#Market Extra: How Biden’s infrastructure plan could rescue rural America

In rural America the pandemic has made connectivity issues worse, despite decades of trying and tens of billions in federal subsidies aimed at broadly deploying broadband across rural communities, where poverty, and disappearing businesses and family farms have become the norm, forcing the young to leave town for brighter horizons.

It isn’t that the internet doesn’t exist in remote outposts, where families often live many miles apart, but that the costs of connecting, supplying and maintaining adequate high-speed broadband service have been outrun by increasingly digital lives.

“What we’ve learned in the pandemic is that speeds we thought were sufficient, are nowhere near sufficient,” said Shirley Bloomfield, chief executive officer of the NTCA – the Rural Broadband Association, an industry group of small-town and community-based telecoms.

“Instead of a burst of demand during the week from six to nine at night, we now see a steady stream of demand all day long,” she told MarketWatch.

The pandemic exposed how crucial broadband has become for big cities and U.S. economic growth, but also small towns, where reliable and affordable internet can mean the difference between access to an education and health care or not, particularly when the nearest doctor easily could be a 60-mile drive away.

Read: Telemedicine provides a lifeline during the pandemic — for wealthier Americans

Service and speed

The U.S. has been working to achieve “universal” broadband for all Americans, like the postal service, in the decades since it was set out by the Telecommunications Act of 1996.

Yet, a new report estimates that 42 million Americans still lack access to broadband internet, according to research firm and connectivity tracker BroadbandNow. That is about double the most recent tally from the Federal Communications Commission, the main regulator of America’s airwaves.

BroadbandNow points to flaws in the FCC’s approach to counting internet connections that result in a sizable overcount per each census block. Specifically, if one household in a census block has a connection, the FCC considers the entire neighborhood covered, a method that doesn’t reflect the actual dearth of service.

Tyler Cooper, BroadbandNow’s editor in chief, also thinks the FCC’s existing minimum broadband standards have become outdated. Right now, the FCC requires broadband customers to be supplied with a download speed of at least 25 megabits per second and 3 mbps for uploads, thresholds it set in 2015. Cooper wants to see the standard being at least 100 mbps for downloads and 50 to 100 mbps for uploads.

“The upload number is pretty important, because that determines if you can do Zoom
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calls or other two-way communication,” Cooper told MarketWatch, adding that while 25 mbps allows for basic internet browsing, most work-centric applications have become “a lot more demanding of resources.”

Can the digital divide be fixed? The NTCA’s Bloomfield has become more hopeful, based on meetings with President Biden’s transition team, that the new administration finally can make a difference on rural broadband in ways that help prevent small towns from sliding further backward.

“It isn’t a red or blue state issue,” Bloomfield said, noting that Congress already funds rural broadband projects, including recently with a focus on vetting providers, but also through a new mapping initiative to better pinpoint existing services, speeds and potholes, through funding from last year’s coronavirus aid packages.

“Every senator has a rural part of their state,” she added.

Breaking down $115 billion

Biden’s election campaign said it wanted to provide $20 billion to expand rural broadband. More details of his infrastructure plans are expected to emerge in his first 100 days, following his $1.9 trillion “first step” spending proposal to help offset the economic carnage of the pandemic.

Read: Biden’s ‘rescue America’ plan is big. How its trillions could help both Wall Street and Main Street

Jeff Johnston, CoBank’s lead communications economist, estimates that out of $115 billion that likely will be needed to bridge the U.S. digital divide there still is about an $80 billion funding gap, even after considering the tens of billion already earmarked for various broadband funding programs.

“That is obviously a big number,” he said, comparing the funding shortfall with the near $30 billion that major telecoms allocate to wireless capital expenditures each year.

But in terms of recent government stimulus, it pales in comparison, including the Federal Reserve’s $120 billion monthly bond-buying program of U.S. Treasurys
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and government-backed mortgage bonds, which was kicked off last spring to keep credit flowing, and has no slowdown in sight.

Even so, Johnston sees at least two ways to tackle the broadband funding shortfall: either by pushing through a new infrastructure spending package or by expanding the FCC’s current pot of fees collected from landline providers, where the pool of customers is shrinking, to include broadband providers.

“Look, it is by no means a slam dunk,” Johnston said, adding that charging new fees would probably face resistance from technology giants like Comcast Corp
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Google parent Alphabet Inc.
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Facebook Inc.
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and Charter Communications Inc.
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“But we think that’s something that should be revisited.”

Big Tech and towns

As Washington gets ready to wrangle over how it taxes and spends in the new Biden era, Cooper at BroadbandNow sees positive developments already happening at the local level and among highflying technology companies that could ease a path to quicker, universal broadband.

“There are entirely new forms of connectivity that are at the precipice of becoming realistic at scale,” Cooper said, pointing to several low-Earth orbit satellite programs in development, including Elon Musk’s Starlink program, a part of SpaceX, which is beta-testing domestic and international broadband service. Amazon
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owner Jeff Bezos also has been developing a competing program called Project Kuiper, as well as the U.K.-based OneWeb telecom.

The upshot would be that satellite service could bypass the need for providers to lay down and maintain expensive terrestrial programs. Although, in terms of building up local communities, it is hard to ignore the progress made in cities like Chattanooga, Tenn, which took off as a technology hub, after the city built its own broadband company.

“The kicker here, why they are not super commonplace, is that, unfortunately, there are 22 states that roadblock or outlaw these sorts of initiatives at the state level,” said Cooper.

Mark Santero, chief executive officer at Homestead Funds, which manages assets for the National Rural Electric Cooperative Association, sees a slow recovery for rural towns from the pandemic, particularly since they rely heavily on hard-hit small businesses, which he expects to take at least two or three years to stage a comeback.

“And that’s going to depend on stimulus spending, with state and local governments getting support to rebuild services,” Santero said, adding that building out high-speed internet should be at the forefront.

“Broadband is tied to the lifeline of rural economies,” he said, noting that sees potential for a movement back to rural economies, away from big cities, if the infrastructure exists to set up shop.

“My views come from sitting at an association where this is all we talk about,” he said. “It’s going to be a trend, not an overnight sensation.”