Rural broadband subsidy programs are a failure. We need to fix them.

[Commentary] A cost-effective subsidy program should provide funds first where they will yield the largest bang for the buck and last where they yield the smallest. In this case, the government would define the network services it believes everyone should have (hopefully based on a careful analysis of both supply and demand information) and geographic areas it wants covered, and ask companies to say the size of the subsidy they would need to build out in those areas. A group of 71 economists signed a letter in 2009 encouraging this type of approach. It would then be possible to make an objective choice about which projects receive subsidies and which do not.

We should take this opportunity to rethink universal service and implement new ways of promoting coverage where it does not exist so that it benefits consumers, not just rural Internet service providers.

[Scott Wallsten is president and senior fellow at the Technology Policy Institute]