved and underserved areas, and larger carriers are certainly expected to get some of that money.
But apparently that’s not enough!
ITIF clearly wants to help the largest carriers get much more than “some,” both from BEAD and from other federal broadband programs at the U.S. Treasury, the Federal Communications Commission (FCC), and the U.S. Department of Agriculture (USDA).
This would also suppress as much competition for major carriers as possible, either by providing members of Congress with ammunition to rewrite BEAD and other laws or by rewriting existing regulations to favor large carriers.
Over the past decade, about half of fiber broadband connections to new customers have been built by major national and regional carriers, and about half by everyone else. But BEAD and regulations for it, from the National Telecommunications and Information Administration (NTIA), essentially ended overt, state-imposed restrictions on publicly owned broadband.
Under BEAD regulations, “eligible entities” for funding may not exclude cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments (“potential providers”) from eligibility for grant funds (NOFO Section IV.C.1.a).
The ITIF report
The ITIF’s December 3 report, starts with this stunning claim:
“In most cases, local governments have neither the competence nor the economies of scale to deliver broadband as well as private ISPs. So, favoring government-owned networks wastes societal resources, creates unfair competition, and is frequently unsustainable in the long run.”
That’s nonsense.
I got no response to two emails I sent to the report author asking for more details. But over the years I’ve seen about 100 draft financial models on proposed municipal and public-private partnership networks and more on private or coop networks. I wrote the models used by most of the industry worldwide and Broadband Communities put them into the public domain. I have long done free and confidential commenting.
Some business plans were silly, some ended up being poorly executed. But except for the very earliest days, I’ve never seen a pattern of greater competence on the part of the public sector. Municipal systems typically now hire known competent services for network management and physical repair. Those services barely existed 20 years ago. There’s also now a fairly large supply of competent consultants, managers, and other personnel.
There’s a vibrant vendor ecosystem, too. It has created affordable, highly automated network architectures, routers, switches and error detection/correction systems.
The biggest advantage I’ve seen – and it is not universal among municipal systems — has been forgiveness of local franchise and property taxes. But localities often agree to do that for private deployers as well. Communities want broadband. Why tax what you want?
My (often stated) attitude about who should build a specific broadband network is usually “whoever has access to the cheapest capital.”
I’ve certainly seen private profiteering, especially where a major carrier controls local middle-mile networks. But the idea that major carriers routinely take advantage of the public is also silly. The communications sector usually lags the S&P 500 although it has been ahead for the past few years.
Advantage: Major carriers
Major carriers have several huge advantages in this regard. They can and do profiteer when competition is weak or nonexistent, and cut prices when they have to. They also benefit from the fact that public systems must operate openly. The public competition’s plans can be and are monitored in advance by private competitors.
Monopoly carriers in the U.S. also have a spotty history on pricing honesty. Many customers (me included) have had “lifetime guaranteed” rates increased. This is especially true of national carriers. My “guaranteed” and quite cheap T-Mobile rate ($60, plus tax) for two lines was raised $10 last summer. Still cheap, but not what I was promised. Inflation? T-Mobile still advertises and offers the $60 deal, without the promise, to new customers, and most customers now access the cellular networks through their own internet providers’ Wi-Fi!
There’s an FCC docket and at least one class action suit over that. I’ve yet to hear of such arbitrary behavior by a government-owned carrier.
Major carriers unfairly tarred, too
I might add that much angst in liberal circles about American broadband prices being generally higher than European is also nonsense. Deployments are more costly here.
In western Europe, over half of all dwellings are in multi-dwelling buildings. Meanwhile, in the U.S., that’s under 30 percent. In much of Europe, “farmhouses” close to the cultivated fields are rare; farmers “commute” from small towns.
We can play with the statistics. The densest country in Europe, the Netherlands, has a population density of 1,400 people per square mile – more than 12 times the density of the contiguous United States.
Additionally, about half the land area of the USA has no permanent population at all. All that said, it clearly requires far fewer resources per household to connect Europeans, at least western Europeans.
The acronym BEAD includes the word “equity.” While the price for a lowest-cost service tier under BEAD is left up to the states, the consensus is that usually such a tier should be around $30 a month or less, except in particularly difficult-to-serve areas. Upsetting THAT is also being discussed in Congress.
I have documented (in a series of five detailed, award-winning reports on this site, starting in 2014) that states restricting municipal deployments tended to lose rural population faster and are at an educational disadvantage as well (even pre-pandemic). A good summary of those reports’ evolution, on a website sponsored by the American Statistical Association, can be found here.
Broadband is important and national carriers can’t be everywhere… and small local telecoms often need capital. Congress should resist the temptation to “balance the budget” by targeting aid to broadband deployers.
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