Biden’s Plan for Broadband Isn’t Bold Enough
(Bloomberg Opinion) -- President Joe Biden’s $2 trillion infrastructure plan is smart to look beyond ports and potholes. But I worry about the part of the plan aimed at expanding broadband. It’s both too ambitious and not ambitious enough.
Make no mistake, broadband is infrastructure. It’s unacceptable that American schoolchildren have to piggyback on the Wi-Fi provided by fast-food restaurants to submit homework, and adults have uneven internet access as they hold down remote jobs, apply for jobs, or make Covid vaccine appointments. The problem needs fixing — and soon.
But the Biden plan doesn’t ask for enough money to fix it. It proposes a $100 billion budget over eight years to close America’s digital divide, similar to a parallel bill in Congress. These proposals are predicated on an incorrect FCC mapping of the country’s digital infrastructure that estimates that there are “fewer than 14.5 million” people who lack broadband internet access. The estimate is so far off the mark that the current acting FCC chair, Jessica Rosenworcel, has acknowledged it and commissioned a proper mapping of broadband nationwide.
A more reliable count by an independent research group, BroadbandNow, estimated that 42 million Americans were without broadband and they live in both rural and low-income urban areas. Moreover, the Biden plan calls for “future-proof” broadband, as America’s current broadband standard measured in internet speeds is already out-of-date. The broadband standard is a minimum download speed of 25 Mbps. In Denmark, the average actual download speed was almost 5 times faster; in Switzerland and South Korea, it was over 4 times faster. Taking all of this into account and applying the FCC’s cost structures, my research team estimates the budget needs to be at least $240 billion — more than double the current target. An inescapable conclusion is that the plan’s budget is not ambitious enough and has a budget shortfall of $140 billion.
At the same time, the Biden plan is too ambitious in its proposed solution. It intends to solve the broadband problem through local public and municipal networks — those that operate without a profit motive. That will be difficult to do, to say the least: Municipal networks are banned in at least 18 states.
Biden will have to work with other, better-resourced parties. He will also have to find new ways to raise revenue to pay for the upgrades to America’s digital infrastructure.
I would propose a two-part solution. Both involve Big Tech, the industry that makes the most money from better connectivity.
First, consider a “tech tax” to narrow the budget gap. Nobel laureate Paul Romer has recently suggested taxing the revenues that Big Tech earns from targeted digital ads. There are large revenue pools — of over $120 billion a year — to dip into: In 2020, social media advertising revenues rose to $41.5 billion, while digital video advertising revenue grew to $26.2 billion and advertisers were expected to spend $59.22 billion on search ads. The tech tax revenues can be collected in a new Universal Broadband Fund, modeled on the Universal Service Fund, by which long-distance telecoms were assessed to subsidize telephone service to high-cost areas. Why not revive an old solution for a modern version of an old problem? While it may be naïve to expect bipartisanship on this, it seems not out of the question; lawmakers from both sides of the aisle are keen to get the industry to pay its dues.
Given that the digital ad revenues sales are already over $120 billion annually, and with the rise in digital ads sales, this tax pool will only grow in the near term. A tax rate of, say, 15% could help close the $140 billion budget gap over eight years. Over time, the very presence of such a tax could also create incentives for the tech industry to innovate on new business models that do not rely on harvesting data — a benefit that Romer had identified of levying such a tax in the first place.
Second, the federal government should partner with the big, for-profit players to bring broadband to disconnected areas — something nonprofit, municipal players can’t realistically do.
The large tech companies in lawmakers’ crosshairs — like Facebook, Google, Amazon and Apple — are already in the business of providing internet access, with projects like Facebook Connectivity and Amazon’s 3,000 low-earth-orbit satellites. The Biden administration should work with them to bring high-speed internet to low-access areas by offering goals, incentives and a bidding process.
There have already been some successful public-private partnerships that prove the idea of pairing tech companies with governments and social enterprises can work. Google and the state of California collaborated to connect 100,000 rural households. Microsoft and other companies worked with NGOs on a digital connectivity pilot in East Cleveland. But to attain a national scale, these kinds of projects need the federal government to play the role of organizer and convener.
The major technology companies are connectivity’s biggest beneficiaries. The industry makes money every time we touch a keyboard. It doesn’t seem radical to suggest that they should help pay for the creation of more customers through a tax — especially if they can help solve the problem with some of their own hardware. We should not be wringing our hands over this urgent problem; a solution to our digital divide is literally at our fingertips.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Bhaskar Chakravorti is the dean of global business at the Fletcher School at Tufts University and founding executive director of Fletcher's Institute for Business in the Global Context. He is the author of "The Slow Pace of Fast Change."
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