Biden-Harris plan rightly recognizes the importance of getting disadvantaged people and communities online. When it comes to deploying networks to rural and remote locations like tribal lands, it is far cheaper to transmit through the air than across a vast, rugged terrain. A cellular signal can be sent in infinite directions while a wireline signal only goes in two. 5G, for example, can deliver the same, if not more, data than a wireline connection.
Historically cellular networks were held back because of the political challenge to allocate spectrum rights, but innovation at the Federal Communications Commission (FCC) allowed the US to become a leader in radio frequency auctions, an accomplishment recognized by the 2020 Economics Nobel Prize. While only a small amount of all spectrum is allocated by auction in the US today, market-based allocation offers tremendous social benefits and should be expanded.
A paper I co-authored with David Witkowski compares economic projections of wireless technologies versus the price and performance of spectrum allocation. For example, bidding by 50 wireless providers in the recent C-band auction drove $94 billion in gross proceeds. After setting aside an amount for the incumbent rights’ holders to be compensated, $81 billion was deposited to the Treasury, a tidy sum for social benefit purposes. This tranche of spectrum is expected to generate $192 billion in economic activity over seven years with the next generation of cellular networks.
Compared the competitive process to allocate 280 MHz of C-band spectrum, the FCC gave away four times the amount of similarly valuable spectrum in the 6 GHz band. The FCC still conducts old-fashioned “beauty contests” in which different parties pitch the agency on why they should get spectrum access without having to pay for it. In April 2020, the FCC deemed a whopping 1200 MHz in the 6 GHz band as “unlicensed.” While anyone can use this spectrum, it is essentially a gift to the Big Tech platforms which want to transmit their services via Wi-Fi without paying for it.
Unlicensed 6 GHz spectrum is expected to generate $154 billion in direct and indirect economic benefits over 6 years for various Wi-Fi applications. While both the licensed and unlicensed revenue streams are compelling, the 5G spectrum is on track to deliver 4.5 times more economic value per MHz than Wi-Fi in the 6 GHz band. This amount does not include the $81 billion in 5G auction proceeds, which on its own equals 53 percent of the total economic value of Wi-Fi projected for the 6 GHz.
This comparison is significant because the Biden-Harris plan does not discuss 5G, let alone mobile broadband, the de facto platform for broadband access for most of the world’s internet users. Instead the Biden-Harris plan prefers more expensive networks (fiber to the home) to be delivered by less efficient and less experienced providers (local government). This favoritism likely reflects political, not economic, reasons. Fiber to the home networks have some features suited to the online movies provided by the Big Streamers (Netflix, YouTube, Disney+, Amazon Prime, Microsoft), key Biden-Harris constituents. The plan’s proposed broadband subsidies would ostensibly reward Biden-Harris’ favored districts.
The Biden-Harris plan also observe the importance of financial support for getting the economically disadvantaged online. However its policies create potential conflicts with progressive solutions already in play. For example, it’s a no brainer that .gov domains at federal and state level could and should be free to access without charge. The total amount of data for essential health, safety, and government apps is minimal compared to entertainment. There is already a proof of concept in VA Video Connect which lets Veterans access telehealth without data charge when using AT&T, TracFone, T-Mobile, and Verizon cellular networks. As Nicol Turner-Lee of the Brookings Institute details, the app helped the US Veterans Administration (VA) regularly reach some 2.6 million veterans from remote locations with limited transportation during the pandemic. This proved important because VA hospitals were under high stress during the pandemic and could not maintain their prior level of routine care.
This VA plan is indicative of voluntary exchange, a foundational principle in a market economy in which producers and consumers can exercise their free choice and to decide how to contract. Such programs have been in play in developing countries for years. Indeed the marketplace can deliver any number of free programs for social benefit applications which ensure that everyone can access essential internet applications. However such successful telehealth program may be derailed by new California regulations and threaten to upend the VA Connect for Veterans across the US.
Given their claims of “digital equity”, desire to keep costs for low for the disadvantaged, and preferences for fiber to the home networks, the Biden-Harris plan should incorporate the key beneficiaries of broadband: Big Tech. FCC Commissioner Brendan Carr says that Big Tech has been skipping out on billions of dollars needed to maintain and build America’s networks, and that it’s time to end the free ride. He calls on Congress to legislative Big Tech paying its fair share. Such models have been in place for decades in other industries. It’s logical that the biggest users and beneficiaries cover significant part of the network cost to ensure their usage.
America is fortunate that historically bipartisan broadband policy supported investment in a variety of technologies. The success of that policy can be measured in the high level of private network investment, some $1.8 trillion since 1996. This amounts to about one-quarter of the world’s total of private broadband investment annually, a staggering figure. Americans are less than 5 percent of the world’s population but enjoy an abundance of its broadband resources.
A key element to increasing competition is lowering barriers to entry. That is why the FCC has worked tirelessly reduce regulatory impediments both on wireline and wireless infrastructure, and their efforts have affirmed in court. Notably savings on deployment costs are passed on to the consumer, an important way to keep broadband affordable. Over 5500 providers compete in the US broadband market. Multiple wireless operators cover the country with cellular, satellite, and fixed wireless technologies. Cable and fiber providers, knowing the value of wireless, invest heavily to improve their Wi-Fi solutions and even market wireless offerings.
To make “transformative” change, the Biden-Harris could look at market-based reforms to federal spectrum whose governance structure been untouched for 98 years. A Clinton era proposal suggested that the sale of federal spectrum holdings could generate as much as $300 billion in 1996 (almost half a trillion in today’s dollars) to pay down the national debt and transition the administrative allocation regime to privatization within a decade.
While the Biden-Harris broadband plan is supposed to appear progressive, it relies on old-fashioned technology, antique business models, and elite constituents. If the goal is to get everybody online, wireless networks are the most cost-efficient and user-friendly. Leaders should allow diversity of business models—from incorporating the richest players into the payment picture and to letting consumers use free data. Finally, it is smarter economically and politically to charge companies for their use of networks and spectrum rather than force taxpayers to foot the bill to deliver Big Tech’s traffic.