Broadband Deployment and the Digital Divide: A Primer

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In the New Deal of the 1930s the RuralElectrification Administration used federal subsidiesto extend electricity to rural and isolatedcommunities across the country. By subsidizingthe significant capital investment needed to runwires and build infrastructure, REA supportbrought electricity to households that might otherwisehave waited many years for such service.

Today, similar arguments are being made forsubsidizing new technologies, such as broad-bandInternet service. Some people are promotingthe equivalent of an "REA for broadband" toensure that rural and low-income communitiesgain access to high-speed communications connections.However, the REA analogy is not onlymisplaced, it is harmful. The wires over whichbroadband service can be transmitted are alreadyin place--owned by telephone, cable, and evenelectricity providers. Upgrades are needed to providebroadband, but not the massive investmentthat is required to run a new line to every customer'shome. And wireless transmission fromboth satellite and land-based systems has justbegun. Whereas electricity has traditionally beenprovided by a single distributor, broadbandInternet service has many potential distributorsthat use a variety of technologies.

Tax credits or subsidies to promote broadbanddeployment would distort competitionbetween those technologies, enriching incumbentsand thwarting the technologies of tomorrow.For an industry in which the technologies oftoday were unheard of just a few years ago, nothingcould threaten progress more. And for thoseconsumers who are waiting for prices to fall orservice to extend to their communities, newtechnologies and competition will offer the bestsolution.

Lost in this debate, moreover, is the fact thataccess to the information superhighway does notrequire broadband. While broadband is superior,it is not necessary for access.

The first question, then, is whether low-income,rural, and other households are gainingaccess to the Internet at all. The second questionis whether those households--and for that matter,all Americans--are gaining broadbandInternet access. To both questions, the answersare decidedly positive. In light of this, broadbandtax credits or subsidies appear to be an unwise,unnecessary, and expensive approach to what isquickly becoming a nonproblem.

Wayne A. Leighton

Wayne A. Leighton, now an economist at the Federal Communications Commission, previously served as a senior economist for the Banking Committee of the U.S. Senate. The views expressed in this article are those of the author and do not necessarily represent the views of the U.S. government or the FCC.