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Anytown, U.S.A.

February 14, 2019 (928 words)

On any given day of the week, you can stroll into a bar or diner of your choice and be treated to a variation of the following exchange, being bandied about over a cup of coffee or a glass of beer.

The bleeding heart will be complaining about the way things are, and expect government to step in and right the ship and balance the scales.

The rugged individualist, on the other hand, will be complaining about the way things are and blame the sorry state of everything on misguided or downright wasteful government interventions and initiatives.

Both friendly conversationalists are partly right. Government does seem to have difficulty putting one foot in front of the other at times. But sitting back and expecting the unregulated free market to magically solve society’s problems is equally unrealistic.

…bringing technology to rural communities

Take the subject of broadband internet access in rural areas. The following is from a New York Times op-ed of February 7, “Farmers Deserve Broadband, Too,” written by an assistant professor of media studies at the University of Virginia by the name of Christopher Ali:

“Since the 1930s, policymakers have known that rural communications is a ‘market failure’ – something that happens when private companies don’t provide a socially desirable good because of a lack of return on investment. At that time, electricity and telephone companies were simply unwilling to enter rural America: The population was too sparse and the geography too vast.”

The federal government addressed this problem by creating the Rural Electrification Administration in 1936, to provide loans and grants to rural electric and telephone companies. It worked out pretty well. Within twenty years, 65% of farmers had a telephone and 96% of them had electricity.

Today there are not one but two federal agencies charged with subsidizing broadband access in rural parts of the country, and the amount of money involved is staggering.

The Federal Communications Commission earmarks $4.6 billion for such subsidies. The Rural Utilities Service (RUS) – the successor to the Rural Electrification Administration of the 1930s – operates as a division of the Department of Agriculture, and hands out about $800 million a year. Congress also allocated an extra $600 million to the RUS, on top of the $7.5 billion in rural broadband loans and grants provided by the 2009 Recovery Act.

…lots of funding, but poor results

“Despite this large amount of funding,” Christopher Ali explains, “rural America has not seen broadband deployed and adopted at the same speed and effectiveness that it was with electricity and telephone service almost a century ago.”

Mr. Ali sees two primary reasons for this failure: A lack of a coordinated federal policy, which in turn has allowed major telecommunication companies to sop up a large portion of the federal subsidies without much accountability.

From the governmental side, it sounds like a classic administrative boondoggle. “An opaque set of grant and loan stipulations make it difficult for communities to apply for funding, and in some states, laws prohibit or inhibit towns and cooperatives from wiring their own communities.”

So the first call from assistant Professor Ali is for a national program. As things stand now, “Almost every state has a broadband deployment plan. With so many plans, however, come as many definitions of broadband, target speeds, eligibility requirements for grants and a host of unique priorities.”

…benefits of a national plan

“A national plan would designate a single agency – preferably the Rural Utilities Service, with its century-long relationship with rural communities and offices in every state – as the primary coordinator for rural broadband.”

A coordinated national plan would “mandate the creation of a new national broadband map, using granular and testable data rather than what we have now: Broadband providers report advertised rather than actual speeds to the F.C.C., and broadband deployment is calculated by census block rather than by household.”

“The F.C.C., which manages the current national broadband map, has grossly overestimated broadband deployment; when a single building in a census block is reported to have broadband, the agency considers the entire block ‘served.’”

A coordinated national plan would also “democratize the subsidy system… (by) abandoning rules that force the Rural Utilities Service and the F.C.C to give the bulk of subsidies to the major telecom companies, which deliver only the bare minimum speeds to comply with the law.”

“This money should be provided on a competitive basis without reserving the bulk for the major companies.” Mr. Ali’s op-ed goes on to give a prime example of a major telecom player now pulling down a half billion dollar annual federal subsidy for providing painfully slow download and upload speeds.

…taking advantage of the situation

So yes, as with so many other areas of public policy, government could stand to be sharper. In this case, it needs to get its act together when it comes to rural broadband internet access. But it sure would be nice if the free market, represented here by major telecom companies, were not satisfied to merely take advantage of the situation.

Here’s a thought: What if the major telecom companies, who have the know-how and the resources, would deign to work with government as an ally in this undertaking?

What if the free market made a conscious decision to set aside a not-so-enlightened self-interest just long enough to make sure this king’s ransom in federal subsidy produces a high quality result for the rural people that government is trying to see get served.

Robert J. Cavanaugh, Jr.
February 14, 2019

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