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1、How to Bridge the Rural Broadband GapOnce and For AllDOUG BRAKE AND ALEXANDRA BRUER | MARCH 2021Nearly one in five rural Americans still lack access to broadband Internet service. Federal subsidies could bridge that gap if they are carefully targeted through a reverse-auction program that leverages

2、economies of scale by encouraging large providers to participate.KEY TAKEAWAYSA large, one-time injection of federal capital can succeed in bridging the rural broadband divide if it is reasonably targeted and allocated through a reverse-auction program that serves as a transition away from the FCCs

3、Universal Service Fund. The current FCC program is funded through regressive fees levied on a shrinking base of telecommunications services. Roughly half of its rural support goes to small, inefficient firms for piecemeal investments. This system is unsustainable. Subsidies should be awarded through

4、 auctions that encourage companies of all sizes to participateparticularly those with large economies of scale, so they can efficiently extend broadband service into previously uneconomical areas. These procurement-style auctions should award support for unserved locations using new FCC maps that sh

5、ow precisely where and what type of infrastructure is already available. Policymakers must recognize the cost trade-offs of brand-newz ultra-fast networks: The goal should not be future proofing；1 but the broadest-possible coverage of networks that support reasonable expectations of future applicati

6、on demand. Policymakers also should combine subsidies with other efforts to remove barriers to deployment, including streamlining the pole attachments process and ensuring pole replacement fees are shared fairly between all beneficiaries.areas) spending the majority of the funding at roughly $4.5 bi

7、llion per year.26 The High-Cost Fund expanded to support broadband with its transition into the Connect America Fund (CAF) in 2011-2012 in an effort to refine processes and procedures for distributing funds and to support broadband in addition to voice services.27A prominent challenge with the USF i

8、s its financing. The money for the fund is collected through a fee on telecommunications services. This fee is set as the percentage (known as the contribution factor) of telecommunications interstate end-user revenues (known as the contribution base). The factor is adjusted each quarter depending o

9、n what percentage of telecom provider revenues are needed to meet the USF budget (and other unrelated government services).28 At present, the contribution rate for the first quarter of 2021 is 31.8 percent.29This contribution mechanism has several challenges. First, it is regressive, with the same r

10、ate ultimately flowing through to all consumers regardless of income. A fee on communications services does not make sound economic sense: The goal of the program is to promote universal and affordable communications tools, but it does so by taxing communications tools. The old distinctions and the

11、cross-subsidy theory underpinning the system do not hold under a new regime of intermodal competition, broad interconnection of IP-based networks, and increasing decentralization of communication applications.Importantly, the contribution base of telecommunications services is shrinking. More and mo

12、re communications services are flowing over the top, relying on diverse applications that are available over the web. While this trend has enabled tremendous innovation in communications tools, policymakers must reckon with its impact on the traditional source of funding for USF. For this dwindling

13、base of legally taxable services, the rate at which they are taxed in order to meet the budget of the USF program is steadily increasing. The trend is not sustainable long-term.2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Contribution Base ($millions) -Contribution Factor (Percent)This pro

14、blem is not newjust politically difficult to solveas these challenges were identified and discussed over a decade ago.31 What is worse, the shrinking of the contribution base (and in turn increase in the contribution factor) has dramatically accelerated in recent yearsa trend that is likely to worse

15、n, as companies and individuals have grown to favor video-chat applications such as Zoom, Teams, and BlueJeans during the pandemic. As a result, the USF program is not on sustainable ground as the programs contribution base continues to shrink. As Wall Street analyst and former FCC official Blair Le

16、vin put it, c 25/3 Mbps 250 gigabytes (GB) or U.S. average (whichever is higher)50Baseline 50/5 Mbps 250 GB or U.S. average (whichever is higher)35Above Baseline 100/20 Mbps 2 terabytes (TB)20Gigabit 1 Gbps/500 Mbps2TB0LatencyRequirementWeight (Penalty)Low 100 ms0High 440While higher-speed broadband

17、 is general preferred, higher speeds often come with a trade-off in terms of cost, as they require deploying additional new infrastructure rather than simple upgrades or extension of fiber. There are a few possible explanations for the strong showing of gigabit services: It is possible that the cost

18、 trade-off of deploying fiber is not as high as previously thought. Put another way, the cost savings of incremental upgrades may not be sufficient to remain competitive. Phase I of the RDOF is focused on completely unserved census blocks, so it is likely that these areas require completely new depl

19、oyments, in which case fiber often makes the best sense. For future subsidized deployments, there will be much more focus on locations wrongly considered served under previous data. These areas are necessarily near existing deployments, meaning incremental upgrades or extensions of existing access n

20、etworks will likely be more cost competitive.It is also possible that the RDOF weighting is inappropriately tilted toward higher speeds. Again, economic evidence indicates that the important benefits come from having broad adoption at any speed, rather than considerably higher speed. The most taxing

21、 applications in terms of bandwidth are generally very high resolution, high frame-rate videolower speeds are unlikely to lock subsidy beneficiaries out of transformative applications. Policymakers should consider a more gradual weighting system that does not penalize speeds below one gigabit as har

22、shly as did Phase I of the RDOF.Another very possible explanation is that bidders embellished the speeds they would be able to achieve in order to stay competitive in the auction. Bidders, especially those claiming to achieve gigabit performance over fixed wireless, may struggle to provide such spee

23、ds consistently to the designated census blocks. The large number of new entrants with limited experience in the telecommunications space is a real concern.47 Without built-in experience and economies of scale enjoyed by established firms, new entrants may find projects more difficult thananticipate

24、d. The results of the RDOF demonstrate the clear need to leverage an expert agency when evaluating the viability of projected bids.These concerns are shared by the over 100 members of Congress who called upon “the FCC to validate that each provider in fact has the technical, financial, managerial, o

25、perational skills, capabilities, and resources to deliver the services that they have pledged for every American they plan to serve.48Even for those “experienced bidders that were successful in Phase I, several have a history of financial trouble and the inability to deliver as promised. Frontier an

26、d Lumen Technologies recently disclosed that they may be behind on commitments made during the last high-cost auction: the CAF Phase II.49 Meanwhile, LTD, the RDOFs largest Phase I winner with over $1 billion, defaulted in a previous FCC auction.,，50 It remains to be seen whether these winners will be able to fulfill their obligations during this second go-around, or if the FCC will continue with this support; but policymakers should consider building-in guardrails limiting participation of either untested companies or those t