Good Outcomes Beat Good Intentions: How Dumb Are We?

Good intentions clearly are not enough when designing policies to improve home broadband availability in underserved areas. In fact, since 2021, more than three years after its passage, the U.S. Broadband Equity, Access, and Deployment (BEAD) program has yet to install a single new connection.  

It seems we were determined to make the perfect the enemy of the good, preventing construction until we mostly were certain our maps were accurate. A rival approach would have proceeded on the assumption that residents and service providers pretty much know where they have facilities and where they do not; where an upgrade can be conducted fast and easily, and where it cannot. 

And perhaps (despite the clear industry participant interests that always seem to influence our decisions) we should not have insisted on the “fastest speed” platforms. Maybe we’d have prioritized “good enough” connections that could be supplied really fast and enabled the outcomes we were looking for (getting the unconnected connected; getting the underserved facilities that do not impede their use of internet apps). 

This is not, to use the phrase, “rocket science.” We have known for many decades that “good enough” home broadband can be supplied fast, and affordably, if we use satellite (geostationary or low earth orbit, but particularly now LEO) or wireless to enable the connections. 

To those who say we need to supply fiber to the home, some of us might argue the evidence suggests relatively-lower speed (such as 100 Mbps downstream) connections supply all the measurable upside we seek, for homework, shopping, telework. The touted gigabit-per-second or multi-gigabit-per-second connections are fine, but there is very little evidence consumers can even use that much bandwidth. 

Study/Source	Key Findings
Distinguishing Bandwidth and Latency in Households' Willingness to Pay for Broadband Internet Speed (2017)	Consumers value increasing bandwidth from 10 to 25 Mbps at about $24 per month, but the additional value of increasing from 100 Mbps to 1 Gbps is only $19. This suggests diminishing returns for speeds beyond 100 Mbps.
Are you overpaying for internet speeds you don't need? (2025)	Research indicates that many Australians are overspending on high-speed internet connections they don't need. Most households can manage well with a 50 Mbps plan unless they engage in high-bandwidth tasks like 4K streaming or online gaming.
Simple broadband mistake costing 9.5 million households up to £113 extra a year (2024)	Millions of UK households are overpaying for broadband by purchasing higher speeds than necessary. Smaller households often need speeds up to 15 Mbps but pay for over 150 Mbps, wasting £113 annually.
ITIF (2023)	- US broadband speeds outpace everyday demands - Only 9.1% of households choose to adopt 250/25 Mbps speeds when available - Clear inflection point past 100 Mbps where consumers no longer see value in higher speeds
ITIF (2020)	- Average existing connections comfortably handle more than typical applications require - A household with 5 people streaming 4K video simultaneously only needs 2/3 of current average tested speed - Research shows reaching a critical threshold of basic broadband penetration is more important for economic growth than faster speeds
European Research (2020)	- Full fiber networks are not worth the costs - Partial, not full end-to-end fiber-based broadband coverage entails the largest net benefits
US Broadband Data Analysis	- Compared to normal-speed broadband, faster broadband did not generate greater positive effects on employment
OpenVault Q3 2024 Report	- Average US household uses 564 Mbps downstream and 31 Mbps upstream - Speeds around 500 Mbps sufficient for most families
FCC Guidelines	- 100-500 Mbps is enough for 1-2 people to run videoconferencing, streaming, and online gaming simultaneously - 500-1000 Mbps suitable for 3 or more people with high bandwidth needs

We might all agree that, where it is feasible, fiber to home makes the most long-term sense. But we might also agree that where we want useful home broadband speeds, right now, everywhere, with performance that enables remote work, homework, online shopping and all other internet apps, then any platform delivering 100 Mbps (more for multi-user households, but likely not more than 500 Mbps even in the most-challenging use cases) will do the job, right now. 

Good intentions really are not enough. Good outcomes are what we seek. And that often means designing programs that we can implement fast, at lower cost, with wider impact, immediately or nearly so. “Better” platforms that cost more and are not built are hardly better.

If Grocer Profits Rose About 1.5% Is that Evidence of "Price Gouging" at the Grocery Store?

Some people seem to believe that grocery prices exhibited evidence of price gouging because of the Covid pandemic. 

Price gouging represents what people consider “unfairly high” or “excessive” increases of the prices of goods, services, or commodities in relation to the normal market price or the cost of providing those goods or services. 

Such potential behavior typically occurs during emergencies or periods of market disruption when buyers have limited choices and are considered vulnerable. And the key is the notion of “unfair” or “excessive” increases. 

Economists always predict price hikes when supply is constricted or demand inflates, especially unexpectedly.   

Studies do show an increase in profit rates during the Covid supply chain problems, but some of us would also note that supply and demand also could explain all the increases. 

There arguably was more demand for groceries as consumers were confined to their homes and restaurants were shuttered for “on premises” dining. Supply chain disruptions caused shortages--and shortages tend to create price pressures. 

With plants shuttered and workers at home, production dropped. Transportation networks also faced slowdowns and materials shortages which, in turn, cascaded through the rest of the value chain. Measures to protect workers also slowed productivity, since time, cost and effort had to be shifted to “sanitizing” premises rather than producing. 

One Federal Trade Commission report suggests grocery retailer profit margins rose from about 5.6 percent to as much as seven percent.  

Other studies suggest profit increases because of Covid on the order of about 1.5 percent between 2019 and 2020, with margins declining afterwards. 

“Demand for many retail grocery products unexpectedly spiked upward during the pandemic, just as the supply chain was struggling with a series of input, labor, and transportation challenges,” the FTC report notes. 

Shipping demand increased while supply decreased, for example. 

The point is that one need not assume any “price gouging” to explain temporary profit increases at a time when demand grows and supply decreases. That basic dynamic would lead to higher prices, and often higher profits in any market similarly affected. 

Event	Good/Service	Imbalance Type	Key Consequence(s)
2020-2023 COVID-19 Pandemic	Toilet paper, hand sanitizer, computer chips, lumber	Excess demand, supply chain disruptions	Shortages, delayed construction projects
1970s Oil Crisis	Gasoline	Inadequate supply	Long lines at gas stations, fuel rationing, higher energy costs
2011 Japanese Earthquake and Tsunami	Semiconductor chips, automobiles	Supply chain disruptions	Production delays, higher prices for electronics and cars
Hurricane Katrina (2005)	Gasoline, food, building materials	Excess demand, supply chain disruptions	Shortages, price increases, delays in rebuilding efforts
2022 Russian Invasion of Ukraine	Wheat, sunflower oil, natural gas	Inadequate supply	Global food price inflation, energy crisis in Europe

And while there is no automatic and linear relationship between prices and profits, imbalances in supply or demand (less supply; more demand) almost always lead to higher prices. And temporary supply-demand imbalances arguably often lead to temporary profit gains. 

Situation	Demand	Supply	Price	Impact on Supplier Profits
Shortage of Housing	High demand for housing in desirable areas with limited construction	Limited supply of available homes	Increased home prices and rents	Increased profits for landlords, home sellers, and real estate developers
Concert Ticket Scarcity	High demand for tickets to a popular concert or event	Limited number of tickets available	Increased ticket prices, potential for scalping	Increased profits for the concert organizers, artists, and potentially scalpers
Collectible Item Craze	Sudden surge in demand for a rare collectible item (e.g., limited-edition sneakers, rare trading cards)	Limited supply of the collectible item	Significantly increased prices	Increased profits for collectors who already own the item and resellers
Natural Disaster Disruption	Increased demand for essential goods (e.g., batteries, flashlights, bottled water) after a natural disaster	Limited supply due to transportation disruptions and supply chain issues	Increased prices for essential goods	Increased profits for suppliers who can still provide essential goods, potentially even with unethical price gauging
Technological Innovation	High demand for a new, innovative tech product (e.g., a revolutionary smartphone)	Limited initial production capacity due to manufacturing constraints	High initial prices and potential for waiting lists	Increased profits for the tech company, despite potentially limited initial supply

When Will AI Capex Payback Happen First?

Most of us would likely agree that artificial intelligence benefits are going to take a while to be seen almost anywhere except the financial results of infrastructure providers, who clearly will benefit. Nor would that ever be unusual when an important new technology--not to mention a possible new general-purpose technology--first emerges. 

Indeed, analysts at Goldman Sachs say “leading tech giants, other companies, and utilities to spend an estimated $1 trillion on capex in coming years, including significant investments in data centers, chips, other AI infrastructure, and the power grid.” 

Still, “this spending has little to show for it so far.” Nor would one realistically expect to see quantifiable results so early. The pattern with general-purpose technologies is that the platforms and infrastructure must be built first, before use cases and apps can be developed. 

Also, some functions are more susceptible to generative AI impact, for example, than others. 

Most of us would be willing to concede that customer service is one area where generative AI, for example, should produce results. Functions with many repeatable elements are commonly thought to be susceptible to AI automation. 

In a survey conducted for Bain, enterprise executives reported that better results were seen in sales; software development; marketing; customer service and customer onboarding, for example. Between October 2023 and February 2024, though, most other use cases seemed to produce less favorable outcomes than expected. 

source: Bain 

Generative AI thrives on well-defined patterns and processes, so jobs involving repetitive tasks with clear rules and minimal ambiguity are likely candidates for early change. 

But lots of functions and tasks are not routine or well structured; not simple but complex, so the range of use cases that can benefit near term is arguably limited. 

As the report notes, Daron Acemoglu, Institute Professor at MIT, estimates that only a quarter of AI-exposed tasks will be cost-effective to automate within the next 10 years, implying that AI will impact less than five percent of all tasks.

Most of us would be willing to concede that customer service is one area where generative AI, for example, should produce results. Functions with many repeatable elements are commonly thought to be susceptible to AI automation. Generative AI thrives on well-defined patterns and processes. Jobs involving repetitive tasks with clear rules and minimal ambiguity. 

All that noted, the first quantifiable results will be seen among suppliers of infrastructure, as apps cannot be built until the infrastructure is in place.   

GPT/Possible GPT	Infrastructure Provider	Early Revenue Gains
AI/Large Language Models	NVIDIA	171% year-over-year revenue increase in Q2 2023, driven by demand for AI chips
Internet	Cisco Systems	Revenue grew from $69 million in 1990 to $22.3 billion in 2001 as internet infrastructure expanded
Personal Computers	Intel	Revenue grew from $1.9 billion in 1985 to $33.7 billion in 2000 as PC adoption surged
Electricity	General Electric	Revenue increased from $19 million in 1892 to $1.5 billion in 1929 as electrical infrastructure spread
Railroads	Steel Companies (e.g. Carnegie Steel)	U.S. steel production grew from 68,000 tons in 1870 to 11.4 million tons in 1900

That noted, it also could be said that there has been overinvestment--at some point--in infrastructure for past general-purpose and new technologies. It also might be noted that application and device over-investment also occurs, early in the adoption of a new technology. 

Technology	Time Period	Description of Over-Investment
Railroads	1840s-1850s	Excessive railroad construction and speculation led to financial panics in 1857 and 1873 in the US and UK
Automobiles	1910s-1920s	Hundreds of car companies were founded, with most failing as the industry consolidated
Radio	1920s	Rapid proliferation of radio stations and manufacturers, followed by consolidation
Internet/Dot-com	Late 1990s	Massive speculation in internet-related companies led to the dot-com bubble and crash in 2000
Renewable Energy	2000s-2010s	Over-investment in solar panel manufacturing led to industry shakeout
Cryptocurrencies	2010s-2020s	Speculative frenzy around Bitcoin and other cryptocurrencies

But there is a difference between “over-investment” and the proliferation of would-be competitors in a new market. It always is normal to see more startups in any area of new information technology than there are surviving firms once the market is mature. 

The difference between over-investment and normal competition in a new market can be subtle. What might not be subtle is the lag time between capex investments and revenue realization, for firms not in the "picks and shovels" part of the ecosystem.

Infra suppliers already have profited.