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Regulation - What is it Good For?

The Accessible, Affordable Internet Act for All – Part 2

This is the second look at the Accessible, Affordable Internet Act for All sponsored by Rep. James E. Clyburn from South Carolina and Sen. Amy Klobuchar from Minnesota. The first blog looked at the problems I perceive from awarding most of the funding in a giant reverse auction.

In a nutshell, the bill provides $94 billion for broadband expansion. A huge chunk of the money would be spent in 2022, with 20% of the biggest funds deferred for four years. There are other aspects of the legislation worth highlighting.

One of the interesting things about the bill is the requirements that are missing. I was surprised to see no ‘buy American’ requirement. While this is a broadband bill, it’s also an infrastructure bill and we should make sure that infrastructure funding is spent as much as possible on American components and American work crews.

While the bill has feel-good language about hoping that ISPs offer good prices, there is no prohibition that I can find against practices like data caps imposed in grant-funded areas that can significantly increase monthly costs for a growing percentage of households.

The most dismaying aspect of the bill that is missing is the idea of imposing accountability on anybody accepting the various federal grant funds. Many state grant programs come with significant accountability. ISPs must often submit proof of construction costs to get paid. State grant agencies routinely visit grant projects to verify that ISPs are building the technology they promised. There is no such accountability in the grants awarded by this bill, just as there was no accountability in the recent RDOF grants or the recently completed CAF II grants. In the original CAF II, the carriers self-certify that the upgrades have been made and provide no back-up that the work was done other than the certification. There is a widespread belief that much of the CAF II upgrades were never done, but we’ll likely never know since the telcos that accepted the grants don’t have any reporting requirements to show that the grant money was spent as intended.

There is also no requirement to report the market success of broadband grants. Any ISPs building last-mile infrastructure should have to report the number of households and businesses that use the network for at least five years after construction is complete. Do we really want to spend over $90 billion for grants without asking the basic question of whether the grants actually helped residents and businesses?

This legislation continues a trend I find bothersome. It will require all networks built with grant funding to offer a low-income broadband product – which is great. But it then sets the speed of the low-income service at 50/50 Mbps while ISPs will be required to provide 100/100 Mbps or faster to everybody else. While it’s hard to fault a 50/50 Mbps product today, that’s not always going to be the case as homes continue to need more broadband. I hate the concept that low-income homes get slower broadband than everybody else just because they are poor. We can provide a lower price without cutting speeds. ISPs will all tell legislators that there is no difference in cost in a fiber network between a 50/50 Mbps and a 100/100 Mbps service. This requirement is nothing more than a backhanded way to remind folks that they are poor – there is no other reason for it that I can imagine.

One of the interesting requirements of this legislation is that the FCC gathers consumer prices for broadband. I’m really curious how this will work. I studied a market last year where I gathered hundreds of customer bills and I found almost no two homes being charged the same rate for the same broadband product. Because of special promotional rates, negotiated rates, bundled discounts, and hidden fees, I wonder how ISPs will honestly answer this question and how the FCC will interpret the results.

The bill allocates a lot of money for ongoing studies and reports. For example, there is a new biennial report that quantifies the number of households where cost is a barrier to buying broadband. I’m curious how that will be done in any meaningful way that will differ from the mountains of demographic data that show that broadband adoption has almost a straight-line relationship to household income. I’m not a big fan of creating permanent report requirements for the government that will never go away.

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