Jan 30, 2019

How States Can Improve Internet Access

Rural Reform Series

This is the second installment in a multi-part series identifying policy reform opportunities that could improve the quality of life for rural Americans.

There is no doubt that technology access is vital to participation in the modern economy. Unfortunately, too many remote areas still lag behind in communications technology adoption, shutting them out from opportunities and quality of life improvements. State policymakers seeking to help rural constituencies should, therefore, consider reforms that improve telecom access.

It is true that much telecom policy is set at the federal level by the FCC. But there is much that state policymakers can do to improve rural telecom access. Here are few state level policy ideas to help expand rural telecom access, drawn from Mercatus publications.

Remove Local Barriers to Telecom Infrastructure

When most people connected to the internet using physical cables, the challenge of rural access was formidable. Innovative workarounds, like satellite internet connections, emerged to fill the gap, but at the unfortunate cost of speed and affordability. The disincentives to expand broadband wrought by Title II regulations (so-called “net neutrality”) did not help matters—fortunately, those anti-investment rules have since been repealed.

The emergence of new super-fast wireless broadband, called 5G, presents state policymakers with a great opportunity. Unlike relatively concentrated internet infrastructure, like large cell towers or buried fiber cables, 5G coverage is more distributed. Hundreds of thousands of mini antennas the size of a small backpack will provide consumers with fast connections at affordable rates.

Importantly, 5G is crucial to power the technologies of tomorrow. For instance, autonomous vehicles will be greatly enhanced by fast and comprehensive 5G coverage. It is therefore imperative that rural communities have access to 5G networks to enjoy the benefits of next-generation transportation.

But robust 5G coverage is far from a foregone conclusion.

Because wireless companies must place many small antennas, rather than install one big cell tower, they will need to either locate appropriate utility poles and public rights-of-way or get permission from local homeowners. This can be a frustrating and costly endeavor. Municipalities may impose attachment fees for access to utility poles or prohibit private property owners from allowing small cell installation.

State policymakers can facilitate rural broadband penetration by removing barriers to facility installation, according to senior research fellow Brent Skorup.

One case study of this approach is the FCC’s satellite dish-era ‘over-the-air-reception device (OTARD) rules. In the 1990s, many local policymakers enacted similar fees and bans on homeowners’ abilities to install satellite reception dishes on their own roofs. While this may have satisfied critics of the expanding telecom access and bolstered municipal coffers, it stymied competition in television provision and curtailed property owner’s freedom.

At Congress’s urging, the FCC promulgated OTARD rules which limited policymakers’ abilities to restrict satellite dish installation. If the TV receiver was small enough, around the size of a pizza box, homeowners would be free to install the equipment unobstructed.

State and local policymakers should consider enacting their own OTARD-like rules that carve out space for private property owners to install reasonable 5G cells without fees or restrictions. These reforms would not only respect private property rights, but they could also stimulate a wave of 5G coverage across the areas in most need of technological access.

Universal Service Fund (USF) Reform

Policymakers have attempted to tackle the problem of rural telecom access through subsidies. The USF is the largest effort, distributing some $75 billion in “high cost” telecom subsidies over the past two decades. The FCC-run fund redirects fees on consumer phone bills to telecom providers serving rural areas in the hopes that this will boost penetration.

But rural denizens can be forgiven for not knowing about this program, as it seems to have made little difference for rural access in spite of ever-increasing costs.

Although Congress expected USF expenditures to decrease over time as its mission was achieved, the opposite is true. By 2015, the $8.8 billion in USF payments almost doubled the $4.9 billion in 1999 disbursements. This extreme cost inflation has continued despite promising improvements in phone and broadband competition.

These expenditures include ample waste and misdirection of funds. The Government Accountability Office (GAO) has criticized USF administration for inefficiencies and overlap. There is considerable overhead, too. One study estimated that more than half of each USF dollar goes directly to administrative expenses. Another study suggests that USF expenditures could counterproductively limit broadband penetration by prioritizing certain providers over other, possibly more competitive ones.

If these fees must be collected, might they at least be better used?

This is the question Montana’s Public Service Commission raised in 2017. In public comment and testimony, Skorup urged the Commission to petition the FCC to reform the USF. Specifically, states could seek more flexibility in how to achieve the goals the USF set out to address.

Vouchers are one promising option. Rather than trying to guess which services or providers will best serve the needs of rural populations, USF expenditures could be distributed directly to rural households. After all, they are the ones who know the most about their technological needs.

The voucher amount could be tiered based on the needs of the population. For example, rural communities in the Northeast may have access issues, but they are less remote than households in Montana. So more remote households could receive greater subsidies to reflect the higher barriers to access in that area.

States do not have the ability to change USF administration on their own. But reform can be won by petitioning the FCC for a rule change. The benefits may be well worth it.

Expanding Access Means Expanding Opportunity

In general, one of the best ways to help rural communities is to facilitate pathways to access the outside world. In the case of telecommunications, improving access pays cumulative policy dividends.

Of course, there is a straightforward benefit: more people can connect to the internet. But robust broadband coverage and access also mean more opportunities for bandwidth-heavy technologies like driverless cars, telemedicine, and drone deliveries.

Policymakers seeking to improve the lives of their rural constituents would, therefore, be especially wise to target telecommunications access, as it is a foundation for so many other possible social benefits.

 

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate