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The $100 Billion National Broadband Plan for America

The new Administration in the USA laid out a $100 billion proposal for broadband investment as part of its $2 trillion infrastructure plan. Under the proposal, the plan is to provide national broadband coverage. The Administration will use better competition measures, such as 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 rather than telcos; content and transport became intertwined. Regulatory wholesale arrangements were weakened, leading to a high concentration level among only a few prominent players. Most of them have a monopoly in their local areas. The potential misuse of their market power later led to the call for Network Neutrality, making it impossible for the 'monopolists' to prioritize certain traffic over their networks from companies who were prepared to pay premium prices for such a service offered by those telcos (ISPs).

Under the leadership of FCC chairman Tom Wheeler during the Obama Administration, Net Neutrality was introduced, only to be wind 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, backed by 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 Municipality Broadband. However, Republican State Governments blocked local councils — often through court action - to move in that direction. 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 Municipality Broadband initiatives, the overall market share of this kind of broadband in America is negligible (less than 5%).

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 million 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.

In my smart city work, I am a great advocate of providing more power to cities and local communities in relation to improving lifestyle, sustainability, and local economies. A fundamental 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 local professional leadership, solid holistic strategic plans, and a cutting through silo-based bureaucracies. Otherwise, much of the money channeled 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, the intention is to give Starlink $885 million to connect homes in rural areas. This could be a real game-changer if Starlink will indeed deliver what it promises both with technology and affordability.

It also looks like that 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 compete on an even playing field. This is also the primary tool that the authors of the plan see to 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 recovery from the pandemic. It will be interesting to see what the outcome will be of these two opposing forces. 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 implement some structural changes. 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 significant shake-up of this industry, potentially reducing the dominance of local telecom monopolies in the country.

By Paul Budde, Managing Director of Paul Budde Communication – Paul is also a contributor of the Paul Budde Communication blog located here. Visit Page

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