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National Broadband Plan, But What Will it Cost?

On Tuesday I blogged about the Federal Communication Commission's National Broadband Plan, which was released on Monday evening.  I talked about the problems - that broadband in the U.S. is too slow and not ubiquitous - and the solutions.  But what will those solutions - from creating a National Digital Literacy Corps to reforming the Universal Service Fund - cost?  And how will we pay?

The FCC estimates that providing universal broadband coverage at 100 Mbps could cost as much as $350 billion.  Yet the public investment to date (part of the American Recovery and Reinvestment Act) is a small fraction of that - $7.2 billion.

The logical conclusion, then, from the Brookings Institution perspective, at least, is that "encouraging greater private sector investment is key to realizing the long-term benefits of broadband."

Out of the $7.2 billion that Congress has appropriated for telecommunications, Arizona has received $2.3 million.  According to Arizona's Government Information Technology Agency (GITA): "The first grant is for approximately $1.8 million over a two-year period for broadband data collection and mapping activities. The second grant is for approximately $500,000 over a three-year period for the purpose of broadband planning and determining future broadband needs."

In Arizona, according to the AIC infrastructure study, "To provide broadband connectivity to the currently un-served population of Arizona would cost between $1-2.2 billion. Creation of a state-of-the-art statewide fiber to the home (FTTH) network would cost an additional $23 billion that would give Arizonans the same speed of access as the citizens of countries such as Japan, France and Korea."

In the AIC study, researchers identified a number of ideas for financing the $24-25.2 billion needed to develop a fiber-to-the-home telecommunications network in Arizona:

  • Anchor tenancy - the State and local governments purchase all their bandwidth needs from a single concern and in return the company provides infrastructure to areas that otherwise would not receive service.

  • Public-sector provision of infrastructure - municipalities build, operate and maintain their own telecommunications infrastructure.

  • Creation of a telecommunication infrastructure bank ­- this provides municipalities and private companies access to low cost loans in order to finance telecommunication infrastructure.

  • Establishment of a broadband universal service fund - allows telecommunication providers access to a source of funds they can utilize when providing broadband services to above normal cost of provision communities.

  • Reduction of right-of-way (ROW) costs - streamlining or limiting ROW costs reduces the overall burden on telecommunications providers.

  • Alteration of building codes - require new buildings or re-models to be wired to provide fiber to the home.

  • Re-alignment of tax incentives - level the playing field for telecommunications so that it receives the same tax treatment as other sectors on its infrastructure investments

  • Offering grants to the private sector for areas that are not commercially viable without support.

Clearly, if the government is going to proceed with a National Broadband Plan, taxpayers are going to have to pony up some more money, even if the private sector bears costs as well.

That has some asking, "Why does the government need to be involved at all?"  It's a fair question - it has been largely private sector developments that increased broadband access from 8 million Americans in 2000 to nearly 200 million in 2009. 

But there is reason to believe that the 4% of Americans who don't have access to broadband because they live in remote or rural areas will never be served by the private sector without public sector support.  And the cost to serve those unserved populations is a fraction of the $350 billion total - $24 billion.  In Arizona, the cost to provide service to unserved populations is about 4% of the cost to provide state-of-the-art service to all Arizonans.

Then there are the hold-outs - those 100 million Americans who have access to broadband but choose not to sign up.  To reach them, the FCC proposes a National Digital Literacy Corps.  But that's an idea the private sector should take up.  It's in private broadband providers' interest - if they convert non-adopters to subscribers, they make more money.

In the end, the development of a truly high-speed, world-leading telecommunications network in the U.S. should be led (as it has been) by the private sector, with some public sector involvement where broadband provision has proven commercially unviable.

Written on Thursday, 18 March 2010 05:13 by Gary Yaquinto

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