Need for sell and buy side subsidies points up advantage of government, coop owned fiber networks

Testifying before Congress back in May, NTIA Administrator Alan Davidson confirmed that a failure to fund the ACP will negatively impact BEAD. "As we build out our broadband networks, we want providers to know that there's some certainty that they'll have customers, particularly in these rural areas, particularly in areas where there's lower-income Americans, they need to know that those Americans are going to be able to afford to get online. The ACP plays a major role there," he said.

How ACP negotiations might shake out

This statement clearly points up market failure and the need for a lower cost alternative model for advanced telecommunications infrastructure. Davidson is in effect saying without both seller subsidies -- delivery infrastructure subsidies such as the NTIA's Broadband Equity, Access and Deployment (BEAD) program and buy side subsidies based on household income (the Affordable Connectivity Program), market failure will result. In short, providers won't be able to to connect American homes and consumers won't be able to afford their monthly bills since providers have to price in a profit margin and allow for income taxes. Even then, it's hard to make it pencil out. Jeff Luong, AT&T’s vice president of network engineering, reportedly said at the recently held Fierce Telecom U.S. Broadband Summit that even with AT&T spending about $20 billion per year on infrastructure, “we cannot build out in all the areas we deem as economical.”

This situation clearly points up the need for lower cost alternative and one more likely to avoid the problem of uneven deployment by investor owned providers that must carefully segment where they build fiber that leaves many homes unconnected: fiber optic networks owned by governmental entities and consumer utility cooperatives. Neither must generate profits or pay income taxes.