Biden’s $100B Broadband Plan Gives Big Tech A Free Ride

The White House recently called for 100 percent high speed broadband coverage with a whopping $100 billion price tag. The goal to ensure coverage to all Americans is commendable as is the focus on people in rural areas. However the Biden plan ignores the reality of landline broadband provision in rural America, which is largely delivered by small-scale and family-owned businesses. Moreover, it rejects incorporating Big Tech in network cost recovery, even though the Silicon Valley platforms have the most to gain from high-speed networks. New research examines this issue with an analysis of four fiber to the home networks in rural America. The networks have an average of 20,000 customers and cover 3000 square miles (about two-thirds the side of Connecticut) and include many non-white households with people low-income, the proffered focus of Biden’s plan.  

Network Traffic Rules of Thumb: 5/75/25 and 90/10

The paper provides traffic reports from the rural broadband providers detailing that just 5 video streaming entertainment providers—Netflix, YouTube, Amazon Prime, Disney+/Hulu and Microsoft Xbox, collectively the “Big Streamers”—drive 75 percent of downstream network traffic. This conforms with national aggregate level reports by Cisco, Sandvine, and others. Big Streamer video entertainment traffic is associated with 90 percent of the net new network operating cost. The rest of the internet, including essential services for health, work, education, e-commerce, government, and public safety take up less than 25 percent of network capacity and only 10 percent of the cost.

Big Streamers earn $25 per month from two-thirds of households but pay essentially zero to support delivery cost in the middle and end mile.

The four rural broadband providers charge an average of $50 per month for a standard broadband subscription, a price that is essentially 40 percent less than five years ago because of increases in broadband speed, capacity, and competition from wireless providers. On top of broadband, most users pay $25 per month to the Big Streamers to access their video entertainment services. For every dollar earned by the Big Streamers, the rural broadband providers must invest $0.48 in equipment to deliver this specific video streaming entertainment traffic. Roughly, two-thirds of a network’s subscribers access the Big Streamers, but the cost to deliver video, under current policy circumstances and Biden’s plan, is spread across all subscribers. Presently this amounts to $11.65 per subscriber, but if was attributed only to Big Streamer customers, the cost would be $17.48. This means that one-third of users are paying more than they should, while two-thirds are paying less than they should. In any event, users do not experience these costs today because rural broadband providers make some upgrades anyway, reducing their financial capability to reach un-served and under-served areas. The paper projects a shortfall of $144 per year per broadband subscriber, increasing to $300 in three years given the current trajectory of Big Streamer video traffic. The four rural broadband providers expect $82 million in increased costs for video streaming entertainment, which is unlikely to be recovered by increasing broadband prices (something Biden opposes) or new customers (most population growth is to suburban areas).

Read the article.