Rep James E. Clyburn from South Carolina and Sen. Amy Klobuchar from Minnesota have reintroduced the Accessible, Affordable Internet Act for All into the current Congress and is one step towards a larger push for an infrastructure plan. I have so much to say about this proposed legislation that it’s going to require multiple blogs to hit all of the issues. I realize that this bill is in its infancy, but since it’s co-sponsored by 30 other Senators and Representatives the bill may go through as written. In a nutshell, the bill provides $94 billion for broadband. This is clearly an infrastructure bill that wants to spend money in a hurry.
The largest portion of the bill – $79.5 billion – would go directly to broadband expansion. Part of this funding is going to give $100 million to each state. Unfortunately, the rules of how the states must use the funding is highly prescribed – so these are not state block grants. Without outright saying so, the rules imply that states should hold a reverse auction under the same rules as the FCC. Further, the state grants must be used only to cover areas deemed eligible for grants by the FCC, and I fear that in many cases it’s going to be hard to spend the state money. It eventually goes back to the federal coffers if unused after ten years. This gives money to the states without giving the states the autonomy of deciding how to use it.
Roughly $60 billion of this funding will go into a giant federal reverse auction that would happen no later than 18 months after the bill passes. Another $15 billion would be awarded by a second reverse auction up to four years later.
I can’t be the only one who has a problem with the idea of a giant reverse auction. I would hope that the FCC will have learned some lesson from the recent reverse auction for RDOF where much of the money awarded can best be described as a disaster. I foresee the following problems in holding one giant reverse auction:
- First, the FCC gets to decide which areas are eligible for the reverse auction. They are not even remotely up to this task today and will not be ready for it in eighteen months. The revised FCC mapping is still going to use marketing speeds reported by ISPs to define places that have or do not have broadband. Since there are no real penalties for ISPs for claiming imaginary marketing speeds, this means there will still be plenty of rural communities that will wrongfully get left out of the funding process.
- In an issue that nobody is discussing, the FCC also sets the amount of funding for each Census block based upon a lame model they use that pretends to understand local construction costs everywhere in the country. This was one of the big faults of the last reverse auction. The FCC model over-allocates grant funding to areas that have relatively low costs like the Midwest plains and badly under-allocates grant dollars where costs are much higher, like Appalachia. This may have been the biggest fatal flaw of the last reverse auction and badly disadvantages high-cost communities. The FCC has absolutely no business in estimating what it costs to bring broadband to rural America. But they must do so to hold a reverse auction and will again badly harm many parts of the country.
- We’ve seen that federal billion-dollar giveaways attract bad actors to a reverse auctions. If this was a big problem in a $16 billion RDOF auction, imagine the mischief we’re going to see in an auction that is five times larger. The only way for the federal government to keep out bad actors is to somehow pre-qualify ISPs, and I don’t see the FCC having the backbone to tell ISPs they can’t participate.
- There is no way to realistically include drastically different technologies in a reverse auction. Some of the bad actors will try to gain an advantage by claiming imaginary technologies. The FCC erroneously allowed bidders to claim gigabit fixed wireless for rural areas in the most recent reverse auction – a technology that does not exist. That’s going to happen again, but on a bigger scale. All of the WISPs who were eliminated from the last reverse auction for honestly bidding 100 Mbps speeds will have learned that they need to bid gigabit speeds. A mr fundamental issue is that if the federal government is going to spend $80 billion on broadband infrastructure, then we need to build a permanent solution like fiber and no short-lived technologies. This kind of money needs to create networks that will last a hundred years – not a decade.
- In an auction of this size, most of the money is going to go to the largest ISPs – there is no other way to give away this much money. That frankly will be a national travesty. The big telcos purposefully let the rural telephone copper networks go to hell and so now we’ll reward them by giving them free money to build fiber so they can keep their rural monopolies. Some of these big telcos are never going to be good ISPs. Even if you hand them a free fiber network, they are going to pinch pennies on technicians and customer service. They won’t maintain the networks, and within fifteen years, newly built fiber networks will already be limping along. Fiber is an awesome technology, but it requires reinvestment in electronics and good maintenance practice, and the big telcos will never do the right thing in rural America.
There is another requirement that all of the grant projects be done at prevailing wages. That basically means paying city labor rates for rural construction. I understand that all of the infrastructure bills are considered as a jobs bills, but if prevailing wages add 20% to the cost of building fiber, then we’ll pay $80 billion for new networks that should only cost $64 million. This requirement also will have the insidious side effect of driving up the cost everywhere for fiber construction – because a grant of this magnitude is going to employ a majority of the work crews in the country. This grant will swamp the market and crews won’t work anywhere else for less.