Market Extra: Biden’s infrastructure plan includes $100 billion to expand fast internet to rural, poorer areas


President Biden’s White House said on Wednesday that it plans to invest $100 billion to expand fast broadband to everyone in America under his $2.25 trillion infrastructure plan.

It could cost at least that much to hook up far-flung and poorer communities with affordable, high-speed internet, according to one estimate.

Here are some of the reasons why the pandemic has exposed the need to expand quick and reliable broadband in the U.S., particularly at prices more families can afford.

It is tempting to imagine throngs of urban dwellers fleeing high-price cities to take up work remote in bucolic corners of America due to the coronavirus pandemic and the widespread availability of broadband internet.

But for swaths of rural America, the digital divide still means it is tough to work from home, dial up a doctor for a video appointment, or for children to learn remotely.

In rural America the pandemic has made connectivity issues worse, despite decades of trying and tens of billions in federal subsidies aimed at broadly deploying broadband across rural communities, where poverty, and disappearing businesses and family farms have become the norm, forcing the young to leave town for brighter horizons.

It isn’t that the internet doesn’t exist in remote outposts, where families often live many miles apart, but that the costs of connecting, supplying and maintaining adequate high-speed broadband service have been outrun by increasingly digital lives.

“What we’ve learned in the pandemic is that speeds we thought were sufficient, are nowhere near sufficient,” said Shirley Bloomfield, chief executive officer of the NTCA – the Rural Broadband Association, an industry group of small-town and community-based telecoms.

“Instead of a burst of demand during the week from six to nine at night, we now see a steady stream of demand all day long,” she told MarketWatch.

The pandemic also exposed how crucial broadband has become for big cities and U.S. economic growth, but also for small towns, where reliable and affordable internetcan mean the difference between access to an education and healthcare or not, particularly when the nearest doctor easily could be a 60-mile drive away.

Read: Opportunity in America starts with fixing the internet, says social investing pioneer

Service and speed

The U.S. has been working to achieve “universal” broadband for all Americans, like the postal service, in the decades since it was set out by the Telecommunications Act of 1996.

Yet, a new report estimates that 42 million Americans still lack access to broadband internet, according to research firm and connectivity tracker BroadbandNow. That is about double the most recent tally from the Federal Communications Commission, the main regulator of America’s airwaves.

BroadbandNow points to flaws in the FCC’s approach to counting internet connections that result in a sizable overcount per each census block. Specifically, if one household in a census block has a connection, the FCC considers the entire neighborhood covered, a method that doesn’t reflect the actual dearth of service.

Tyler Cooper, BroadbandNow’s editor in chief, also thinks the FCC’s existing minimum broadband standards have become outdated. Right now, the FCC requires broadband customers to be supplied with a download speed of at least 25 megabits per second and 3 mbps for uploads, thresholds it set in 2015. Cooper wants to see the standard being at least 100 mbps for downloads and 50 to 100 mbps for uploads.

“The upload number is pretty important, because that determines if you can do Zoom

calls or other two-way communication,” Cooper told MarketWatch, adding that while 25 mbps allows for basic internet browsing, most work-centric applications have become “a lot more demanding of resources.”

Can the digital divide be fixed? The NTCA’s Bloomfield applauded Biden’s decision to include broadband in its infrastructure proposal. “No infrastructure package would be complete without digital infrastructure,” she said in a statement after details of the plan emerged. “We need to aim high and invest in efficient and scalable technologies like fiber to meet the needs not only of today’s consumers but also tomorrow’s.”

Congress already funds rural broadband projects, including recently with a focus on vetting providers, but also through a new mapping initiative to better pinpoint existing services, speeds and potholes, through funding from prior coronavirus aid packages.

Breaking down $115 billion need

The Biden administration outlined details on Wednesday of its plan to invest $100 billion to expand fast and affordable broadband to everyone in America, as part of its roughly $2.25 trillion infrastructure and stimulus blueprint.

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Prior to the release of the Biden plan, Jeff Johnston, CoBank’s lead communications economist, estimated that out of $115 billion likely needed to bridge the U.S. digital divide, there had been about an $80 billion funding gap, even after considering the tens of billion already earmarked for various broadband funding programs.

“That is obviously a big number,” he said, comparing the funding shortfall with the near $30 billion that major telecoms allocate to wireless capital expenditures each year.

The entire broadband investment, as currently proposed, would be less than one month of the Federal Reserve’s $120 billion a month bond-buying program of U.S. Treasurys

and government-backed mortgage bonds, which was kicked off last spring to keep credit flowing, and has no slowdown in sight.

Even so, Johnston sees at least two ways to tackle the broadband funding shortfall: either by pushing through the new infrastructure spending package or by expanding the FCC’s current pot of fees collected from landline providers, where the pool of customers is shrinking, to include broadband providers.

“Look, it is by no means a slam dunk,” Johnston said, adding that charging new fees would probably face resistance from technology giants like Comcast Corp
Google parent Alphabet Inc.
Facebook Inc.

and Charter Communications Inc.
“But we think that’s something that should be revisited.”

Big Tech and towns

As Washington gets ready for more wrangling over how it taxes and spends in the new Biden era, Cooper at BroadbandNow said positive developments already have been happening at the local level and among highflying technology companies that could ease a path to quicker, universal broadband.

“There are entirely new forms of connectivity that are at the precipice of becoming realistic at scale,” Cooper said, pointing to several low-Earth orbit satellite programs in development, including Elon Musk’s Starlink program, a part of SpaceX, which is beta-testing domestic and international broadband service. Amazon

owner Jeff Bezos also has been developing a competing program called Project Kuiper, as well as the U.K.-based OneWeb telecom.

The upshot would be that satellite service could bypass the need for providers to lay down and maintain expensive terrestrial programs. Although, in terms of building up local communities, it is hard to ignore the progress made in cities like Chattanooga, Tenn, which took off as a technology hub, after the city built its own broadband company.

“The kicker here, why they are not super commonplace, is that, unfortunately, there are 22 states that roadblock or outlaw these sorts of initiatives at the state level,” said Cooper.

Mark Santero, chief executive officer at Homestead Funds, which manages assets for the National Rural Electric Cooperative Association, sees a brighter economic forecast since early in the year, thanks to abundant fiscal stimulus that’s helping stabilize household finances to ramped up vaccinations to Biden’s efforts to modernize the nation’s infrastructure.

“Agriculture specifically is becoming more and more technology dependent, with connected machines collecting data to boost crop yields,” he said, adding that healthcare and retail also have been adapting to technology by offering virtual doctor visits and expanded online ordering.

“In rural areas, it’s the lack of broadband access that is a barrier,” he said. “If the Administration’s vision of connectivity for rural households becomes a reality, that’s very positive for rural economies.” 

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