How not to waste $45 billion in broadband subsidies

In the middle of the pandemic, the Federal Communications Commission used a reverse auction process to save taxpayers about $7 billion on projected expenses of $16 billion for broadband service to unserved areas — nearly a 50 percent savings! But because of concerns over some outcomes of the reverse auction, the current infrastructure bill may abandon competitive bidding and instead allocate the $45 billion in broadband subsidies in ways that virtually guarantee higher costs and fewer people connected. Rather than ditching a tool proven to deliver cost-effective results, we should take a page from the FCC’s successful spectrum license auctions and continue to use this powerful tool while learning from the mistakes to ensure that new auctions do not suffer from the same deficiencies. First, we need comprehensive, complete, and accurate knowledge of which areas do not have service. Achieving this objective requires careful analysis and mapping, which hopefully the FCC process will provide soon, and the bill relies upon for its planned distribution of subsidy money. Second, it is crucial to ensure that the bidders can provide the service they promise. One way to solve this problem is for the companies to bear the risk of their proposal since they have the most knowledge and control of performance. The bottom line is not to throw the auction out with the bathwater.

[Gregory Rosston is the Gordon Cain Senior Fellow at the Stanford Institute for Economic Policy Research and Director of the Public Policy program at Stanford University. Scott Wallsten is president and senior fellow of the Technology Policy Institute, and a senior fellow at the Georgetown Center for Business and Public Policy.]