Pew Lays Broadband’s Cornerstones in the Wrong Place

The Pew Charitable Trusts recently published a wide-ranging series purporting to explain the “policy cornerstones” for states to adopt for universal connectivity. Pew’s four cornerstones are ongoing state-level deployment funding, affordability policy, minimum speed standards and network scalability. While these are the right topics for broadband policies, Pew’s prescriptions on each treat government funding and mandates as the drivers of connectivity. The right path would acknowledge the primacy of private investment, competition, and technological advances and treat government interventions as exceptions requiring justification rather than the cornerstone of broadband policy. Because Pew’s prescriptions work against the real drivers of connectivity, they would lead states away from effective, pro-consumer broadband outcomes.

First, consider deployment funding. Pew wants states to have dedicated replicas of the federal Universal Service Fund, which has poured billions of dollars into ISPs’ pockets for decades. Pew’s argument is that, since federal programs are often limited in their duration or total funding, states must pick up where federal funding leaves off. But this conclusion assumes that ongoing government funding is a good goal. It’s not.

There may have been a case for subsidizing one-time capital investments to extend the reach of broadband networks to remote areas. But the goal of that funding should be for networks to sustain themselves, not to endlessly prop up ISPs that can’t stay in business without taxpayer handouts over and above free infrastructure. Indeed, deployment gaps are already an increasingly small cause of the digital divide. The right policy question for deployment subsidies is how to end them, not keep them going.

Pew misses the mark by prescribing only government funding as a deployment solution when universal deployment has been driven overwhelmingly by private infrastructure investment and technological advances.

The Broadband, Equity, Access, and Deployment (BEAD) program, the largest ever broadband funding program, totals $42 billion to be spent over four years. The state programs Pew envisions would take decades to provide so much funding. Yet since BEAD was created in 2021, private ISPs have invested more than double its total funding every year. That’s what’s driven deployment of higher capacity networks that benefit more people. Government funding is a comparatively small part of the deployment story.

Technological developments are the other major part. As much as ISPs invest to deploy existing types of infrastructure, whole new types have done more to reach very rural areas than any government program. Fixed-wireless access (FWA), which uses wireless connections to towers instead of running wires, has improved dramatically in the last decade and is winning customers from traditional wireline providers. Low-Earth-orbit (LEO) satellites can now provide high-quality broadband from space, bypassing overland challenges altogether. Subsidy programs that view the government’s job as paying for the favored technology at any point in time will be quickly outdated.

This obsolescence is a real problem for sustainable deployment solutions. Subsidies for uneconomical technology erode the profit opportunity of actually solving hard deployment problems since the market that could be served by an innovative technology is instead served with an uneconomical technology with a subsidy. Consumers lose twice: they are stuck propping up the uneconomical ISP, and they miss out on otherwise possible technological advances. Furthermore, subsidies for traditional wireline service create constituencies to defend them by denigrating more economical and advanced alternatives. Subsidy recipients would rather keep their taxpayer largesse than see alternative technologies solve the rural deployment problem.

Pew elides this discussion, joins the denigration of new technology, and frames the issue as how to ensure that even if the federal money spigot turns off, states are ready to keep the cash flowing to ISPs.

On affordability, Pew correctly identifies low-income consumers as the proper target for support, but the policies it endorses do not achieve that goal. Pew suggests that New York’s broadband rate regulation is an effective affordability solution and that its “survival through judicial review demonstrated that low-cost service requirements can be a viable policy tool.” It is neither. Just because a policy is legal does not mean it works, and rate regulation can never solve affordability challenges because affordability is a function of both price and household income, not price alone. Any price will be unaffordable to some people. Mandating a low price, therefore, only renders low-income households less attractive investments while leaving behind the lowest income households who still cannot afford the regulated rate. That’s not an effective affordability policy.

A better route is to let market prices prevail everywhere and give rebates or vouchers to low-income consumers that make that price affordable, defined as 2 percent of disposable income. To be fair, Pew does also endorse direct affordability support in the style of the federal low-income program Lifeline. But it misidentifies the key benefit of the direct consumer voucher model in Lifeline. It is not that “providers receive the benefit and apply the savings directly to an eligible customer’s bill.” Rather, the superiority of direct consumer support is that it requires ISPs to have a subscriber to get government money. Rather than being paid just to exist, as deployment and operational-expense subsidies allow, voucher-style affordability support gives consumers flexibility while making ISPs compete for the benefit.

Consumer-side vouchers are also the better version of deployment policy. Sustainable broadband deployment requires enough quantity demanded at a price that covers the fixed costs of deployment and variable costs of operating the network. Vouchers for market-rate service make the economic case easier for high-cost areas and create virtuous incentives in which ISPs can profit more by serving areas more cheaply. This dynamic is in contrast with direct ISP subsidies which pay providers just to exist and erode the incentive to become self-sustaining.

On speed, Pew commendably avoids the false claim that every consumer needs a gigabit connection. It gets off to a promising start when it describes government speed standards as “a floor for publicly funded service to meet current consumer needs.” That’s the right approach for two reasons. First, the government’s only speed-defining role is when it is buying service with government money. Second, the relevant standard is whether a connection meets consumer needs, not a magic number of megabits per second.

Yet, when it comes to the policy analysis, Pew provides no estimates of what consumer needs are and whether the standards it endorses are closely tied to them. Instead, it shifts to prioritizing “codified state-level speed requirements” as necessary to prevent communities from “being locked into inadequate infrastructure that cannot support consumer needs or attract future investment.” Its cornerstone headline is “higher speed minimums,” and it gives kudos to two states for exceeding the FCC’s current 100 megabits per second (Mbps) download, 20 Mbps upload benchmark.

This vision treats the government standards as driving speed increases, but they are not. U.S. broadband speeds have been increasing for decades, not because the FCC or any state picked a higher number every so often. As with deployment, broadband speeds have increased because private ISPs invested in their network capacity and sell higher speed packages to compete in the marketplace. And, as with deployment, technological advances paved the way for faster speeds. ISPs didn’t develop and deploy fiber networks, DOCSIS 4.0, or LEO satellites because they were compelled to meet government-set speed standards. They developed these technologies to better win customers and then the government later codified speed thresholds.

Yet Pew’s framework acts as though state governments are necessary to drag broadband speeds to usable levels. It writes: “Network demands will continue to evolve, often faster than broadband infrastructure can be replaced.” For something Pew says happens “often,” Pew’s tale of networks being overwhelmed is without support in the text. The closest it gets is citing the kinds of applications that occasion increased demand:

“remote work, video conferencing, telehealth, and artificial intelligence-enabled services increasingly rely not only on download speeds but also on upload capacity, low latency, and reliability. Analysis of consumer and business use consistently shows increased demands on network performance.”

True enough! But all those applications are well within the capabilities of today’s broadband networks. Videoconferencing requires only about 4 Mbps. Pew does not define “artificial intelligence-enabled services,” but the most common ones send text back and forth via a standard web browser. That does not require anything like massive throughput or ultra-low latency. Of course, network demands will not remain static, but enabling networks to cope with future increases will happen because ISPs respond to changing technologies and market conditions, not because state governments wrote bigger numbers into law.

On scalability, Pew pairs a rosy view of fiber with an ominous view of everything else. It acknowledges ITIF’s argument that overreliance on fiber raises costs and delays service in high-cost areas, then intones that “questions remain” about whether fixed wireless and LEO satellites can meet future demand without saying what demand is or why we should expect new technologies to fail to meet it. Pew’s own issue brief answers the question anyway: it correctly cites ITIF for the point that these technologies can help meet scalability objectives in exactly the high-cost, low-density areas where fiber is hardest to build.

Meanwhile, FWA and LEO capacity keep growing. Starlink’s next-generation satellites substantially expand its network capacity. Mobile carriers have increased FWA access with spare network capacity, and they stand to acquire more mid-band spectrum in the upper C-band auction. Upcoming 6G networks will be custom built for high-bandwidth, low-latency services whether they are in support of AI or any other application the market demands.

Pew points to higher “upkeep expenses” as a reason to doubt LEO. That concern is only a policy problem if taxpayers pay the upkeep. In a market, a provider’s operating costs are its own problem. They show up in the price and quality it can offer, and if they’re too high, the provider loses customers to a cheaper rival. Policymakers can judge the result by consumer prices and performance without second-guessing anyone’s cost structure. Thus, Pew’s worry makes sense only if it assumes providers will run at a loss and the state will cover the difference. That is how many subsidized rural wireline networks work today, and it’s exactly the recurring maintenance funding Pew’s deployment cornerstone asks for. It is also a contradiction: if fiber really has lower long-term costs, why would fiber networks need permanent state funding to maintain them? Projecting that failing business model onto LEO and FWA providers and other major ISPs that don’t get perpetual operating subsidies gets the issue backward.

Pew is right that broadband policy is approaching a crossroads. But the right path is for state governments to take stock of how their broadband networks are really working and focus on real consumer needs. Rather than laying new cornerstones for the old framework, Pew should acknowledge the reality of practically universal broadband deployment, embrace new technologies, and reshape policy interventions around effective adoption support.