Government Broadband Has Been a Costly, Corrupt Failure. Congress' Infrastructure Bill Calls For More.

The bipartisan infrastructure deal that's expected to pass the Senate this week would spend $65 billion on broadband projects, including more than $40 billion for largely unnecessary municipal broadband efforts.

When Kentucky officials rolled out an ambitious plan in 2015 to build a government-owned broadband network that would span more than 3,000 miles, the price tag was estimated at $350 million.

It was a big expense, but they promised that it would bring "modern, high-capacity fiber infrastructure" to a state with some of the slowest average internet speeds in the country. Businesses, schools, and residents would benefit. And with the full power of government behind it, the KentuckyWired project would be up and running by the spring of 2016.

Four years later, an audit found that the still-incomplete project had cost taxpayers at least $1.5 billion, thanks to cost overruns, big consultant fees, and a flawed bidding process that rewarded political connections instead of prioritizing expertise—problems that opponents had warned about from the outset.

KentuckyWired is hardly alone. In just the past decade, dozens of taxpayer-funded and government-build broadband networks have been proposed in towns, cities, and states across the country. Some were scrapped before they got off the ground; others were sold at a loss to private companies when the government couldn't figure out how to make them economically viable. The ones that survive today are approaching obsolescence, thanks to the advent of 5G wireless connections and other private-sector innovations that offer competitive speeds and better prices. Government-run broadband services struggle to succeed without the private sector's profit-making pressure.

But now the feds are preparing to throw another $65 billion into the black hole that is government-run broadband. The $550 billion "bipartisan infrastructure deal" unveiled Sunday night would spend nearly twice as much on broadband as it does on mass transit ($39 billion) and close to three times as much as it directs toward airports ($25 billion).

The largest chunk of that spending—$42 billion, though the numbers could change as first the Senate and then the House debate the bill in the coming weeks—would be steered toward states that put together plans for "deploying broadband, closing the digital divide, and enhancing economic growth and job creation." These so-called "digital equity grants" would prioritize projects run by state and local governments or nonprofit organizations.

In other words, get ready for a lot more KentuckyWireds.

The Biden administration's pitch for including so much broadband spending in the infrastructure bill leans heavily on an historical parallel: the 1936 Rural Electrification Act, a Depression-era effort to run power lines to every home and farm in the country. "Broadband internet is the new electricity," reads the White House's fact sheet on the slimmed-down infrastructure package. (Biden originally proposed a $2.25 trillion plan with $100 billion for broadband.) "Yet, by one definition, more than 30 million Americans live in areas where there is no broadband infrastructure that provides minimally acceptable speeds."

Yes, internet access is critically important to how Americans work and play. So are grocery stores and car dealerships, but we don't expect the government to run those things.

Biden's claim that 30 million Americans don't have reliable internet is either outdated or just plain wrong. The Federal Communications Commission's official data say a far smaller number, about 14 million Americans living in 4.3 million households, don't have access to broadband internet speeds. And that figure has been shrinking rapidly—it fell by 20 percent during 2019 alone.

The comparison to the Rural Electrification Act is similarly out of whack. There's no compelling evidence that a giant infusion of federal cash is necessary to close the already-rapidly-closing digital divide—and, keep in mind, this is $42 billion on top of the $9 billion the Federal Communications Commission has already budgeted to spend over the next 10 years.

Instead, this $42 billion is likely to end up propping up projects that aren't necessary and wouldn't exist without the promise of federal money.

"Municipal broadband is unlikely to scale well to fit U.S. broadband needs," concluded a pair of researchers at the Information Technology and Innovation Foundation in a report published in June. "If the goal is to get as many Americans online as possible, policy should prioritize efficient spending and allow for an environment where those most optimized to succeed can compete without unnecessary barriers."

The report also noted an ideological issue that could disrupt the Biden administration's plans to use government-run networks to get more Americans online. "The goal of many municipal broadband advocates is not principally getting more broadband to more areas, but rather to reduce the share of broadband that is provided by the private sector," noted Doug Brake and Alexandra Bruer, the two researchers.

Exactly. Imagine if people complained that too much of the country's grocery market was controlled by the private sector, and if Congress responded to those complaints by creating a new chain of government-run grocery stores to compete with Giant and Wegman's. That's essentially what Congress and the White House, in a bipartisan fashion, have proposed here.

"With few exceptions, government-owned networks (GONs) have been abject failures," a coalition of pro-market think tanks and advocacy organizations warned in a letter to Congress last week urging a rejection of taxpayer funding for municipal broadband.

The groups, headed by Americans for Tax Reform, pointed to the sad history of "wasteful overbuilds, corruption, and improper expenditures" on projects funded by the $4 billion Broadband Technology Opportunities Program that was part of the 2009 federal stimulus. After all the money was spent, a federal audit concluded that the program had no effect on the adoption rates of broadband internet. Now Congress is prepared to make the same mistake with 10 times as much money.

Already, there are warning signs of more broadband boondoggles to come.

On Monday, the Washington Examiner reported that $1 billion of the new broadband spending is earmarked for the Appalachian Regional Commission, an economic development partnership between the federal government and 13 states. The commission just happens to be headed by Gayle Conelly Manchin, wife of U.S. Sen. Joe Manchin (D–W.Va.), whose support for the infrastructure package will be critical to its passage through the Senate.

Prioritizing political favoritism over outcomes? Yep, that's what government-run broadband is all about.