Maximizing Value and Minimizing Myths in Broadband Expansion

The Federal Broadband Equity Access and Deployment (BEAD) Program, a prominent feature of the Infrastructure Investment and Jobs Act (IIJA), is intended to usher the digital age into areas long underserved by modern broadband. With $42.45 billion earmarked for this purpose, the expectations are high. However, a cloud of misinformation and misunderstanding threatens to cast a shadow on this initiative, potentially leading to a scenario where taxpayers receive as little as fifty cents of broadband for every dollar spent. It is imperative that policymakers address these concerns and ensure that the BEAD Program lives up to its potential.

The BEAD Program's goal is clear: deliver broadband to areas with no broadband or substandard quality. The National Telecommunications and Information Administration (NTIA) is entrusted with its execution – the NTIA distributes funds to state governments, who are then responsible for supporting broadband providers to drive expansion. Yet, the journey ahead is fraught with pitfalls, as some members of Congress, states, and the NTIA appear to be swayed by certain misconceptions.

One prevailing myth is that a competitive bidding mechanism, utilized successfully in previous initiatives like the Federal Communications Commission’s (FCC) Connect America Fund (CAF), results in a race to the bottom, and ultimately inadequate service.

This belief, however, is not rooted in reality. In fact, the particular bidding mechanism in question, the reverse auction model, has repeatedly demonstrated its efficacy across the government and saved taxpayers millions in procurement costs, according to the Government Accountability Office. An example of its triumph was seen during the FCC’s incentive auction that reallocated radio spectrum from underutilized broadcasters to mobile broadband providers, a move that injected fresh vitality into mobile broadband. This auction was perhaps the most complex the world has ever seen and was lauded by a Noble Prize-winning economist, who helped design it.

The source of the myth appears to be misconceptions about the FCC’s Rural Development Opportunities Fund (RDOF), where missteps were made that included awarding subsidies to areas didn't need them and to providers that lacked the capacity to fulfill their responsibilities.

Regrettably, instead of appropriately attributing these problems to administrative errors, some officials have wrongly pegged the competitive bidding mechanism itself as the culprit. This misguided perspective, if carried forward, could lead to costly mistakes, as history has shown that the mechanism itself isn't to blame.

Furthermore, BEAD's effectiveness is undermined by a host of fallacies that continue to influence policy decisions. Believing that open networks promote competition, regulating prices ensures affordability, imposing union-like employment policies promotes wealth, and controlling technology choices future-proofs networks are all misconceptions. These notions may sound appealing in theory but have repeatedly proven impractical and counterproductive in practice.

But the most pernicious myth is the perception that the issues witnessed during the RDOF initiative were due to the bidding mechanism, rather than administrative shortcomings. This belief, if allowed to fester, could result in squandered resources and failed promises. The CAF II auction lowered expected subsidy costs by 70 percent. Also, economist Sarah Oh Lam has shown that a reverse auction provides twice the broadband as normal grant programs, which NTIA allows states to use.

RDOF and BEAD are strange bedfellows for other reasons. The FCC’s legacy regulations meant that RDOF targeted traditional telephone serving areas, which are often economically irrelevant for broadband. And the FCC’s limited funds for RDOF led the agency to give grantees many years to meet their commitments, which conflicts with the relatively fast pace of BEAD deployment. And the broadband speeds funded by RDOF are much lower than those that BEAD targets.

The BEAD Program is an opportunity to bridge the digital divide and empower underserved communities with the connectivity they desire. To unlock its full potential, it is essential for policymakers to discard these myths, embrace proven mechanisms like effective auctions, and remain focused on addressing administrative errors, which exist regardless of the bidding system, rather than prematurely discarding successful approaches. By doing so, we can ensure that every dollar invested in BEAD translates into tangible, transformative broadband.

Mark Jamison is a nonresident senior fellow at the American Enterprise Institute, where he works on how technology affects the economy, and on telecommunications and Federal Communications Commission issues.