Red Tape Isn't the Only Reason America Can't Build

The Atlantic

a day ago

The buzziest idea in Democratic politics right now is the 'abundance agenda,' which criticizes liberals for saddling government programs with bureaucratic red tape that delays those programs to the point of never delivering. Few examples seem to illustrate the point better than rural broadband.
As part of the 2021 bipartisan infrastructure law, Congress allocated $42.5 billion in subsidies to a new Broadband Equity Access and Deployment (BEAD) program. Its required 14 procedural steps to actually get this funding to internet service providers, or ISPs—companies such as AT&T, Verizon, Charter, and Frontier—along with significant labor, environmental, and domestic-production requirements, seem to fit the pattern of a well-intentioned program that has been stuffed with too many bells and whistles. (One of us, Asad Ramzanali, worked on broadband issues including BEAD in both the House of Representatives and the White House.)
Thus, three and a half years after the law passed, shovels have still not broken ground on any project funded by this program, as the New York Times columnist Ezra Klein recently explained to an incredulous Jon Stewart, who lamented the 'incredibly frustrating, overcomplicated Rube Goldberg machine that keeps people from getting broadband.'
Figuring out how to provide high-speed internet to all Americans has been an important public-policy goal for decades. As the coronavirus pandemic made painfully clear, broadband is crucial to full participation in society. And multiple empirical studies have shown that increased broadband access is correlated with stronger economic growth. Yet more than 7 million homes and businesses still do not have access.
But the current political debate misunderstands the nature of the problem at almost every level. When it comes to broadband, procedural simplicity on its own hasn't worked in the past and won't work in the future. The deeper issue is that the United States government has abandoned the full range of policy tools that would actually get the job done. Any effort to achieve 'abundance' must start by recognizing that red tape isn't the only reason America can't seem to build anymore.
The BEAD program does seem overcomplicated. It requires the Federal Communications Commission to complete a national map of where broadband is currently missing, the Commerce Department to distribute funding to states, state-level broadband offices to allocate subgrants to internet service providers, and the ISPs to deploy cables to connect homes to the internet. The numerous intermediate steps—initial planning grants, five-year action plans, map challenges, final plans, and more—sound like the kind of red tape that blocks progress and generates distrust in government.
The solution seems glaringly obvious: simplify the steps. Cut out all the middlemen and empower the FCC to provide money directly to ISPs as efficiently and quickly as possible. Any reasonable person would reach that conclusion.
The first Trump administration had the same thought. In 2020, the FCC rolled out a multibillion-dollar program called the Rural Digital Opportunity Fund (RDOF). To allocate the money, the FCC quickly identified areas that had insufficient service. It then held a reverse auction of small geographic plots, awarding the subsidy to whichever ISP submitted the lowest bid for each plot. There was no notice of funding opportunity. No planning grants. No five-year action plans. No subgranting process. No state broadband offices. And no labor, environmental, small-business, or diversity requirements. ISPs quickly bid a cumulative $9.2 billion to serve high-speed broadband to 5.2 million homes and businesses.
Jerusalem Demsas: Not everyone should have a say
In many ways, RDOF was a neoliberal economist's dream—an efficient allocation of scarce public resources distributed through a competitive process. But removing bureaucratic steps turned out not to result in a better outcome. Without accurate mapping data to understand where need existed, RDOF allowed ISPs to bid on serving such locations as an empty patch of grass, industrial-park storage tanks, and a luxury resort that already had broadband. Without proper due diligence, other providers committed to projects that were not technically or financially feasible.
As a result, the RDOF program still hasn't delivered much broadband to Americans. More than one-third of the bids have already been deemed in default, according to the FCC. In other words, nearly 2 million of the 5.2 million promised locations will never get service under the program, and that number is likely to keep growing. Worse, many of these locations may not get service from BEAD, either, because RDOF was assumed to cover them.
Within that context, Congress's approach to the BEAD program—making sure that broadband maps are accurate; that state governments, who know their residents and needs best, develop thorough plans that will ensure long-lasting service; and that communities have opportunities to provide input—is less baffling. With the benefit of hindsight, the process should have been simpler. But Congress was clearly responding to the failures of RDOF, which meant more checks in the system.
Why is internet service a problem that the government needs to solve, anyway? The answer is that private-sector companies seek to maximize profits, but in many rural areas, building networks is unprofitable. There might not be enough customers to offset the onetime costs of construction or even the ongoing costs of repairs, customer service, and overhead.
To date, the federal government's approach to promote service in unprofitable areas has almost exclusively been to subsidize private companies. The first federal broadband subsidies go back to at least 1995. Since then, the U.S. has put more than $100 billion into broadband expansion, primarily into rural areas, across more than 100 federal programs. Like RDOF, many of these programs have severely underperformed.
This is what happens when government loses the ability, or the will, to undertake more direct interventions in the market and to challenge, not merely subsidize, corporations. A century ago, America faced a problem almost identical to the broadband shortage: rural electrification. Well into the 20th century, life in much of rural America was little changed from the 19th. Without electric appliances—refrigerators, washing machines, even lamps—running a farm was backbreaking, round-the-clock work. By 1935, private providers had electrified more than 80 percent of nonfarm households but only 11 percent of farm households. That year, as part of President Franklin D. Roosevelt's New Deal, Congress created the Rural Electrification Administration to address this problem.
At first, REA Administrator Morris Cooke hoped to partner with private electricity companies, not unlike our current subsidy-heavy approach for broadband. However, those companies argued that rural electrification would not be financially self-sustaining. Even with government support, they proposed building out to only 351,000 new customers, which would leave millions unconnected.
The New Dealers recognized that subsidies to private firms could only go so far. So they turned to three other strategies. First, when the private sector was unable to serve all Americans, the REA organized communities across the country to develop their own, cooperatively owned electricity-distribution networks, funded by the federal government. The REA encouraged state laws to charter these cooperatives, provided engineering support to build infrastructure, and assisted cooperatives in negotiating for sources of electrical power.
Second, the New Deal created public options. Federal government–owned providers, most famously the Tennessee Valley Authority, were established to generate electricity at affordable rates. These public options functioned as an important 'yardstick,' in Roosevelt's words, to evaluate the performance of the private sector. If the private sector refused to offer electricity at affordable rates, the TVA could step in to sell electricity directly to cooperatives instead.
Third, private-sector electricity providers were classified as public utilities subject to strict regulation. The government couldn't build public plants to generate power across the entire country or successfully organize every community. So it required electric companies to expand services to cover everyone in their existing and adjacent service areas, even households that were unprofitable to serve. These utilities were required to set prices that allowed them to turn reasonable but not excessive profits.
George Packer: How Virginia took on Dominion Energy
The REA was a success. By 1940, a quarter of farm households were electrified, and by 1953, that figure had risen to 90 percent. That same year, retail rural electricity rates approximated rates found in urban areas.
A similar approach could be applied to rural broadband today. Local governments could offer public broadband—as happened in Chattanooga, Tennessee, which has one of the fastest broadband networks in the world, run by the municipally owned electric company, a public option that competes with Xfinity and AT&T. Cooperatives could purchase internet service in the same way as they buy electricity. And public-utility regulations could require broadband providers to cover areas adjacent to their service areas at a reasonable price in exchange for rate regulation.
So why has the federal government focused on subsidizing for-profit ISPs rather than using the mixed approach that worked during the New Deal era?
Consider what happened in Chattanooga. After its municipal model proved successful, ISPs saw a threat and mobilized. They successfully lobbied lawmakers to pass laws restricting public options in broadband. Twenty-five states, including Tennessee, had such laws on the books in 2019, according to a report by BroadbandNow. In Congress, Democrats have repeatedly proposed federal legislation to preempt such state laws, but those proposals have languished. And although some of the state limits on public options have been repealed, 16 states still restrict municipal broadband. Lobbying from ISPs might likewise explain why the FCC has never used its existing legal authority to require ISPs to expand service at mandated affordable prices. (A conservative appeals court foreclosed that option for the FCC only recently.)
The lesson of rural broadband is that some government failures are due not to procedural excess, but to giving up on regulatory tools that might antagonize Big Business. Unfortunately, learning this lesson again may now cost us $42.5 billion. Last week, the Department of Commerce rolled back many procedural hoops of the BEAD program—ostensibly with the same goals as RDOF. It's tempting to think that America can learn how to build again without having to wage difficult battles against powerful corporate interests, simply by eliminating bureaucratic red tape. But if efficient building were really so easy, we'd already be doing it.