President Biden’s proposed $2 trillion infrastructure plan seeks to do for the internet what it also promises to do for the nation’s decaying bridges, roads, ports, airports and transit systems: Ensure safe access to necessary services.
The “digital divide” was accentuated during the coronavirus pandemic, as children unable to connect to online classes — especially in households with brothers or sisters doing the same — were left behind. The American Jobs Plan promises roughly $100 billion over 8 years to bring high-speed broadband to the masses, especially in rural America, which every president since Ronald Reagan has vowed to help connect to faster telecommunications services.
The Biden administration intends to give broadband subsidies to local governments, non-profits and cooperatives, but faces resistance from an antagonist that has also promised to help close the digital divide through multiple presidential administrations: The telecommunications industry. AT&T Inc.
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The administration “risks taking a serious wrong turn in discarding decades of successful policy by suggesting that the government is better suited than private-sector technologists to build and operate the internet,” said Michael Powell, president of the cable trade group NCTA, which represents Comcast and Charter Communications Inc.
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Pushback was inevitable, tech executives say, after years of cable companies and trade associations like NCTA lobbying on rural broadband after investing billions of dollars into expansion efforts.
“The typical approach of large industry is that government is intruding,” Nathan Johnson, co-chief executive of wireless service company TruConnect Communications Inc., told MarketWatch. “Their attitude is ‘Stay out of our business.’ They view certain regions [especially the Midwest] as theirs. The feeling is they already have fiber in the ground, and don’t want to compete with a free solution.”
Republican pushback
Biden is also facing specific pushback to the internet funding from Republicans. Sen. Roger Wicker of Mississippi, the top GOP member on the important Commerce Committee, said Biden’s broadband proposal “opens the door for duplication and overbuilding.” The ranking Republican of the House Energy and Commerce Committee also spoke against the funding.
“President Biden is poised to waste billions of dollars and hurt private investment in our networks without actually closing the digital divide,” said Rep. Cathy McMorris Rodgers of Washington.
The GOP has long championed funding expanded internet access. The false starts and unfulfilled dreams of connecting America’s rural areas harken back more than 30 years to the days of the late Sen. Conrad Burns, a Montana Republican who vowed to bring high-speed internet to America’s hinterlands.
Consider the plight of Lifeline, a federal program conceived in the mid-1980s by the Reagan administration to bring subsidized phones — and, later, mobile and broadband services — to every household. Even though 33.5 million low-income Americans are eligible for subsidized — even free — cell phones and internet access courtesy of Lifeline, barely 20% receive it because the Federal Communications Commission and Congress have “slowly chipped away its budget,” TruConnect co-CEO Matthew Johnson said.
Just 15 years ago, then-President George W. Bush said the U.S. “needs a national goal for broadband technology, for the spread of broadband technology. We ought to have a universal, affordable access for broadband technology by the year 2007.”
Former President Donald Trump fleetingly made increasing broadband-internet access a major piece of his infrastructure plan. In 2019, Trump agreed to a $2 trillion infrastructure deal with congressional Democrats before the agreement crumbled.
Despite all the promises from politicians and companies, when the COVID-19 pandemic struck, just half of all rural residents had access to internet speeds that would let multiple at-home students stream Zoom concurrently, according to the Federal Communications Commission’s 2020 Broadband Deployment Report. About three-fourths of America’s rural population had access to the minimum broadband internet service level as of 2018, up from 60% in 2014, the report said, but 58% of rural residents told Pew Research Center in 2018 that access to high-speed internet was a problem where they lived. Nearly a quarter called it a “major problem in their area.”
‘Timing seems right’
COVID-19 highlighted the troubling breadth of the digital divide, leaving millions without basic broadband to apply for jobs, book telemedicine appointments, receive entertainment and adequately do schoolwork, according to tech experts and consumer groups.
“The timing seems right [for a major infrastructure plan] after having gone through the pandemic,” said tech consultant Chetan Sharma, who estimates more than 30 million consumers do not have broadband capability. “It proved the existing broadband infrastructure wasn’t quite ready.”
Advances in satellites and wireless-fixed broadband are coming into play, but can people afford services that cost $50, $60 or even $100 a month? Sharma thinks that’s cost-prohibitive, which only emphasizes the importance of how the government subsidizes an infrastructure plan and “sorts out” its implementation.
If nothing else, the pandemic drove home the notion that internet access is not a luxury item but a necessity, Katharine Trendacosta, associate director of policy and activism at Electronic Frontier Foundation, told MarketWatch.
“We have not treated internet access like telephone access and electricity access,” Trendacosta said. “The telecom lobby learned a lot about how to prevent universal service. They have been good at pushing back.”
Publicly traded telecom companies that have plowed billions of dollars into building regional fiber networks are loath to spend more because they are under immense pressure from investors to be profitable, she said. Then again, few of them showed an inclination to reinvest when they were issued tax breaks; instead, they spent on stock buybacks, Trendacosta said.
Investment analysts don’t believe the federal government stepping in to supply access in cost-prohibitive areas would do much damage to the telecoms giants.
“We expect Federal Infrastructure funding to focus on unserved/underserved areas that can’t get even 25 Mbps today, and look to eliminate state rules barring competitive municipal networks, but find it unlikely that the Federal government will subsidize competitive builds in areas with cable or fiber operators today,” Morgan Stanley telecom analysts wrote this week in a note.
The analysts noted that the telecoms industry is mostly looking to build out high-speed networks in more competitive areas, estimating that 50 million households have access to fiber-based internet services today, growing to 91 million by 2025. While spending to build out those faster networks, though, the analysts believe the industry will face pressure from the administration to avoid increasing prices to pay for the buildout.
“We expect this focus to come in the form of talking down pricing — trying to make broadband providers reluctant to raise prices — rather than funding competition in areas where broadband already is available,” they wrote. “We believe this reluctance was somewhat in the cards anyway, based on recent discussions with broadband providers, and model somewhat slower price increases this year at cable companies.”
If the infrastructure plan can tamp down price increases and build new networks in unserved and underserved areas, it would be expected to increase the number of Americans with access to faster internet speeds, a longtime desire for American politicians that has yet to become reality.
“If you’re breathing in the United States, you should have these services,” Aaron Hughes, CEO of 6connect.com Inc., which provides companies with a key component that helps expand the internet, told MarketWatch. “This is something that needs to happen, and has needed to happen for a long time.”
