Paying For A National Broadband Plan

Perhaps the biggest issue to be resolved in any national broadband plan is figuring out how we're going to pay for whatever goals we set.

The FCC has recently put out an estimated cost of $350 billion to upgrade our country's infrastructure to 100Mbps to every home, which is definitely a big number.

Throughout these discussions the FCC has been careful to cite that there's an expectation that the bulk of this money will come from private sources. But what I worry about is that we're conflating private capital sources with private providers.

We need to acknowledge that private providers alone may not have the capacity to invest that much money on their own over the next few years. They've already sunk a lot of money into their existing networks, and for the most part are only looking to incrementally upgrade. Plus they have a fiduciary responsibility to their shareholders to be prudent in what they do invest in, which is why rural areas are often left behind.

That's why we need to make sure the conversation about how to pay for an ambitious national broadband plan focuses more on answering the question of how do we make broadband a more attractive investment for private capital sources, regardless of who's doing the deployment.

While there are viable projects across the country now stuck spinning their wheels because credit's dried up, despite the economic downturn there's still a ton of money out there, it's just sitting scared on the sidelines looking for a safe place to invest.

The problem broadband deployers face is that their networks are considered a risky investment, especially in rural areas.

Also, regulatory uncertainty surrounding broadband acts as a disincentive for private capital to invest as they don't want to put up money today if the regulatory environment is going to change tomorrow in any significant way that may threaten those investments.

So to get private capital flowing to broadband projects we need to work towards clearing up any of that regulatory uncertainty, and we need to put in place incentives that make broadband less risky and therefore more attractive to investors.

This brings us back to the idea of loan guarantees as a mechanism to unlock private capital. By government stepping up to share the risk, we can transform broadband networks into safe investments for private capital and free up billions for all manner of broadband projects. I'm going to revisit our fast-track partial loan guarantee proposal in more detail next week.

For now let me just say that I think it's vitally important we address this issue of how to incentivize private capital to invest in broadband. The biggest question I'm always asked when discussing plans for nationwide fiber deployment is where's the money going to come from. And I firmly believe that these guarantees could be the key to unlock the billions we need to get the job done.

Conversely, if for some reason we don't want to have private capital involved, we could follow Christopher Mitchell's suggestion that government simply set aside $35 billion in budget authority so that it can hand out $350 billion in direct government loans.

Given the positive economic impact that would be realized from doing this, it's hard to argue against the idea. But I do still prefer guarantees as they don't require government to write a check, take on all of the risk, or do all of the vetting of loan applicants.

Either way the main point is that we need to find a way to pay for our national broadband plan, and that we need to look beyond the questions of how do we make broadband deployment more attractive to private providers to figure out how we can either make broadband networks more attractive to private investors or how government can step in to get the job done if private entities aren't able or willing to step up.