Jonathan Chambers wrote another great blog this past week on Conexon where he addresses the issue of federal grants having waste, fraud, and abuse – the reasons given for holding hearings in the House about the upcoming BEAD broadband grants. His blog goes on to say that the real waste, fraud, and abuse came in the past when the FCC awarded federal grants and subsidies to the large telcos to build networks that were obsolete by the time they were constructed. He uses the term underbuilding to describe funding networks that are not forward-looking. This is a phrase that has been around for many years. I remember hearing it years ago from Chris Mitchell, and sure enough, a Google search showed he had a podcast on this issue in 2015.
The term underbuilding is in direct contrast to the large cable and telephone companies that constantly use the term overbuilding to mean they don’t want any grant funding to be used to build any place where they have existing customers. The big ISPs have been pounding the FCC and politicians on the overbuilding issue for well over a decade, and it’s been quite successful for them. For example, the big telcos convinced the FCC to provide them with billions of dollars in the CAF II program to make minor tweaks to rural DSL to supposedly bring speeds up to 25/3 Mbps. I’ve written extensively on the failures of that program, where it looks like the telcos often took the money and made minimal or no upgrades.
As bad as that was – and that is the best example I know of waste, fraud, and abuse – the real issue with the CAF II subsidy is that it funded underbuilding. Rural DSL networks were already dying when CAF II was awarded, mostly due to total neglect by the same big telcos that got the CAF II funding. Those billions could have instead gone to build fiber networks, and a whole lot of rural America would have gotten state-of-the-art technology years ago instead of a tweak to DSL networks that barely crawling alone due to abuse.
The FCC has been guilty of funding underbuilding over and over again. The CAF II reverse auction gave money to Viasat, gave more money for upgrades to DSL, and funded building 25/3 Mbps fixed wireless networks. The classic example of underbuilding came with RDOF, where the areas that were just finishing the CAF II subsidy were immediately rolled into a new subsidy program to provide ten more years of subsidy. Many of the areas in RDOF are going to be upgraded to fiber, but a lot of the money will go into underperforming fixed wireless networks. And, until the FCC finally came to its senses, the RDOF was going to give a billion dollars to Starlink for satellite broadband.
The blame for funding underbuilding lies directly with the FCC and any other federal grant program that funded too-slow technologies. For example, when the CAF II funding was awarded to update rural DSL, areas served by cable companies were already delivering broadband speeds of at least 100 Mbps to 80% of the folks in the country. By the time RDOF was awarded, broadband capabilities in cities had been upgraded to gigabit. The policy clearly was that rural folks didn’t need the same quality of broadband that most of America already had.
But the blame doesn’t just lie with the FCC – it lies with all of the broadband advocates in the country. When the ISPs started to talk non-stop about not allowing overbuilding, we should have been lobbying pro-broadband politicians to say that the FCC should never fund underbuilding. We’ve collectively let the big ISPs frame the discussion in a way that gives politicians and regulators a convenient way to support the big ISPs. Both at the federal and state levels the broadband discussion has often devolved into talking about why overbuilding is bad – why the government shouldn’t give money to overbuild existing ISPs.
Not allowing overbuilding is a ludicrous argument if the national goal is to get good broadband to everybody. Every broadband network that is constructed is overbuilding somebody, except in those exceptionally rare cases where folks have zero broadband options. If we accept the argument that overbuilding is a bad policy, then it’s easy to justify giving the money to incumbents to do better – something that has failed over and over again.
It’s time that we call out the overbuilding argument for what it is – pure protectionism. This is monopolies flexing political power to keep the status quo, however poorly that is working. The big ISPs would gladly roll from one subsidy program to another forever without investing any of their own capital to upgrade rural networks.
Every time a regulator or politician says that we should not be using federal money to overbuild existing networks, we need to prod pro-broadband politicians to counter that argument by saying we should not be spending any more money on underbuilding. Broadband is infrastructure, just like roads and bridges, and we should be investing any grant money into the most forward-looking technology possible. If the national goal is to make sure that everybody has good broadband, then we should be ready to overbuild anywhere the incumbents have underperformed, be that in rural areas or inner cities. It’s time we shift the conversation away from protectionism to instead prioritizing bringing broadband that will still be good a decade or two after the grant award. Let’s not spend another penny of grant money on underbuilding networks by investing in slow technologies that are inadequate and obsolete even before they are completed.