In 1996 and nearly a quarter century later in 2021, the United States enacted legislation stating public policy that all Americans should have access to reliable advanced telecommunications. The 1996 Telecommunications Act stated that “Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services.” It also charged the FCC and state public utility commissions to “promote competition and remove barriers to infrastructure investment.”
There’s a major flaw with both bills. The 1996 Telecom Act is predicated on the inaccurate notion that premise advanced telecommunications functions as a competitive market and thus market forces and technological advances will bring about universal access. That’s incorrect because advanced telecommunications infrastructure like other utilities and voice telephone service functions as a natural terminating monopoly where market forces are weak or nonexistent. Many buyers but few sellers and high cost barriers to competitor entry along with first mover advantage enjoyed by incumbents discourage competition and cannot be overcome by regulation. In 1996, no technology was superior to fiber to the premise (FTTP) for reliably delivering advanced, Internet protocol-based voice, video and data and none better has emerged since.
The Infrastructure Investment and Jobs Act (IIJA) of 2021 contains findings by Congress that “Access to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States” and a “persistent ‘digital divide’ is “a barrier to the economic competitiveness of the United States and equitable distribution of essential public services, including health care and education.”
But like the 1996 Telecom Act, the legislation contains the flawed assumption that “increased competition among broadband providers has the potential to offer consumers more affordable, high-quality options for broadband service." (Emphasis added) That’s not a solid policy to bring about the aforementioned access. The term “has the potential” reflects the same aspirational, magical microeconomic thinking that a natural monopoly utility market can somehow transform itself into a competitive one with providers competing to sell FTTP connections door to door. Electric power, natural gas and water utilities don’t work that way and neither do telecommunications lines.
Achieving universal access to reliable advanced telecommunications infrastructure like the copper lines that brought voice telephone service to most every American doorstep in the 20th century is undoubtedly good public and economic policy. But it cannot be attained if the underlying assumptions about it are based on wishful thinking. Also needed is well considered program policy to implement the goal that’s absent from both pieces of legislation.
Instead, the U.S. has defaulted to what could be called pinata policy. Various federal agencies established tightly proscribed and vastly oversubscribed grant programs to futilely throw money at the challenge hoping the goal will somehow be met. Then investor-owned telecom and cable companies and public entities whack at the pinata with big sticks and scramble for some of the grant dollars that fall to the floor. That’s hardly well thought out program policy that’s optimally aligned with policy and puts the funding cart before the policy horse.
The pinata fights will grow more intense in 2024 as states will have to sort out competing claims by private and public sector entities over eligibility for some of the $43.45 billion in grants appropriated by the IIJA to states to subsidize advanced telecommunications infrastructure projects. As 2023 drew to a close, California offered a preview for another federal grant appropriation to states for advanced telecommunications infrastructure.
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