After much discussion, President Biden finally released the general outlines of his $2 trillion infrastructure plan, of which $100 billion will be devoted to broadband services.
Whether Biden will be able to get his proposal through Congress remains to be seen. But if he is successful, his proposal could dramatically alter the contours of the US broadband industry by injecting more federal money into the space than ever before.
However, it's not clear exactly how Biden's plan will work. As usual, the devil is in the details. Here are four questions that need to be answered to properly vet the president's bold broadband plan.
1. What is broadband?
While this question might seem hyperbolic or rhetorical, it's neither. A mostly reliable 25Mbit/s downlink is much, much different from an always-on, symmetrical 1Gbit/s connection. The first can be achieved relatively easily over most mobile networks today, while the other would almost undoubtedly require fiber.
Based on the handful of paragraphs Biden's plan devotes to broadband, it appears the president is leaning toward fiber because of his calls for a "future proof" infrastructure. Tom Wheeler, President Obama's FCC chairman, similarly argued for a "future proof" approach to broadband, writing in recent House testimony that prioritizing symmetrical 1Gbit/s capacity "is to prioritize a 'fiber first' policy."
If a "future proof" network must support 1Gbit/s on both the uplink and downlink, then today's wireless and cable network operators would be ineligible for government subsidies. Further, the situation also raises the possibility that Biden's plan would actually finance fiber-powered 1Gbit/s alternatives to existing cable and wireless networks.
Meaning, Biden's infrastructure plan might actually fund competitive challenges to Comcast's cable network or T-Mobile's fixed wireless efforts.
"The tone [of Biden's proposal] sets a negative view toward the industry," wrote the financial analysts at Cowen, pointing out that shares of cable providers like Comcast, Altice USA and Cable One declined during the week of Biden's proposal even while the overall stock market rose.
Others, though, aren't so worried: "We are skeptical that a majority of the Congress wants to allocate billions to subsidize fiber networks to compete with cable," wrote the financial analysts at New Street Research in their assessment of Biden's plan.
2. What is overpriced service?
Biden's plan largely aligns with previous Democratic efforts to promote broadband around the country. However, one line raised eyebrows among analysts: "Americans pay too much for the Internet – much more than people in many other countries – and the President is committed to working with Congress to find a solution to reduce Internet prices for all Americans, increase adoption in both rural and urban areas, hold providers accountable, and save taxpayer money."
Biden didn't say exactly what that all would entail, but the prospect of the US government setting prices for Internet connections caused concern among financial analysts.
"This is more forward-leaning commentary than we've heard from Biden or even most congressional Democrats on broadband prices," wrote the analysts at Cowen. "We think Biden's tone could elevate the risk of some type of broadband price regulation. We don't mean direct FCC regulation of all broadband prices. We mean that Congress (or the FCC at Biden's direction) could press all ISPs to offer a 'lifeline' tier of broadband service (50/50Mbit/s) at an FCC-set price. If this is where the bill goes, the key would be whether Congress/FCC only require ISPs to offer this regulated tier to low-income homes (shouldn't be a problem for ISPs) or whether it must offer it to all customers (clearly would be a concern)."
The financial analysts at New Street Research also wondered exactly what Biden means by reducing the "price" of broadband. "To some it means that the average price is fair, on the basis of international metrics, to the average American. To those who adopt that view, policy should bring down the average price," they wrote.
However, another meaning might only involve the "entry-level price," leaving other prices untouched.
3. Who will benefit?
A number of previous administrations, both Republican and Democratic, have focused on allocating government funding to existing broadband providers to either lower costs for consumers or to lower network buildout costs for providers. In the end, the providers benefited.
However, Biden's plan specifically mentions an alternative: financing community-operated municipal networks. Specifically, it calls for "lifting barriers that prevent municipally-owned or affiliated providers and rural electric co-ops from competing on an even playing field with private providers."
If Biden's plan does indeed push federal money toward municipal broadband projects, it could essentially divert that money from the cable, telecom and wireless providers that would otherwise get it.
However, some analysts aren't too worried about that particular outcome. "While we know that some local governments would like to have an option to provide their own broadband service, we think the ones that actually would do so would be rural communities unserved by current cable or fiber offerings, which would not be material to the companies we cover," wrote the analysts at New Street. "While a number of states ban such efforts, a majority of states do not, yet we have not seen municipal efforts in those states that do not that materially impact the companies we cover."
However, there is one clear group of beneficiaries to Biden's plan: Network equipment suppliers. The analysts at Cowen noted that Biden's proposal is nothing but good news for the likes of Ciena, Cisco, Infinera, Nokia, Adtran and others.
4. Is broadband a utility?
Herein lies the fundamental question facing lawmakers voting for Biden's plan. And their answer – whether through this vote or future votes – will help to shape the outline of the US broadband market for decades to come.
"With the 1936 Rural Electrification Act, the federal government made a historic investment in bringing electricity to nearly every home and farm in America, and millions of families and our economy reaped the benefits. Broadband Internet is the new electricity," according to Biden's plan.
Some believe that kind of thinking is exactly what is needed.
"The reference to electrification implies that much of the funding for modernizing the network might come in the form of low-interest federal loans given to community-based organizations," wrote Doug Dawson with CCG Consulting. "This same plan for electrification spurred the formation of electric cooperatives and would do something similar now. I favor this as the best use of federal money because the cost of building the infrastructure with federal loans means that the federal coffers eventually get repaid."
But if broadband is a public utility, along the lines of electricity, then it would likely be carefully managed by state or local officials.
On the one hand, such an approach could spur the delivery of speedy networks to remote and rural users. On the other, it could squelch private investments in technologies ranging from Massive MIMO to low Earth orbit satellite broadband.
Thus, expect much debate on the topic as summer looms.
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