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 of inquiry about how the Federal Communications Commission (FCC) should improve its universal service goals and its High-Cost Support program (now known as the Connect America Fund) for broadband deployment. In this comment, I propose that the FCC consider authorizing broadband vouchers to rural households. Attached is a study illustrating that High-Cost Support could provide vouchers worth $5 to $45 monthly to every rural household in the United States. This voucher framework has many benefits over traditional grant programs:
- Consumer choice. Rural broadband users determine which providers ultimately receive program funds.
- No crowding out or overbuilding. No provider faces a competitive disadvantage owing to FCC 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. Federal and state officials 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 US Department of Commerce’s Broadband Equity, Access, and Deployment [BEAD] program or state programs) is penalized or excluded from receiving consumer vouchers.
The notice asks, “What changes, if any, should we consider to the High-Cost program in light of the Infrastructure Act and other recent developments?”
The new BEAD program offers over $40 billion to states and cities to expand broadband services in rural areas. As the FCC recognizes, it is important that High-Cost Support and BEAD program funding not be duplicative. One way for High-Cost Support funds to complement BEAD funds is to distribute broadband vouchers to rural households.
The FCC’s Universal Service Fund’s statutory language about use of 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 FCC were to authorize voucher programs, federal and state officials 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—large or small; for-profit or nonprofit—would compete to be the recipient of those households’ FCC-funded monthly bill credits. Regional and local governments could easily supplement or match the FCC funds with local funding, much like as the UK voucher program has done, 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 (CARES) 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. Over 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 with vouchers 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, including with fiber optics in many cases.
A 2020 study by Michael Kotrous and me illustrates how a rural voucher program could operate. That study is attached. We estimate that with the $4.6 billion budget of High-Cost Support in 2019, regulators could have assigned a sizable voucher—between $5 and $45 monthly—to every rural household in the United States.
A handful of states have shown interest in and the capacity for operating a broadband voucher program. High-Cost Support’s statutory language seems broad enough to authorize voucher programs. The FCC should consider disbursing some or all High-Cost Support funds to rural households as vouchers to upgrade and extend broadband networks in rural areas. Based on real-world outcomes of voucher programs, large and small providers would participate and expand their network coverage.
Brent Skorup and Michael Kotrous, “Narrowing the Rural Digital Divide with Consumer Vouchers” (Mercatus Policy Brief, Mercatus Center at George Mason University, Arlington, VA, October 2020)