Are the Boonies Getting Broadband?

May 15, 2011— -- When Congress passed the American Recovery and Reinvestment Act in 2009 that plunked down $787 billion in stimulus funding to reignite the economy, it earmarked less than 1 percent to provide broadband Internet access in rural areas.

Was the government stiffing these less-connected states? Not exactly -- with a stimulus pie so large, that sliver translates to a generous $7.2-billion serving.

Rural broadband advocates – including President Obama, who underscored the initiative in the 2011 State of the Union address – often frame expanded high-speed wireless coverage as today's equivalent to building the transcontinental railroad, electrical grid and interstate highway system.

"Rural regions often represent areas of so-called market failure, requiring the government to step in because private companies neglected them; they are less robust markets," said Sharon Strover, a rural broadband expert and director of the Telecommunications and Information Policy Institute at the University of Texas-Austin. "This is, after all, the historic case in this country for both electricity and telephony in rural regions, and that was the original rationale behind establishing the Rural Electrification Administration, now known as Rural Utility Services."

For people living in wired urban areas, the so-called "digital divide" might seem foreign, but the National Broadband Map released in February by the Department of Commerce revealed that 40 percent of rural households don't use broadband, compared to 30 percent of urban ones.

Under the National Broadband Plan drafted by the Federal Communications Commission, the federal government wants to bridge that divide, providing high-speed broadband service to 100 million American homes by 2020.

From a social equity perspective, most would agree that broadband deployment is a laudable goal; everyday transactions and interaction increasingly rely on telecomm services.

"This country has sought a type of unity and equality by ensuring people have equivalent opportunities, and having basic broadband infrastructure is now bound up with equality," Strover said.

But not everyone thinks that rural areas should receive so much fiscal focus since the direct economic impact of broadband deployment -- particularly job creation -- is difficult to quantify.

"Most of this (rural broadband) research tries to look for a correlation between economic growth and broadband," said Scott Wallsten, an economist and vice president of research with the Technology Policy Institute. "Of course that correlation is entirely meaningless because broadband has been growing regardless of economic ups and downs over the last five, 10 years."

To Wallsten, the digital divide in the U.S. between Internet 'haves' and 'have-nots' doesn't stem from people's ZIP codes, but from their tax brackets.

"If you really want to make a difference, you should be doing something to help low-income people get online, and those low income people live in more urban areas," Wallsten said. "There are also rural poor people, too, of course, but the bulk of the people who are not online are in more urban areas that have access but for various reasons, they don't subscribe, and in my opinion that's where we should be focused."

Wallsten also points out that the urban poor help subsidize rural telecomm services through phone taxes that funnel $8 billion in annual taxpayer funding to the Universal Service Fund (USF). The USF began as a federal program to provide phone service in rural areas, and the FCC recently announced that it's overhauling the USF to subsidize broadband. (For more details on the Universal Service Fund, go here.)

"Everyone pays these taxes on these phone services that fund the USP, so that means we have a bunch of urban poor people subsidizing funding for rural everybodies," Wallsten says.

At the same time, Wallsten doesn't argue against rural residents having access to broadband, but he does insist that there's a more fiscally prudent and equitable way to go about closing the digital divide.

"I wouldn't go as far as to say there should be no government role in rural areas because there are clearly going to be areas that are not possible to serve without a subsidy," Wallsten said. "The question is how to do it right."

But Strover sees rural broadband deployment beyond data and download speeds. To her, the imperative for rural broadband also involves supplying technology resources that can have a ripple effect on the nationwide economy in the future.

"The divide should be thought of as not just the presence of or access to technology, but also the abilities to use it, and the expertise to maintain and expand it," Strover said. "If the U.S. is to move ahead in fundamental ways, ensuring that we have a universally capable grid and a universally capable and trained group of users and participants will be essential."