I took a look at testimony provided by Assistant Secretary of Commerce Larry Strickland to the House Committee on Energy and Commerce as part of its hearing on broadband stimulus. Mr. Strickland made strong arguments for why broadband adoption is necessary, citing the National Telecommunications and Information Administration’s success in meeting deadlines set by Congress for disbursing funds to broadband programs as authorized in the American Recovery and Reinvestment Act.
According to Mr. Strickland, 12,000 community anchor institutions (schools, libraries) have been wired for access to the Internet. Approximately 86,000 miles of broadband network has been deployed or upgraded, and stimulus funding has generated approximately 520,000 new Internet subscribers.
I expected the feel good stuff from NTIA, but, as the committee’s background report implies, does $ 7 billion spent intervening in the broadband access market trump a decade worth of investment by private sector players in the broadband space?
The committee determined that between 2002 and 2011 private broadband providers invested on average $65 billion a year in network facilities. By 2010, 95% of Americans had access to broadband services while two-thirds of households had broadband in the home. Pew Research put out a study confirming the House committee’s determination as to broadband in the home. Sure an additional 520,000 broadband consumers accessing service sounds good, but that number is marginal when 200 million households already have broadband in the home.
The committee is correct when it says that private sector players have incentive to be efficient and minimize waste; it’s their capital, specifically the investors’ capital, that they are playing with and maximizing shareholder wealth requires controlling costs while trying to provide a superior quality of service.
There is nothing that can be done now about stimulus finds that have already been disbursed other than continuing oversight on projects that are not yet complete. What this hearing should do is send a signal to municipalities that wish to proceed with deploying their own networks seeded with funds directly from tax receipts or via bonds guaranteed by future tax receipts. The general intent of this market intervention was to ensure that the unserved and underserved got access to broadband services; access that is priced competitively.
If municipalities want to ensure against waste, they should build only backbone networks where services are not being provided and allow private broadband access providers to deploy last mile facilities; government builds the road while private providers build the driveway.
Otherwise, to avoid the waste identified by the committee, government should stay out of the market making business.