Will The Swamp Flood Out Broadband For Rural America?

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Peter Ferrara Contributor
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Approximately 23 million Americans mostly living in rural areas do not have access to fixed, broadband internet service in their homes. Government has provided millions in recent years to the large internet service providers and the big mobile carriers precisely to address this gap and ensure universal broadband service to everyone in America.

But that taxpayer money has been wasted in the big corporate swamps, which have failed to get the job done. Rather, those big corporate interests are now pursuing the opposite, through regulatory favoritism that will disfavor the smaller broadband providers who are investing their own money to close the broadband gap.

The Federal Communications Commission (FCC) has issued a notice of proposed rulemaking that would favor improved 5G internet service for concentrated urban areas over new 1G service for the rural hinterlands that lack any service now. The proposed rule would change the current regulatory regime the FCC adopted in 2015, which was considered open to broadband investment by every possible provider, small and large.

Those 2015 regulations were adopted unanimously by the FCC, with the votes of all five members. Those rules covered internet service provided through the 3550-3650 MHz spectrum first, expanded to the 3550-3650 MHz spectrum in 2020.

The 2015 regulations provided for Priority Access Licenses (PALs) covering 10 megahertz of spectrum that enabled internet service to specific census tracts. Those PALs were auctioned for three-year license terms for 74,000 census tracts, renewable for a second three-year period.

The manageable investment needed to provide internet service for a census tract meant that the market for expanded broadband was open to a wide range of potential competitors, including small rural ISPs, small mobile phone service providers, universities, sports arenas, industrial companies, building managers, and other possible competitors. Moreover, the three-year lease term maintained ease of entry into this business, as did the one time right of renewal, foreclosing effective permanent licenses that would exclude new entrants into the internet buildout market.

But under the new proposed rule, the Priority Access Licenses would be expanded from 74,000 census tracts to much larger 416 Partial Economic Areas, and the term of the licenses would be extended from three years to 10 years, with an unlimited, unspecified “renewal expectancy.” Just one such renewal would lock up the geographic area for 20 years.

The much larger geographic area for the licenses would enable only the biggest corporate players to buy up licenses combining high profit, concentrated urban areas with the more sparsely populated, low profit rural areas. But their real interest is the more high-profit, urban concentrations, rather than serving the less profitable, sparsely populated rural areas.

Smaller competitors would then be economically barred effectively from entering the market to compete, and extend new service into those chronically underserved rural areas. Indeed, millions in rural investments to extend service to those areas would effectively be stranded under the new rules.

Rural voters supported Trump so he could drain the swamp, not extend into a flood of surrounding areas. His FCC commissioners should not be playing crony capitalism, picking winners and losers like central economic planning socialists. They should be focusing instead on expanding broadband investment by removing all vestiges of the Obama era “net neutrality” burdens that so effectively discouraged investment in broadband buildout.

Peter Ferrara served in the White House Office of Policy Development under President Reagan, and as Associate Deputy President of the United States under President George H.W. Bush. He is a Senior Fellow at the Heartland Institute, and a Senior Policy Advisor to the National Tax Limitation Foundation.