The new Biden Administration in the USA laid out a $100 billion (AU$128 billion) proposal for broadband investment as part of its $2 trillion+ (AU$2.5 trillion) infrastructure plan.
Under the proposal, the plan is to provide national broadband coverage. The Administration will use better competition measures, such a price transparency, the use of public utility infrastructure and subsidies for low-income households to achieve its goals.
Of course, we will have to wait and see if this policy will indeed be implemented, but there seems to be a significant level of support for it.
Competition in broadband in the USA had weakened since 1996 when a new law basically classified the internet as telecoms. The telcos now started to call themselves Internet Service Providers (ISPs) rather than telcos; content and transport became intertwined. Broadband became a largely unregulated business as it was classified as internet rather than telecommunications.
Regulatory wholesale arrangements were weakened, leading to a high level of concentration among only a few large players, most of them having a monopoly in their local areas. Potential misuse of their market power later led to the call for network neutrality. This made it impossible for the “monopolists” to prioritise certain traffic over their networks from companies who were prepared to pay premium prices for such a service offered by those telcos (ISPs).
Net neutrality was introduced under the leadership of Federal Communications Commission chairman Tom Wheeler during the Obama Administration, only to be wound back again under Trump.
Tom Wheeler facilitated for me, back in 2009, to present the Australian NBN plan to the Obama team in the White House. Obama lost the initiative through inaction and Trump was not interested in such a plan. Now, under Biden, the basic concept of that plan is coming back, supported with what looks like a solid plan. I am sure Tom, behind the scenes, has been involved in this as well.
The new policy document suggests that 30 million Americans live in areas with no broadband infrastructure at an acceptable speed. There is bipartisan support at least for this group of people to get better broadband access.
What I find interesting and encouraging is that the plan would see local councils becoming involved in improving broadband for these people.
For more than 20 years, lots of municipalities have tried to take the initiative to use local infrastructure (namely electricity infrastructure) to develop what is known as municipal broadband. However, Republican state governments blocked local councils – often through court action – to prevent them from using their infrastructure for broadband purposes.
The Republicans were, of course, cheered on by the telcos, who rewarded them with large donations. The American ideology that governments should not be allowed to operate in what these communities saw as essential infrastructure is a very powerful sentiment. So, after 25 years of municipal broadband initiatives, the overall market share of this kind of broadband in America is negligible (less than five per cent).
Professor Susan Crawford, the adviser to President Obama on broadband, was accused of being a communist and a socialist when she proposed a national broadband network. This is how strong the American ideology is. Under Trump, this was only amplified.
It is rather ironic that thanks to the pandemic, we now see by far the largest government intervention in American history. The $100 billion broadband intervention is part of the $2 trillion stimulus package. This has the potential to create a major internal political shift, especially if the current Administration can hang on for two terms. The fact that America did not collapse when the last major stimulus package was introduced known as the New Deal in 1929 should show that government intervention can be a good thing. Also, the Government’s intervention in the economy during WWII, resulting in top taxing rates as high as 90 per cent, didn’t result in a collapse of the country.
In my smart city work, I am a great advocate of providing more power to cities and local communities in relation to improve lifestyle, sustainability and local economies. A key problem here is that cities are heavily underfunded. So I am glad to see more involvement at that grass-roots level. However, here one needs to keep an eye on professional local leadership, solid holistic strategic plans and a cutting through silo-based bureaucracies. Otherwise, much of the money channelled through local communities will be wasted.
Apart from cities, we have rural and regional communities. In a previous article, I mentioned the American federal subsidy plan, the Rural Development Opportunity Fund. Under this scheme, its intention is to give Starlink $885 million (AU$1.1 billion) to connect homes in rural areas. This could be a real game-changer if Starlink will indeed deliver what it is promising both in relation to technology and affordability.
It also looks as though under the plan, some of the impediments of competition that resulted from the 1996 legislation might be taken away. I mentioned the lack of proper wholesale regulations above. The plan indicates it will remove barriers for competitors to enable them to compete on a levelled playing field. This is also the main tool that the authors of the new broadband plan see that will drive broadband costs down.
Now, of course, the big challenge for the Administration is to push this through Congress and, as mentioned, the Republicans are dead against increased government involvement. At the same time, America’s economy will need a strong boost to recover from the pandemic.
The economic threat of China might also work in favour of these government initiatives. It will be interesting to see the outcome of these two opposing forces that are at work within the American society. The odds are against the Democrats as both Obama and Trump failed to push through large-scale infrastructure investments. However, these are different times and there is a real opportunity to get some structural changes implemented. If successful, it could also break through the unstainable level of partisanism in the USA.
In relation to telecoms, the $100 billion broadband plan could mean a major shake-up of this industry potentially reducing the dominance of local telecom monopolies in the country.
Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.
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