Another Idea for Federal Broadband Funding

It’s obvious that we need better broadband in the country, and much of that broadband is in rural places that are going to require financial assistance to build. The new White House and Congress are finally talking about the need for an infrastructure package that will create jobs and that will build rural broadband along with fixing roads and bridges. However, deficit hawks worry that too much spending will increase the deficit to an unsupportable level.

There is an idea from our past that can build better broadband while not increasing the permanent deficit. As a nation, we solved a similar problem when we figured out a way to bring electricity to everybody in the country. The challenge of bringing broadband to everybody is amazingly similar to what happened with electrification.

Franklin D. Roosevelt campaigned on the issue during his 1932 presidential campaign, and after he won, he worked with Congress to create the Rural Electrification Administration (REA). Rather than the government directly funding electric infrastructure, the REA offered 30-year loans to electric cooperatives to electrify rural America. Citizens from all over the country came together and formed cooperatives, borrowed the federal money, and electric grids sprang to life all over rural America.

There is no reason this same idea can’t work for rural broadband. The challenge is nearly identical. The best long-term infrastructure solution for broadband is fiber. Fiber provides enough broadband capacity to meet the needs of homes today and will meet broadband needs decades from now. No other technology can scale to the needed bandwidth demands over the next century.

The basic funding method used for electrification still makes sense, as does the idea of doing this through cooperatives. Cooperatives owned by the customers are willing to take on the long-term debt needed to make this work. Cooperatives are largely non-profits since any profits generated by the business must be rolled back into the business. It makes far less sense for the government to subsidize the giant for-profits ISPs like AT&T, CenturyLink, or Frontier – those big companies care about the bottom line and are not willing to operate a business with slim margins. We’ve seen these companies in the past improve rural profitability by cutting back on staff and maintenance.  That’s not the kind of stewards we want operating rural broadband networks for the next hundred years.

There are a few differences between now and the 1930s that we have to recognize. There has been a lot of years of inflation since 1932 and it doesn’t look feasible in many cases to build broadband networks and repay the money with 30-year loans, even at low interest rates. A new program would need to consider longer loans like 40 years, and maybe even 50 years. There is no reason a coop wouldn’t accept longer loans if it means getting fiber broadband. It’s also likely that in the highest-cost places that there would have to be some grant funding to accompany the loans.

These loans could go almost immediately to existing telephone and electric cooperatives. In areas where there are no cooperatives, or where the existing cooperatives don’t want to tackle broadband, the government could help with the formation of new cooperatives, just like they did in the 1930s. I’ve been working in rural areas all over the country and I can’t think of a community that would not be excited about this idea.

One of the best features of this plan is that most of the money spent by the government is in the form of loans that will get repaid. That means that the expansion of broadband doesn’t have to be a big burden on the taxpayer.

There are some obstacles to overcome to make this work – but mostly it just requires the will of the White House and Congress to solve the rural digital divide. There will be lobbyists from all of the big ISPs moaning about how this unfairly competes with the private sector. That argument falls apart quickly when you visit a rural county and can’t find even one rural home that has broadband speeds of 10/1 Mbps. The big companies have completely failed rural America and their lobbyists must be ignored.

There will also be a lot of silly discussions about which rural places should be eligible for this money – and those discussions will be couched in terms of talking about the number of homes that have access to broadband speeds of 25/3 Mbps. These speed discussions are a red herring because urban residents have access to far faster broadband. In the 2020 broadband report to Congress, the FCC said that 82% of homes already have access to broadband speeds of 250/25 Mbps. Hopefully, policymakers will agree that rural broadband ought to be as good as urban broadband and that we can stop using speed thresholds – everybody in America deserve good broadband.

Funding cooperatives should not be the only government solution because the solution won’t work everywhere for everybody that needs better broadband. But I can’t think of any reason why the this shouldn’t be part of the solution.

4 thoughts on “Another Idea for Federal Broadband Funding

  1. As an old guy who remembers my uncle’s non-electric IA farm in the 40s, REA’s transformed the GreatPlains. Their greatest benefit is that the infrastructure now belongs to the community served and the profits from it stay at home and are not lost to the wealth centers whose interests are profits only.
    OSFG in MN

  2. It’s not just a rural issue. There are substantial infrastructure gaps in exurban areas and small towns because they like rural areas are not viewed as profitable investments by investor-owned providers.

    As such, the cooperative concept would have to be expanded in scope to a much larger overbuild and upgrade of existing metallic infrastructure. And you’re correct that the investor owned providers can’t claim unfair competition when they are not present in the first place due to insufficient profitability.

  3. It’s a great idea. The only challenge is the resistance from exactly the entrenched interests that have prevented this sort of great idea from happening up until now.

    Until some decent chunk of Congress agrees to the pitched battle that they’re going to have to have with the cable and telco incumbents to do something that will be positioned as inherently anti-competitive and anti-capitalist … nothing’s going to work.

    As of the last conflict, the incumbents managed to get the FCC to deny that regulation is its job. People need to understand just who is the problem here and then hound their congresspeople to pass significant pro-competition pro-regulation laws.

  4. Midwest Energy Cooperative has been doing this very thing since 2014. To date we have borrowed over $70 million, building 2,400 line miles of fiber in both Southwest and Southeast Michigan collectively, providing access to more than 36,000 member-customers. Our base package is 50/50 for $50/mo.

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