Broadband Subsidies for Community Anchor Institutions

The SHLB Coalition developed Connecting Anchor Institutions: A Broadband Action Plan to provide ideas and actionable policy recommendations for government leaders at the federal, state, and local levels to address the broadband needs of anchor institutions. The ten policy papers highlight connectivity gaps and explain why broadband access is vital to communities nationwide. In the coming weeks, the Benton Foundation will be highlighting each of the Action Plan policy papers. The following is an excerpt of the seventh paper. Later this month, we'll be looking at Rural Broadband Programs. To read the complete Broadband Action Plan, visit www.shlb.org/action-plan

Introduction

Studies show community anchor institutions (CAIs) often cannot afford to purchase the broadband capacity they need to serve their communities. While the E-rate and Rural Healthcare programs have been enormously helpful, many schools, libraries, and healthcare providers still report they cannot purchase sufficient broadband because of the cost or because robust broadband networks are not available. Many other anchor institutions—such as public housing, community colleges, community centers, and other community-based organizations—do not receive federal subsidies for broadband connectivity and have even more trouble finding the resources to pay for reliable broadband. Federal, state, and local governments need to address the connectivity challenges of tomorrow by providing additional financial resources and incentives to CAIs so that they can afford to purchase broadband services that meet their needs.

Anchor Institutions Often Cannot Afford to Pay for the Reliable Broadband Services They Need

Broadband prices are often higher than anchor institution can afford to pay especially in rural areas. Many anchor institutions cannot afford their share of the cost of broadband, even after receiving federal funds from programs like E-rate. This could be the result of insufficient local budgets or excessive pricing by broadband providers. Because there is often little competition in rural areas, broadband providers may have little incentive to lower prices, especially because they realize the E-rate and Rural Healthcare programs will subsidize a portion of the cost.

Anchor institutions other than schools, libraries, and health clinics likely face similar challenges obtaining affordable and reliable, high-capacity broadband, but there is little data collected to document the scope of this challenge.

Adapting to Anchor Institutions’ Broadband Needs

While some states and the federal government have programs that provide funding for anchor institutions, the demand for broadband services continues to grow and government programs need to be reformed to adapt to the changing marketplace.

In 2014, the FCC added $1.5 billion in annual support, indexed to inflation, bringing the E-rate program to about $4 billion per year. Recognizing the high costs of building additional broadband networks, the FCC also offered to award an additional 10 percent in E-rate funding to states that contribute their own funding to support 10 percent of the costs of special construction projects deploying fiber to schools and libraries. This decision could help make fiber connectivity more affordable, especially in rural areas.

The FCC also allowed schools and libraries to self-provision fiber—that is, construct, own, operate, and maintain their own network or a portion of a network—as long as they compare the costs of doing so to the costs of leased services. But the FCC did not increase the percentage subsidy for rural schools and libraries that purchase service using existing networks.

The FCC also reformed the Rural Health Care (RHC) program in 2012, but the reduction in the amount of subsidy from 85 percent for the RHC pilot program to 65 percent for the Healthcare Connect Fund (HCF) may be limiting the success of the program. A significant number of rural health providers still have 5 Mbps or less, with many still using legacy copper. This is at least partially because healthcare providers struggle to raise the 35 percent match funding to purchase necessary upgrades.

Government programs should collect more detailed information about the levels of connectivity of anchor institutions and their needs for connectivity in the future. Once additional data is collected, policymakers will be in a better position to identify the amount of the subsidies necessary to ensure that anchor institutions can afford to purchase the broadband services they need.

Many anchor institutions other than schools, libraries, and health care providers do not receive federal government subsidies, yet they have significant needs for high-capacity broadband. Community colleges, community centers, public housing projects, and other community-based organizations can provide valuable services for their communities, especially for low-income populations. State and local programs to make broadband service more affordable for these anchors would be especially helpful to the communities they serve.

Network Sharing and Aggregation Are Valuable Methods of Reducing Prices and Costs

In addition to providing direct financial subsidies to anchor institutions, policymakers can also reduce anchors’ connection costs by encouraging network sharing. As the National Broadband Plan recognized, the more users share a network, the lower the per-user costs will be. Some federal and state programs discourage network sharing by restricting programs to particular types of users, thereby creating “silos” that are inefficient and lead to duplicative investments. Policymakers should explore initiatives to reduce these barriers, and allow existing services to be used for other purposes as long as they do not increase the amount of funding required.

About the author
Gina Spade is the founder of Broadband Legal Strategies, a law firm specializing in universal service issues. During her 13 years at the Federal Communications Commission, Gina served as the policy manager for both the E-rate and Rural Healthcare programs. In addition, she oversaw audits, fraud detection, and financial issues, including the tracking and reduction of improper payments, for all universal service programs while in the Office of the Managing Director.