Rural Internet Program Politics

The U.S. Federal Communications Commission’s rural broadband funding program, the 

Rural Digital Opportunity Fund, is pretty much technology neutral. What it arguably is not so much is supplier neutral, even if such programs have become more neutral over time. 

Even if the regulations do not specify it, all rural support programs historically have favored rural fixed network telcos who are carriers of last resort. 

The assumptions for the subsidies are sound enough. Since there actually is no sustainable business case for fixed network communications in many rural areas, the only way service will be provided is by use of subsidies. 

But the need for subsidies does not, in and of itself, explain why most of the funding has traditionally gone to rural fixed network telcos, even if the obvious answer was that, in the monopoly era, there was only one firm to which such funds might have been given.

That has changed over time, as other platforms have emerged. 

When voice was the issue, mobile networks arguably would have been capable. In the broadband era, cable TV companies are obvious suppliers, and many fixed wireless or new alternatives such as low earth orbit satellite firms will eventually emerge as potential suppliers as well.

You can assume the funding decisions will not--as a political matter--be based strictly on which platforms can deliver suitable broadband access. There is a requirement to supply voice services, which many internet service providers might prefer not to do. There are some regulatory oversight conditions cable TV or other smaller independent companies might shy away from. 

And then there are the non-network issues. Most rural telcos are “significant” providers of local jobs and have significant political support in states. Nor is it clear those businesses are sustainable without direct subsidies, where others might well survive without the funds. Mobile operators, wireless ISPs and cable TV operators might have a business case without subsidies. 

Some argue the past programs have not worked, or might not actually be needed as much as often is claimed. Perhaps 60 percent of high-cost funds support corporate overhead, not the expansion of networks. And since funding is based on “high costs,” applicants have incentives to keep their costs high. 

The need for subsidies and societal value is clear enough. The politics of funding arguably are also clear. Carriers of last resort arguably will carry some political weight that is not reflected in funding criteria in a direct sense.