Throwing Money at Universal Broadband Isn't Enough

Regular readers are probably familiar with my opinion on universal broadband service, but for anyone who's missed out, it's pretty simple: Love the idea, but fear the devil is in the details. Specifically, I'm talking about the details about who is going to pay, what they're paying for and how the money is to be collected. Oh, and then there's the question of who's going to build out the infrastructure.

Because universal broadband is a key initiative of the new administration, here's an early look at current thinking. There are two bills (House of Representatives and Senate) that differ in two key respects: The House bill proposes an investment of roughly $6 billion, while the Senate bill is for $8 billion; and the House bill earmarks roughly half of the funds to be administered by the Rural Utility Service. Both bills call for "net neutrality" requirements for infrastructure providers (a bit tricky because there's no agreed-on definition of net neutrality).

Then there's the open question of what, if any, role the Universal Service Fund will play. Both bills tacitly acknowledge the USF has been a disastrous failure, both in philosophy and execution. As I've noted previously, the USF managed to subsidize both the Gambino crime family and Wyoming billionaires. And the fund's basic design was totally whacked: It operated as a tax on telcos, which passed along the fees to their customers -- meaning that people who were paying full costs for telephone services already were being asked to pay again, while the actual users didn't need to pay.

Happily, both bills seem to conceive of an entity other than the corrupt, poorly managed, and poorly architected USF handling the job. So, how is this likely to play out?

First off, proponents of universal broadband tend to believe that $6 billion isn't nearly enough money. Gigi Sohn, a well-known communications-policy lawyer with whom I served on a panel recently, says the real cost of implementing universal broadband is closer to $20 billion; others say closer to $200 billion. If they're right, the investment is unlikely to be effective in reaching the goal of truly "universal" broadband.

If the net neutrality provision is passed, universal broadband proponents may discover that carriers aren't interested in a build-out under those terms. That may not be the end of the world -- municipalities and state and local governments could fill the breach despite their previous problems with Wi-Fi. Running Internet access as a direct public service -- rather than attempting to create a business case where none exists -- may be the exact right answer here.

The problem -- and it's a biggie -- would be how to convince carriers to take the traffic from the access providers, and at what price. As I've documented previously, demand for Internet service is increasing exponentially, yet carriers don't make money transporting it. That comes right back to the question of peering agreements -- something universal broadband proponents have yet to tackle.

The upshot? Making universal broadband happen may prove harder than merely proposing it.

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