Uncapped Fiber Fixation Can’t Close the Digital Divide

As states weigh how to reform their Broadband Equity, Access, and Deployment (BEAD) programs, they face a stark and urgent tradeoff: Spend marginal dollars on reaching the last few unserved homes with fiber—or use those same dollars to help far more Americans actually adopt broadband.

That tradeoff must be informed by three key facts:

• Lack of deployment accounts for just 3 percent of the digital divide.
• Adoption issues—such as lack of interest or affordability—account for 71 percent.
• Every BEAD dollar can be used for either deployment or adoption support—but not both.

Source: NTIA Data Explorer

These facts mean state broadband offices and NTIA should ask not just “To how many unserved locations can we deploy fiber.” They should also ask, “What am I giving up if I spend my next dollar on fiber deployment instead of affordability or adoption efforts?”

In many cases, the answer is sobering. If states devote excessive funds to high-cost fiber deployments, they will all but eliminate their ability to fund affordability programs, digital navigator initiatives, or digital skills training. BEAD, therefore, risks spending $42 billion leaving the real causes of the digital divide untouched.

Despite these facts, the BEAD Notice of Funding Opportunity, supported by ideological and business interests, pushes states to deploy as much fiber as possible. Yes, fiber is a high-capacity technology. But in many rural or high-cost areas, it’s also orders of magnitude more expensive than alternatives like fixed wireless or low-earth-orbit (LEO) satellite—technologies that have now gotten better so they can provide comparable user experiences. Indeed, these technologies have come a long way even since Congress first enacted BEAD.

Proponents of fiber maximization rarely reckon with the tradeoffs of their position. With a more flexible, technology-neutral approach, states could fund both universal coverage and years of affordability support. With a fiber fixation, they may barely achieve coverage—and will leave most of the digital divide untouched.

Let’s consider one key tradeoff: deployment versus affordability. Lack of affordability accounts for 15 percent of the digital divide, while lack of deployment accounts for just 3 percent.

ITIF has proposed a national affordability blueprint modeled on the erstwhile Affordable Connectivity Program (ACP), but more targeted to those who need it most. It would cost $360 per household per year.

That means that every $360 spent on deployment could instead fund a full year of affordability support for a low-income household. So, if a state chooses to spend, say, $77,000 per location to run fiber to one rural home, it is also choosing to deny 213 years of affordability support to households that need it.

And again—affordability accounts for five times as much of the digital divide than deployment.

To be clear, states should absolutely use BEAD funds to close coverage gaps. But they should do so efficiently and with a clear understanding of the tradeoffs.

ITIF has recommended a $1,200 per-location cap on deployment costs, which is already more than twice the cost of a LEO satellite terminal that can provide reliable service in even the most remote areas. If policymakers prefer a higher cap, fine—but there must be some cap. Otherwise, states risk spending $42 billion to solve just 3 percent of the problem.

The map below illustrates the opportunity cost of high deployment spending. It estimates how many years of affordability support each state could provide under ITIF’s plan—if they cap average per-location deployment costs at various levels (based on each state’s eligible population for affordability support and total allotted BEAD funds).

The model assumes every location is served at the cap; in other words, it is consistent with an average-cost cap, not an inflexible ceiling for every location.

The data show that once a state spends more than a few thousand dollars per location, it quickly runs out of money for anything else. That’s a policy failure. A state that spends everything on expensive deployment is choosing not to address the main causes of the digital divide.

Taking the national average, with ITIF’s proposed $1,200 cap, states could both finish deployment and fund affordability support for eight years—three times longer than the now-defunct ACP.

The bottom line: If states or NTIA plan to spend tens of thousands of dollars per home on deployment and thereby deny affordability support to millions, they should be prepared to explain why they’re spending most or all their money on 3 percent of the problem.

Instead, NTIA should:

• Cap average per-location deployment costs, and
• Establish clear safe harbors for spending on non-deployment activities like affordability support, digital navigators, and digital literacy programs.

That’s how we’ll close the digital divide, not just the deployment divide.