The Problem
A considerable divide persists between those who have access to high-speed connections and those—often in rural areas—who must rely on much slower dial-up modems or satellite. Providers have little incentive to invest in areas where potential customers are few and dispersed; and, given the limited amount of the electromagnetic spectrum that is available for wireless use, a technical challenge exists as well. For communities who lack broadband, the implications are not simply a slower Internet connection, but also lack of access to information and online-enabled commerce, ultimately hampering social and economic development.
The Proposal
Several industry-facing initiatives should be undertaken to level the field for all Americans. In addition to opening up more of the spectrum for wireless—which would lower the start-up costs associated with greater high-speed access—a reverse auction could award subsidies to the firm that offers the lowest bid to provide broadband access in key areas. The individual subsidies could be released as key milestones are reached, and these milestones and associated subsidies could be traded among firms, with the ultimate goal of full access.
Abstract
Roughly one-third of households in rural America cannot subscribe to broadband Internet services at any price. This puts many rural communities at a disadvantage with respect to economic growth, job creation, educational opportunities, health care information, commerce, and more. Internet users in urban areas are also adversely affected by the exclusion of so many rural households. For example, e-commerce merchants can attract fewer customers, online universities can attract fewer students, and users of e-mail, Internet telephony, and videoconferencing can communicate with fewer friends and business associates. Government can facilitate the expansion of broadband infrastructure into unserved communities through a suite of interrelated policies. Appropriate changes in spectrum policy would reduce the cost of building new broadband wireless systems in rural areas. These potential new wireless providers could then compete with existing telephone, cable, and cellular companies and other organizations for the obligation to bring broadband to an unserved community in return for a one-time subsidy. Defining this obligation in a highly flexible form and making it tradable on an open market would minimize the cost of infrastructure deployment and thereby reduce the subsidies needed. Attaching very lightweight restrictions on subsidy recipients could protect consumers from monopoly providers that might be tempted to limit their customers’ choice of content or applications. Allowing and encouraging local government agencies to play an active role could encourage providers to deploy infrastructure by guaranteeing future revenues and ensuring access to critical resources. Collecting better information on availability of broadband services nationwide would allow both policymakers and potential service providers to better identify the communities that need service. Together, these mutually reinforcing policy reforms would allow government to move the United States closer to the goal of universal access to broadband Internet by harnessing market forces without competing with market forces.
