U.S. ISP Rural Business Model Will Change Significantly Because of Infrastructure Subsidies

It remains unclear how $42.5 billion in new subsidy support for consumer broadband will be allocated, as the funds are slated to go directly to states and territories to fund internet improvements.

So there will be potentially 50 or more different sets of rules. At least $100 million is reserved for each of the 50 states, and an additional $100 million is to be split among American territories, such as Guam and the U.S. Virgin Islands.

The intent is to focus on unserved and underserved areas of the country, those that lack any internet access or where consumers can receive only low-bandwidth speeds. 

Among the big questions is how state lawmakers will choose priorities: unserved versus underserved; how many awards in any single geographic area; the balance of fixed versus mobile support; and which platforms might be favored over others. 

At least some believe incumbent internet service providers will be the big beneficiaries. But even there, surprises could await. 

“The $65 billion figure dedicated to broadband is unprecedented and stands to benefit cable operators in particular,” said Chris Mooney, S&P Global Ratings Director for the U.S. Telecom & Cable sector. “Low population density and environmental obstacles previously deterred cable operators” (and telcos) but the subsidies could change business models. 

Since the state-level awarding process will be political, political considerations likely will play a role. A smart elected official will recognize that the widest-possible impact, affecting the greatest number of people, is politically beneficial. 

The greatest spreading of funds among rival industries and internet service providers likewise will be seen as more helpful to elected officials than awards that affect a smaller number of industries and ISPs. 

All of that suggests the rules will be crafted in ways that maximize the total number of voters and ISPs as possible. 

What is clear is that the internet service provider payback model wil lbe improved for the better as the subsidies are factored into the equation.