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President Joe Biden’s $2 trillion infrastructure plan is smart to look beyond ports and potholes. But I worry about the part of the plan aimed at expanding broadband. It’s both too ambitious and not ambitious enough.
Make no mistake, broadband is infrastructure. It’s unacceptable that American schoolchildren have to piggyback on the Wi-Fi provided by fast-food restaurants to submit homework, and adults have uneven internet access as they hold down remote jobs, apply for jobs, or make Covid vaccine appointments. The problem needs fixing — and soon.
But the Biden plan doesn’t ask for enough money to fix it. It proposes a $100 billion budget over eight years to close America’s digital divide, similar to a parallel bill in Congress. These proposals are predicated on an incorrect FCC mapping of the country’s digital infrastructure that estimates that there are “fewer than 14.5 million†people who lack broadband internet access. The estimate is so far off the mark that the current acting FCC chair, Jessica Rosenworcel, has acknowledged it and commissioned a proper mapping of broadband nationwide.
A more reliable count by an independent research group, BroadbandNow, estimated that 42 million Americans were without broadband and they live in both rural and low-income urban areas. Moreover, the Biden plan calls for “future-proof†broadband, as America’s current broadband standard measured in internet speeds is already out-of-date. The broadband standard is a minimum download speed of 25 Mbps. In Denmark, the average actual download speed was almost 5 times faster; in Switzerland and South Korea, it was over 4 times faster. Taking all of this into account and applying the FCC’s cost structures, my research team estimates the budget needs to be at least $240 billion — more than double the current target. An inescapable conclusion is that the plan’s budget is not ambitious enough and has a budget shortfall of $140 billion.
At the same time, the Biden plan is too ambitious in its proposed solution. It intends to solve the broadband problem through local public and municipal networks — those that operate without a profit motive. That will be difficult to do, to say the least: Municipal networks are banned in at least 18 states. Biden will have to work with other, better-resourced parties. He will also have to find new ways to raise revenue to pay for the upgrades to America’s digital infrastructure. I would propose a two-part solution. Both involve Big Tech, the industry that makes the most money from better connectivity.
First, consider a “tech tax†to narrow the budget gap. Nobel laureate Paul Romer has recently suggested taxing the revenues that Big Tech earns from targeted digital ads. There are large revenue pools — of over $120 billion a year — to dip into: In 2020, social media advertising revenues rose to $41.5 billion, while digital video advertising revenue grew to $26.2 billion and advertisers were expected to spend $59.22 billion on search ads. The tech tax revenues can be collected in a new Universal Broadband Fund, modeled on the Universal Service Fund, by which long-distance telecoms were assessed to subsidise telephone service to high-cost areas. Why not revive an old solution for a modern version of an old problem? While it may be naïve to expect bipartisanship on this, it seems not out of the question; lawmakers from both sides of the aisle are keen to get the industry to pay its dues.
—Bloomberg