Building out broadband internet is the “wild west” of public policy, and naturally, the various proposals fall into three categories: the good, the bad, and the ugly.
Because of a digital age that has made it more difficult to live everyday life without high-speed internet, broadband access affects quality of life. Poor access can hinder online payments, telemedicine, remote work, and remote education, all of which are important to certain industries and can affect economic output.
In response, the federal government has funneled billions of dollars of funding into expanding broadband access in struggling areas through a host of grants and new programs, enacted in spending packages such as the Infrastructure Investment and Jobs Act (IIJA) and the American Rescue Plan Act (ARPA).
Let’s begin with the ugly—the contradictory and excessive program called the Broadband Equity, Access, and Deployment Program (BEAD) included in the IIJA.
The greatest economic defect of BEAD is that it requires entities that receive the grant money from states to match at least 25% of the funding.
The match requirement creates challenges for smaller providers who don’t have the funds but could use the grants to provide access effectively. And it prevents them from providing cheaper options and bringing down prices for broadband projects and services long-term. This keeps large companies that offer high prices and lower quality services in power, without fear of competition.
In the future, the state of Texas should take BEAD as an example of why broadband funding should include transparency and should encourage a free and open market without arbitrary fiscal policies.
Then there’s the bad: the Digital Equity Act, also included in the IIJA. This provision attempts to close the digital divide by expanding access to digital services and digital training in underserved communities.
The specific allotment of funds Texas will receive for this purpose remains unknown, but there is a $1.44-billion funding pool available to states for State Digital Equity Capacity Grants, and $60 million available for planning.
While the planning funds could be put to effective use, the capacity grants may be unnecessary, due to a trend of much of the digital services and trainings being provided by private organizations and non-profits that take initiative and are often much more effective at individual assistance than any government agency.
For example, as the American Enterprise Institute reports, the Boston Consulting group partnered with state and local governments to identify underserved and unserved households and subsequently assisted with providing digital training and discounted services to individuals and small businesses, implementing broadband access and development in a much more direct and effective way than a government entity. Looking forward, Texas ought to reject excessive funding from the federal government for a job that is done better by private entities.
But there’s also the good—the transparency and accountability in broadband policy’s Capital Projects Fund. It provides a clear picture of which types of projects the funding can be used for, sets reasonable deadlines, and provides states with the proper level of flexibility in implementation and administration.
There is a 5% cap placed on administrative funding as a share of total spending. The cap is placed wisely, because a smaller threshold might encourage irresponsible financial decisions such as purchasing materials at a higher price than needed simply because more is available to spend, while the 5% figure provides just enough to ensure efficient administration without bloat.
The program follows a model of federal and state cooperation where states are given freedom to solve the problem and implement it how they see fit.
Although the rest of the IIJA broadband programs contain an alarming amount of waste and have the potential to increase spending and increase inflation, the Capital Projects Fund seems to be a needle in the haystack, serving as a model for how Texas should work with the federal government in the future on issues of broadband policy.
Broadband development, deployment, and access is a vital issue for our state—one that if approached correctly will solidify our position as an economic and technological leader among states. Texas should utilize federal funds in a way that spurs growth and limits waste and should set an example for fiscal responsibility.