Biden administration’s American Jobs Plan: Reframing telecommunications as infrastructure policy

America’s hodge podge of unevenly deployed residential fiber optic connections that reach only about one third of all homes can be traced back to public policy expressed in the 1996 Telecommunications Act.

Although fiber optic technology was available when the law was enacted, the drafters of the statute instead charted a future course based on legacy twisted pair copper telephone lines for dialup and its irregularly deployed successor, DSL. That in turn created path dependency on twisted pair copper to deliver Internet-based services to homes even though it’s technically substantially inferior to fiber given it was designed to deliver analog voice and not digital services.

The fundamental problem with the Act is it viewed telecommunications as a market much like the hot 1990s personal computer market. Its basis is “light touch” market regulation, hoping to encourage market competition that would spur innovation, lifting all boats and creating relative parity in service availability and quality across the nation. PCs are a commodity market whereas telecommunications is not. It’s infrastructure and requires infrastructure policy.

The Biden administration’s infrastructure proposal, the American Jobs Plan, is an opportunity to make a much overdue course correction and establish policy that treats telecommunications as the essential infrastructure it is.

Deloitte white paper points up flawed U.S. policy of chasing throughput versus modernizing copper to fiber

Despite more than $107 billion in federal subsidies between 2010 and 2020 to boost throughput outside of densely populated metro centers, the United States hasn't obtained appreciable and durable benefit, concludes a recently issued white paper by the consulting firm Deloitte.

Optimism over the past 10 years that billions of private and public investment in underserved geographies for broadband access and adoption would help close the digital divide has waned as outcomes have often disappointed. Previous programs increased the number of people with access to the FCC’s definition of broadband by less than 1% (<1%; 1.6 million people) between 2014 and 2019, partially as a result of the changing definition of broadband.

Unless the nation changes course on telecommunications policy and stops chasing "broadband" throughput and instead replaces copper telephone lines reaching nearly every American home with fiber, the paper suggests, it will continue the wasteful cycle and reap less than optimal economic advantage. 

The Biden administration's proposed infrastructure plan offers an opportunity to do that by prioritizing fiber built by public sector and nonprofit corporations that don't carry the burden of generating profits that disincentivizes investing in fiber and only doing so proscribed neighborhood deployments that potentially offer the most favorable return on investment. A big advantage of building public option fiber is it ends the broadband speed chase since fiber can easily accommodate expected growth in bandwidth requirements. That necessitates dispensing with the "technology neutral" standard of the 1996 Telecommunications Act that gave rise to unending debates over what constitutes broadband and the related issue of net neutrality, as described in the Deloitte paper:

Since 1996, the US government has set minimum speed requirements to define broadband service, with the hopes of keeping pace with the exponential growth in consumption. These minimum performance expectations have changed as applications require increasing amounts of bandwidth. From 2011 to 2014, the FCC definition of broadband was 4 Mbps uplink and 1 Mbps downlink. In 2015, the FCC updated its definition of broadband to speeds of 25 Mbps downlink and 3 Mbps uplink. The 2015 broadband definition, which persists today, was more suitable to support new applications. Now, pandemic induced requirements for streaming, videoconferencing, and the promise of further innovation make the FCC’s 2015 broadband definition of 25/3 the topic of ongoing debate at both the state and federal levels.

As policymakers consider potential major FTTH expansion, U.S. confronts labor and supply chain constraints.

As the United States confronts the need to rapidly ramp up deployment of fiber to the home (FTTH) advanced telecommunications infrastructure, it faces a major labor and supply chain challenges. There are only so many qualified people who know how to design, build, operate and maintain FTTH networks. Over the past two decades or so, field technicians were laid off by investor-owned telephone companies that limited FTTH construction as their legacy copper outside plant was placed in run off mode and deteriorated. Others have retired or are about to, but aren’t being replaced by younger journeymen, notes industry observer Doug Dawson.

Additionally, there is a limited capacity to manufacture fiber optic cable and electronic equipment that controls the photons that carry the bits and bytes of information that power high quality digital voice, video and data.

In a recent podcast interview, Dawson said these constraints disadvantage the small community fiber projects that have sprung up to fill the many potholes in America’s FTTH infrastructure that currently passes only a third of all homes. Due to their limited purchasing power, these smaller builds will go to the back of the line, particularly if they– as is the case with many – lack a “shovel ready” construction plan. Waiting for years for FTTH, they’ll face yet further delay as they are out competed by larger projects and those able to pay higher labor rates – estimated to comprise about 70 percent of construction costs.

These circumstances point to the need for solutions, particularly as federal policymakers contemplate a major fiber infrastructure expansion under the Biden administration’s American Jobs Plan. In this context, it’s properly framed as a jobs plan since the nation will need to raise a large corps of workers to construct the enormous amount of fiber needed to bring it to where it needs to be at present and going forward. It might well be a modified 21st century version of the infrastructure oriented 1939 Works Progress Administration with a digital infrastructure component.

Infrastructure funding might also target projects of a broader regional scope in order to compete for labor and equipment and invest more efficiently due to enhanced market power and economies of scale.

As part of or to supplement the American Jobs Plan, policymakers should also consider industrial policy that would provide incentives to rapidly expand the supply of needed fiber optic cable and electronics and establish temporary capacity to ramp up production.

Public option FTTH infrastructure offers potential advantage of ending FCC back and forth over regulation of IP delivered services

With public option fiber to the home (FTTH) advanced telecom infrastructure proposed in the Biden administration’s infrastructure package, a key advantage would be a potential end of the shifting back and forth policy positions of the Federal Communications Commission regarding how to regulate Internet protocol delivered services.

Since they would be delivered on the service layer of FTTH infrastructure owned by public entities and consumer cooperatives, they would conform to the current FCC regime of treating them as lightly regulated information services falling under Title I of the Communications Act. It would also be consistent with the administration’s policy to promote competition in advanced telecommunications services. Information service providers would compete on a relatively level playing field if affordable fiber connections built to a national infrastructure quality standard reached nearly every American doorstep.

Biden administration telecom infrastructure policy objective is universal access and affordability, not enhancing competition

The broader problem is that U.S. government policy does nothing to promote competition. According to the FCC’s flawed broadband maps, 28 million households have only one internet service provider offering at least the minimum broadband speed. Many of the supposed competitors are phantoms. And the number of households in areas with more than one ISP offering gigabit speed service is paltry. Only two million households have that choice, or maybe many fewer—the FCC doesn’t really know at any granular level.

Biden Proposes Government Actually Try to Create Broadband Competition

The fundamental problem with this assessment is telecom infrastructure is a natural monopoly. Enhancing competition is undoubtedly good public policy in a competitive market with many sellers and buyers. However, utility infrastructure isn't and cannot practically be a competitive market due to high cost barriers to entry and first mover advantage. That's why we don't see electric and water utilities fighting to win customers by running multiple lines to households.

Since market forces cannot function well in a natural monopoly market to benefit consumers, the Biden administration's policy to create a public option -- infrastructure owned by public sector and cooperative entities -- is the best policy to ensure infrastructure reaches every American home and not just the estimated one third currently passed by fiber. That's not a pro-competition policy, but rather one aimed at expanding infrastructure capacity to better ensure access and affordability.

It's critical the administration's policy be framed as such. Casting it as enhancing competition gives incumbent telephone and cable companies ammunition to claim government is unfairly competing with them on an unlevel playing field, arguments that will resound with conservative policymakers.

The administration's plan can promote competition by establishing a strong national fiber to the premise telecom infrastructure standard as a quality benchmark to assure reliability and durability against obsolescence. As well as creating incentives for rapid completion and deployment given the nation is at least a decade behind where it should be relative to this critical infrastructure.

No need for maps of existing advanced telecom infrastructure with "public option" fiber reaching nearly every American home.

According to Sherry Lichtenberg, deputy director at the National Regulatory Research Institute, having a big sum of money with which to attack the digital divide will be important, but the key issue may actually be figuring out where to spend it all. “We still don’t really have a good map that shows where things are available,” she said. “It’s important to know who’s got service, who doesn’t have service, where service could be provided if somebody asked for it, and where people are really getting it even if they are asking for it because of the way the rules are written.”

 It Will Take a Lot More Than Money to Fix the Digital Divide

There is no need for maps of existing advanced telecom infrastructure provided the Biden administration's proposed infrastructure plan offers affordable "public option" fiber connections to nearly every American home. It's already known that only about one third of U.S. homes are passed by fiber, most of it built by investor owned providers that limit construction to cherry picked neighborhoods. 

That's unlikely to change anytime soon since their business models demanding rapid returns on capital investment drive them to target dense MDU and greenfield development. They also charge a price premium for fiber throughput, marketing it as high end "gigabit" service that makes higher income areas a priority for fiber infrastructure deployment.

Enabling legislation of Biden administration’s infrastructure plan should ensure fiber built to nearly every American home

The advanced telecommunications infrastructure component of the Biden administration’s proposed American Jobs Plan (AJP) will be more clearly fleshed out when it is drafted into legislation. For now, it’s fine for the AJP to broadly outline a goal of building “future proof” infrastructure. But this is a subjective term, leaving it open to debate and the introduction of present bias as the language is negotiated. The draft legislation should instead definitively establish a fiber to the home infrastructure standard.

The AJP proposes to build infrastructure to “unserved and underserved areas so that we finally reach 100 percent high-speed broadband coverage.” The enabling legislation should avoid the use of “unserved and underserved areas” as well as “broadband” – terms that have sparked years of protracted debate over how they are defined as infrastructure deficits grew. Instead, it should ensure fiber is built to 100 percent of American homes over the near term to replace outdated copper telephone lines, with the exception of homes located in extremely remote areas of the nation.

Biden administration's telecom infrastructure plan effectively says, "Time's up. We have to turn a new page. History demands it."

Former FCC Chairman Ajit Pai said Thursday that the allocation of $100 billion to expand broadband networks in the U.S. under the Biden administration will only serve to hurt consumers and stifle innovation. 

AJIT PAI: The FCC alone already has in the pipeline almost $40 billion to help close that digital divide and ensure that Americans have access to the internet that serves their needs. That’s before any of this $100 billion plan that the President proposed even comes to the table and so that’s part of the concern that many have is that there are already plans to attack this problem.

Moreover, the plan itself seems to suggest that they want to overbuild private networks with public funds and have governments own or operate or even micromanage how those networks are going to be constructed and operated.

Biden's $100B internet overhaul will hurt consumers, stifle innovation: Former FCC chairman | Fox News: 

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Pai's right in that there will be some overlap of public option fiber infrastructure in neighborhoods where investor owned providers have deployed fiber to homes, comprising about a third of all U.S. homes. Implicit in the telecom component of the Biden administration's American Jobs Plan is these providers have gone as far as they can over the past three decades modernizing legacy copper telephone lines built for analog voice communications in the 20th century to fiber for the 21st century's digital services. 

They've harvested the low hanging fruit and will struggle to build out to the remaining two thirds of American homes in a timely manner given their lack of patient investment capital relative to the need and their debt burdened balance sheets. The experience of the current pandemic has demonstrated modernization to fiber is far behind where it should be at the start of the new century's third decade. The Biden administration's plan effectively says, "Time's up. We have to turn a new page. History demands it."