Earlier this month, the Treasury Department approved a plan to invest $110 million “to strengthen or expand broadband infrastructure across the state.” The funds will go through the Maine Connectivity Authority (MCA), a state agency set up last year to manage and distribute millions in broadband spending. According to state and federal officials, the funding will be focused on rural and remote areas.
This tranche of funds will come from the federal government’s Capital Projects Fund, set up through the American Rescue Plan Act (ARPA), a nearly $2 trillion bill passed by Congress and signed by President Biden in March 2021. According to a press release from Governor Mills’ office, this award represents 84% of Maine’s total $128.2 million allocation through the Capital Projects Fund.
The administration refers to this latest injection of money as a complement to Mills’ Maine Jobs and Recovery Plan, a nearly $1 billion supplemental spending bill passed by the legislature in July 2021, within which $21 million was dedicated to broadband. That money also came to Maine as a result of ARPA. Yet another $100 million from the federal Infrastructure Investment and Jobs Act signed by President Biden in late 2021 will come to Maine specifically for broadband in “unserved” areas.
While Mills and Biden proclaim the wisdom of these massive spending bills, many economists argue that they are precisely why Americans are experiencing the highest sustained inflation rate in four decades. Leaving inflation concerns aside, is this even the best use of spending on expanding internet access?
In February, Mills pledged that “every person in Maine who wants to connect to the internet will be able to do so by the end of 2024.” This was made without any metric of determining worthwhile cost-benefit, and the way it’s been executed looks much more like a blank check.
Administration officials say that the new $110 million infusion from the Capital Projects Fund will connect about 22,500 households, at a cost of nearly $4,900 per connection. If a private internet service provider (ISP) was weighing the decision to invest in new infrastructure (assuming the houses are not already served by a wired connection), it would presumably look at how many potential customers it could sign up for a monthly subscription rate. For instance, assuming 100% of newly-connected households (an absurdly high take-rate) opt for internet service at $70 per month, it would take an ISP nearly six years just to recoup their initial investment, not including the costs to maintain the network over that time.
Mills’ press release also boasted of a similar 2020 initiative to spend $5.6 million of federal Coronavirus Relief Funds “to build out permanent internet infrastructure to more than 730 students across rural Maine.” While few could argue with aiming relief at rural students struggling during government-ordered school closures, this program alone cost more than $7,500 per connection. Unfortunately, this amounts to yet another lackluster state-driven solution to a state-created problem.
Proponents of more public broadband spending will blame ISPs for a lack of connection options in some rural communities. But according to NCTA, a telecom industry association, private companies have invested $300 billion in network infrastructure since 2000, $172 billion in the last decade. This has led to a 98% reduction in the price-per-megabit of data, from $28.13 in 2000, to just $0.64 in 2020. The industry has made significant gains in delivering more value to its consumers: increasing speed and increasing options while keeping prices relatively low. Claims that brand new quasi-public entities can deliver this service better than the private sector shows a profound misunderstanding of the industry and the economy as a whole.
The Federal Communications Commission (FCC) defines a Census block to be “served” by adequate service speed at 25 megabits-per-second (mbps) download and 3 mbps upload, also known as 25/3 service. But MCA and their partner agency, ConnectMaine, in conjunction with the Mills administration, recently moved the goalposts via agency rulemaking to say that a Maine household is considered “underserved” if they do not have access to wired 50/10 service. Note that this leaves out the consideration of wireless systems like small cells, satellite, and TV white space. The state considers a household to be “unserved” if it does not have access to wired 25/3 service.
State broadband bureaucrats have continually pushed to distort the issue by outlining their own, much higher and unrealistic, bars for adequate internet service speeds. WMTW reported in November 2021 that the state considers a whopping 84% of Maine households “underserved” or “unserved.” Broken down, only about 14% of households are truly unserved, meaning they lack access to 25/3 service. ConnectMaine decided to move the goalpost to 50/10, so they can say that another 70% of houses are “underserved.” Expect Mills’ Maine Connectivity Authority to take it even further; they seek to fund projects in places without access to 100/100 symmetrical service.
This is how it’s done: the administration further restricts the definition of “broadband,” uses the inflated numbers of “underserved” to justify more massive spending, but then allows the vast majority of funds to build out duplicative networks. These projects are duplicative because they are parallel to already available service, not on expanding access to truly unserved houses. This has played out (or been attempted) in Maine communities such as Hampden, Knox County, Leeds, Southport, and southwest Waldo County.
Essentially, the administration’s policy blindly assumes that every camp or lake house which does not have a connection to gold-rate residential service not only needs that speed, but needs a government-owned entity to build out a new, wired, fiber-optic access point for them.
It’s entirely unnecessary. For nearly all residential consumers, 100mbps symmetrical service is overkill. Zoom, the online video conferencing service, recommends 3.8mpbs upload and 3mbps download for high definition, 1080p video calls. Patients using a telehealth service would require comparable bandwidth.
Just like MCA, the federal ARPA Capital Projects Fund exists to build infrastructure; it’s all in the name. It does not exist to determine access versus affordability, it does not look at meeting consumer needs through innovative technology or focused aid to households. This prevailing philosophy alone makes its “investments” more wasteful.
No matter the problem, the solution for Biden, Mills, and their broadband bureaucrats is to throw money at local public or quasi-public entities to build new, often duplicative fiber-optic infrastructure. This all but guarantees vast mismanagement and waste of public funds. Stories abound from across the country of public-owned broadband districts which took on too much debt to provide a service that not enough people wanted to buy, even while financed by “cheap” municipal revenue bonds.
Both Governor Mills and President Biden need to take a long look in the mirror. Is their “spend first, ask questions later” philosophy really paying off? A federal Government Accountability Office (GAO) report published in May 2022 accounted for more than 100 different broad programs, administered by 15 different agencies, which spent $44 billion from 2015 to 2020 to finance broadband development.
GAO called the funding scheme “overlapping and fragmented,” noting that millions of Americans still lack access to 25/3 service: 17% in rural America, versus only 1% of those living in urban areas. Remember, this is just federal spending. Put aside the millions in state taxpayer-financed bonds issued every year for the same goal.
So, what is a better solution for Mainers? The state should liquidate the MCA and redirect its budget to a program which provides needy households with technology-neutral vouchers to help them afford faster internet speeds. Instead of ConnectME’s distortions, private sector and federal government data would be used to understand the true scope of lack of infrastructure, and avoid costly overbuilding where the FCC has already funded projects.
This bold solution would cut out the massive bureaucracy that has marked the Mills administration’s approach to bridging the “digital divide” while sparing taxpayers from shouldering the debt of faulty and wasteful government-owned networks.
For a service as critical as internet access, why should Mainers allow it to be co-opted and mismanaged by the same entities which have driven up the price of other services, like education and health care, in recent decades? Government isn’t very good at many things, but one can always rely on it to waste massive amounts of other people’s money.
Consumers would be much better served by a healthier economic environment for private ISPs to innovate and compete for the provision of internet services than wasteful government spending on unnecessary infrastructure.