Price controls for broadband won’t work

There is good news inside the beltway — for a pleasant change. Lawmakers are close to a deal on “hard” infrastructure, including a $65 billion commitment to closing our digital divide.

The emerging consensus is to build world-class broadband networks where they don’t already exist, and invest in a low-income broadband subsidy — an extension of the Emergency Broadband Benefit (EBB) launched in May that has already signed up more than 3.5 million households. Its annual cost would be roughly $5 billion.

This is a big deal for several reasons.

First, the broadband sections of the massive infrastructure deal are well crafted to avoid the waste and mismanagement that doomed earlier efforts to close the digital divide. This time around, drafters created smart targeting and clear safeguards should ensure we build new networks only where they are most needed. That is enough reason to cheer.

Second, this compromise — should it survive the procedural squabble this week — also reminds us that bipartisan governance is alive and that the two parties can put aside their polemics and social media sanctimony and come together to serve the voters that elected them to office in the first place. That’s also reason for celebration.

But third — and all Democrats should take note — this bipartisan deal actually commits Republicans to its success. And that may be the single most important aspect. Republican support will make it hard to grandstand and whine about the project from the partisan sidelines, and hard for successive Republican administrations to repeal.

Instead, the GOP now is on record supporting this compromise with skin in the game to make it work. That dynamic, coupled with the bill’s smart design, bodes well for success.

But every good party brings a skunk who wants to upset it. And in this case, leftist ideologues that are finding audience within the administration are pushing for price controls on mobile and broadband connection fees that would very likely sabotage the bipartisan deal.

That would be a shame, since price controls aren’t necessary to ensure that low-income Americans can connect at low subscription rates. Almost all major broadband providers already offer low-income households a discounted tier around $10-20 a month — and these remarkably successful programs have already connected more than 14 million low-income Americans. So, it’s hard to see what this rear-guard action actually accomplishes.

Worse, price controls have a long and sorrowful history of not working, failing to anticipate technological advances, and sidelining infrastructure investment. Applied to the U.S. broadband marketplace, price controls could upend the investment engine that has already delivered faster speeds, more reliable and resilient networks, and more widespread deployment in rural areas than we see in Europe. It’s the big reason why speeds continue to accelerate each year even as prices at any given speed level keep falling.

To understand this risk, it’s worth considering a paper authored last year by Jonathan Nuechterlein (formerly general counsel at the FTC under President Obama and deputy general counsel at the FCC under President Clinton) and Howard Shelanski (formerly administrator of OIRA and head of the FTC’s Bureau of Economics under President Obama). No conservatives are they. 

They make a pretty persuasive case on the problems with price controls and counterproductive, virtue-signaling regulatory diktats: “In many respects, the [2010 National] Broadband Plan was a case study in regulatory humility. It recognized that broadband progress was ‘[f]ueled primarily by private sector investment and innovation’; that ‘government cannot predict the future’; that ‘the role of government is and should remain limited’; and that policymakers should thus focus not on imposing price controls or behavioral restrictions, but on ‘encourag[ing] more private innovation and investment.’ This advice, which the FCC has generally followed, has fared well under the test of time.”

This successful light-touch approach stands in sharp contrast with Europe’s experience with heavier-handed price regulation and forced line-sharing. Networks investment has suffered as a result — Europe’s per capita broadband investment is less than one-third that of the U.S.

Lawmakers would be wise to take note before taking the bait on bringing European-style, blunt-instrument price regulations to the U.S. The White House should also not give the regulation-addled, far left voices an ear.

The emerging bipartisan framework offers a much smarter (and cost-effective) approach to closing digital divides in both rural and urban communities. Success is at their fingertips, if they are only willing to say yes.

Lindsay Lewis is executive director of the Progressive Policy Institute.