BEAD savings should go back to taxpayers

By James Erwin

The Broadband Equity, Access, and Deployment program, a provision of the Biden infrastructure bill, provided $42.5 billion in taxpayer funding for broadband expansion. The Commerce Department has announced significant savings of nearly half the program’s budget, $20 billion, due to reforms – money that should go back to the taxpayer, and not to more pet projects for politicians. 

The BEAD program has become a notorious slush fund, prioritizing rewarding voting blocs above greater broadband access. Prevailing wage requirements, an explicit preference for fiber over cheaper alternatives, and attempts to impose price fixing on state programs all contributed to growing cost estimates to complete projects. This lead many to question whether the $42.5 billion is even going towards infrastructure investments.

Where did this $40 billion number come from in the first place?

It had been conventional wisdom in DC broadband policy circles for some time, reinforced in 2017. That was the year the FCC released a report estimating that it would cost $40 billion in taxpayer money to connect 98% of Americans with fiber-optic high-speed broadband. The report further estimated that an additional $40 billion would be needed to cover the last 2% in the most remote areas, so far away and expensive to reach would they be. At the time, the United States enjoyed 86% coverage.

By the time of the infrastructure bill, 93% of Americans enjoyed access to high-speed broadband due to private sector investment. Lawmakers guesstimated that $40 billion would do for the remaining 7%, at least as a start. The price tag was inherited from a four-year old study and did not reflect the growth of private sector expenditures on new infrastructure.

It also did not reflect the alternatives to fiber. The 2017 report assumed fiber was the only option to achieve speeds of at least 25/3 Mbps, which no longer reflects technological reality with advances in fixed wireless and satellite internet options. It also turns out that discarding this assumption was the key to savings.

Under the leadership of Secretary Howard Lutnick and NTIA Administrator Arielle Roth, new BEAD rules embraced tech neutrality, as we have been urging for years. This was the original intent of the bipartisan infrastructure law – states should accept bids based on cost and ability to provide service, not give arbitrary preference to one technology. Fiber-based ISPs themselves have been clear that there are some areas where it simply is not cost-effective for them to build, so someone else should have a chance to try. Additionally, some ISPs use a combination of technologies to serve homes, such as Starlink service beamed to a ground station then piped through fiber-optic cables to customers.

Tech neutrality increases competition in bidding and lowers costs for deployers. Other reforms, such as peeling back environmentalists’ vetoes, reducing paperwork, and removing union labor preferences all put downward pressure on the ultimate price tag of these broadband subsidies.

The result is $20 billion in savings. This begs the question: what to do with all this leftover money?

Our view is simply that this is taxpayer money that should be returned to taxpayers. The attempts to turn this program into a slush fund for politicians is what has delayed its rollout for so long. Despite signing the infrastructure bill in his first year in office, President Biden’s NTIA imposed such onerous paperwork and constraints on BEAD, many with an eye toward rewarding unions or purchasing devices for suburban families in hopes of buying their votes, that not a single home was connected before President Trump took office.

There will be a push, perhaps a natural impulse on the part of some politicians, to use the already-appropriated money for the operating expenditures of the ISPs or to buy tablets for schoolchildren. This is exactly the sort of slush fund that made the program such an inefficient mess before the reforms implemented by Lutnick and Roth saved taxpayer dollars. This is money that ought to be rescinded by Congress, reducing the deficit by a non-trivial $20 billion and providing another example, in addition to defunding public broadcasting, of the Trump administration’s seriousness about protecting taxpayers.

There will be many voices pleading with the Trump administration for the unobligated dollars, insisting that their use is the best and highest. The administration should hold the line, ignore the bleating, and return the money to its rightful owners: hard-working taxpayers.