The incredible shrinking US broadband plan

[Commentary] A year into the National Broadband Plan and two years into the Obama Administration, it is worth looking at the progress in promoting an infrastructure that candidate Obama had declared essential.

The idea is to liberate 500 megahertz of spectrum, to auction it off to providers of 4G, presumably mobile telecom companies, thus more than doubling their spectrum, and to use the proceeds to create broadband connectivity for unserved areas and people. In the end, it is likely that much less spectrum will be available for auctioning than envisioned, and hence less money would be generated. In other words, a major struggle with broadcasters in the name of broadband Internet will result in $19.6bn for non-broadband purposes, and in only $8.2bn towards infrastructure, all of it for 4G wireless. Why then not move the national effort to fibre, which by general agreement, is the road to the future? The problem is that the Federal budget deficit does not permit the funding of a national fiber initiative. This leaves the government with the fallback to use an off-budget currency – spectrum allocations— to advance its goals, and it shapes its preference to the wireless platform. But if fiber upgrades are to be pursued, too, how would those investments then be generated? The approach here needs to generate creatively off-budget strategies.

It would have four elements:

1. Tax incentives, through investment credits for incremental high-speed network upgrades in low-density areas, and for certain hardware upgrades by low-income end-users.
2. Regulatory incentives, such as encouragement for cable, telecoms, and other infrastructure providers to share the fiber in low-density areas and thus lower their cost, subject to openness requirements and consumer protections.
3. Creation of a Federal off-tax funding mechanism. This already exists through the universal service fund for rural telecom and is being transformed into a wider mechanism for broadband. It is, in effect, an internal taxing mechanism for telecom and soon for broadband, paid through a levy on communications bills. However, the amounts raised today for high-cost areas is about $4.5bn, of which maybe a third would go to fiber, and are not enough to fund fiber nationally. Expanding this mechanism would be the most realistic source of funding, and it might find the approval even of anti-tax Republicans because it is pro-rural and not formally a tax.
4. Local cost sharing. There should be a much stronger role and responsibility for states and municipalities to support the infrastructure in their states following their own priorities. They could work with private companies, and use tax-free municipal bonds to support these projects. This should be promoted by Federal matching contributions, using the broadband fund mentioned above.

To conclude: the vision of a nation-wide fiber infrastructure should not be replaced by merely facilitating the new generation of mobile communications, and then relabeling it high-speed broadband. If the US is losing its technology lead it is not because of a lack of private sector initiatives, but because its government is losing the ability to do or enable big things.