The Smart Way to Close the 'Digital Divide'

The Smart Way to Close the 'Digital Divide'
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Of the many public policy challenges the pandemic has highlighted, the persistence of America’s “digital divide” is attracting growing attention. For decades, federal and state policymakers have grappled with how to close the gulf between those who have easy access to computers and the Internet, and those who do not.

Despite rapid progress over the last decade, millions of low-income and rural households still lack the connectivity needed to capitalize on educational and economic opportunities like online classes and remote jobs, or even stay abreast of the latest public health advisories.

Numerous ambitious programs have tried to expand access to broadband to disadvantaged communities. But despite significant taxpayer-funded investments, the needle has not moved much.

For example, an analysis of the Broadband Technology Opportunities Program — which spent $4.7 billion from 2009 to 2013 to increase broadband adoption in underserved communities — found no clear evidence of a beneficial impact; there were even indications that higher spending sometimes led to lower levels of adoption.

Meanwhile, the FCC’s Lifeline program — which began subsidizing broadband internet for low-income households in 2016 — has struggled to contain widespread waste and abuse. In a 2019 report, the FCC’s inspector general warned of “pervasive, fraudulent practices that violate program rules and divert monies from the intended beneficiaries of the program.”

Overall, the program’s impact has been small, despite billions in funding: increasing Lifeline spending by 10 percent would increase wireless penetration by 0.09 percent, at a cost of up to $2,078 for the marginal user.

To succeed in closing the “digital divide,” policymakers need to reconsider how broadband subsidies are deployed.

Let us start with improving the maps. Before money can be wisely spent, we need to know who does not have access to broadband (the “unserved”) and who can’t afford the broadband that exists in their community. Right now, that data is sketchy at best, hamstringing efforts to determine where services and support are needed most.

According to most estimates, between 20 million and 40 million Americans can’t get broadband. That enormous uncertainty in the basic count is compounded by the fact that we do not have a good sense of where these people live. The FCC’s reliance on incomplete maps means that millions of needy households may be excluded from funding initiatives.

More also needs to be done to target financial assistance programs to low-income households. Better coordination between state and federal agencies would allow eligibility data from Medicaid, SNAP (formerly “food stamps”), and welfare programs to inform how broadband subsidies are distributed. And private service providers must be under greater scrutiny to mitigate their financial incentives to enroll as many customers as possible. The creation of a national verifier system for the Lifeline program in 2019 was a positive step, but time will tell whether its data sharing measures are sufficient to significantly curb fraud and abuse.

In addition, fiber should not be regarded as the solution for every community. Particularly in isolated geographies with limited infrastructure, building fiber broadband networks may not be cost-effective. Other options — like uses fixed or mobile 5G services, TV White Spaces (unused spectrum between stations) or low Earth orbit satellites (such as Elon Musk’s Starlink or Amazon’s Project Kuiper) — deserve to be considered.

Finally, policymakers need to re-assess how revenue to the Universal Service Fund — which promotes universal access to telecommunications services — is generated. Until now, this funding has come by imposing fees on interstate telephone services like long distance calls. These interstate revenues have been declining for decades, however, forcing the tax rate to  steadily increase.

With the coming of broadband 5G wireless services, continuing to raise cellular service state and local taxes is not a viable strategy. Cell phone service taxes are now about 22 percent of the average customer’s wireless service bill already goes to the government — three to four times higher than the typical state’s general sales tax rate. With the deployment of 5G being good alternative to wired broadband services, you do not want to tax what you should encourage.

The imbalance between the shrinking interstate revenue base and the growing breadth of federal broadband subsidies means that Congress needs to make a choice: Either fund these subsidies from general taxes or restrict the scope of spending.

It’s been more than two decades since President Bill Clinton championed the goal of making affordable Internet access a universal reality in America. With each passing year, the economic and social inequalities caused by the “digital divide” grow more acute. To meet this challenge, Congress needs to reassess its approach and learn from its past mistakes.

Liam Sigaud and Steve Pociask write for the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.



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