February 4, 2022

The NTIA Should Consider Authorizing Broadband Vouchers to Rural Households and Grants for Passive Infrastructure

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The Fourth Branch project of the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of regulation on society, commerce, and innovation. As part of its mission, the program conducts independent legal and economic analyses to assess agency rulemakings and proposals from the perspective of consumers and the public. In the past, it has published research related to broadband policy.

I welcome the opportunity to submit comments regarding the notice and request for comment about how the Office of Internet Connectivity and Growth should spend over $48 billion of new funding. The Broadband Equity, Access, and Deployment (BEAD) program offers grantees significant funds to expand broadband services in rural areas. In this comment, I propose that the National Telecommunications and Information Administration (NTIA) authorize grantees to distribute broadband vouchers to rural households, and I propose that the NTIA authorize grantees to construct “passive infrastructure”—the conduits, roadside poles, and roadside vaults on public rights-of-way. Later, I elaborate on broadband vouchers. Attached to this comment is a Mercatus Center policy brief about cost-effective public funding for passive infrastructure.

This voucher framework has many benefits over traditional grant programs:

  • Consumer choice. Rural broadband users determine which providers ultimately receive BEAD funds.
  • No crowding out or overbuilding. No provider faces a competitive disadvantage owing to BEAD funding because all providers have equal access to consumers’ vouchers.
  • No new mapping. Providers need not perform time-consuming and contentious broadband mapping, given that overbuilding is precluded. Grantees can use currently available map data and maps, such as the Census Bureau’s map of rural areas, to determine eligible geographic areas.
  • Compatibility with concurrent rural broadband programs. No provider who participates in existing programs (such as the Rural Deployment Opportunity Fund or state programs) is penalized or excluded from receiving consumer vouchers.

The notice asks, “How can NTIA ensure that all potential subrecipients, including small and medium providers, cooperatives, non-profits, municipalities, electric utilities, and larger for-profit companies alike have meaningful and robust opportunities to partner and compete for funding under the programs?”

One way to ensure robust and fair participation by all sizes and types of internet access providers is for the NTIA to authorize, and for state grantees to distribute, broadband vouchers to rural households. For instance, in two years of distributing broadband vouchers to rural households in the United Kingdom, nearly 90 percent of funding has gone to small providers. The BEAD program’s statutory language about use of broadband funds is broad and seems to permit vouchers to households. Such a voucher, if authorized, would operate much like the FCC’s Affordable Connectivity Program, a $30–$75 monthly benefit to low-income households.

If the NTIA were to authorize voucher programs, state and local BEAD grantees could identify unserved or underserved geographic areas and issue vouchers to every household in those areas. With a voucher, households could simply choose the internet service provider that works best for them—whether it is a rural cable company, wireless internet service provider, phone company, electric co-op, satellite company, or cellular provider. There would be no subsidizing of monopolists and no risk of anticompetitive overbuilding.

Providers—whether large or small, for-profit or nonprofit—would compete to be the recipient of those households’ BEAD-funded monthly bill credits. Regional and local governments could easily supplement or match the BEAD funds with local funding, much like is done under the UK voucher program, increasing the voucher amount to rural households.

State and national governments have successfully used broadband vouchers. At least two states—Alabama and Delaware—have used Coronavirus Aid, Relief, and Economic Security Act funding to create broadband voucher programs that extend broadband coverage to households with students. Under the Delaware voucher program, AT&T, Comcast, Mediacom, and Verizon have provided landline service and mobile hotspots to eligible households with students. More than 20,000 students have benefited. Alabama’s emergency broadband voucher program for students began in the summer of 2020 and within 10 months connected over 200,000 students. Program costs were lower than expected and participation by small phone and electric co-ops was significant.

A common objection to broadband vouchers is that they cannot induce buildout to unserved areas. Nevertheless, the experience of a vouchers program in the United Kingdom suggests that vouchers encourage service expansion to rural areas. The United Kingdom established a rural voucher program around 2014, and providers found “great success” in voucher take-up by encouraging neighbors and communities to pool their vouchers together and commit to a fixed term of service (for instance, a one-year agreement). Voucher pooling is now required by the UK government, and that reliable stream of new revenue and customers induces providers to build out to new areas, with fiber optics in many cases.

In a 2020 study, Michael Kotrous and I illustrate how a rural voucher program could operate. That study is attached. We estimate that, with $4.6 billion annually, regulators could assign a sizable voucher—between $5 and $45 monthly—to every rural household in the United States. The BEAD program dedicates $42.5 billion to rural broadband deployment, so our study shows that the BEAD program could fund a large national voucher program over 10 years.

A handful of states have shown interest in and the capacity to operate a broadband voucher program, and the NTIA should permit and encourage states to consider a rural voucher program. The BEAD program’s statutory language seems broad enough to authorize voucher programs. The NTIA should consider allowing grantees to use BEAD program funds to upgrade and extend broadband networks in rural areas. Given the real-world experience of voucher programs, large and small providers would participate and expand their network coverage.

Attachments

Brent Skorup and Michael Kotrous, “Narrowing the Rural Digital Divide with Consumer Vouchers” (Mercatus Policy Brief)

Korok Ray and Brent Skorup, “Smart Cities, Dumb Infrastructure: Policy-Induced Competition in Vehicle-to-Infrastructure Systems” (Mercatus Working Paper)