California’s Broadband Bridge to Nowhere

California’s Broadband Bridge to Nowhere

The California Broadband Task Force, convened by Governor Schwarzenegger, concluded last month that high-speed Internet access should be a public investment, much like roads and power lines. The CBTF proposes “state-issued broadband bonds” to bring ultra-fast connections to the state’s most desolate reaches. Without public subsidies, however, California already ranks first in the nation for availability of advanced broadband technologies.

According to the CBTF’s final report, a full 96 percent of households have access to high-speed Internet services, but only 56 percent opt to subscribe. This gap indicates a lack of broadband demand, not a lack of infrastructure. This demand correlates strongly with household income. Instead of increasing the affordability of available commercial services, “broadband bonds” will displace existing services with inefficient government-run versions.

This strategy would be akin to replacing grocery stores with a chain of state-run commissaries. Government bureaucrats cannot possibly micromanage a rapidly evolving technology such as high-speed Internet. Unlike roads and similar capital improvements, broadband networks require constant upgrades to serve the changing needs of consumers.

In the past four years, Verizon has built more than 7,000 miles of high-speed capable infrastructure in California. How does this compare to the government’s record of upgrading transportation infrastructure? More than a decade after the legislature introduced plans for a high-speed train system connecting San Diego and Sacramento, lawmakers have yet to finalize the 700-mile route, much less begin the projected 15-20 year construction process. The CBTF’s plan dwarfs this train proposal.

Rather than merely connecting urban centers, the task force proposes bringing the most advanced and expensive broadband technologies into the backyard of every Californian. Even though existing providers now reach 96 percent of households, bond funds would be used to achieve “universal” service. To accomplish this goal, taxpayers must pay to expand networks into the state’s most isolated communities.

According to the CBTF’s report, this includes many towns like Caribou (population 0), Bucks Lake (17), and Pearsonville, with 27 residents. On average, the 2,000 unserved communities cited by the task force have fewer than 250 households apiece. Much like the often-ridiculed $320 million bridge approved by Congress in 2005 to serve an Alaskan island with only 50 residents, California’s universal broadband plan is a digital bridge to nowhere.

Such a bridge will cost the public billions of dollars if every resident must receive uniform access to the same top-notch technologies. Bringing the fastest possible connections to isolated and rural households requires eight to 10 times the investment needed to serve urban customers. According to the CBTF, however, all Californians should receive nothing but the best technology, “regardless of whether it is easier or more difficult to deploy broadband infrastructure in one place than another.”

This inflexible commitment threatens to lock-out more cost-effective technologies, and shackle taxpayers to an expensive obligation with diminishing returns. For state-subsidized universal services such as electricity, all consumers receive the same power through identical power lines. In the competitive high speed Internet market, however, consumers enjoy a diverse selection of wired (DSL, fiber optic, cable) and wireless (satellite, mobile broadband) services.

By subsidizing only a handful of these options, the state will suppress new innovations which may better suit the needs of remote and rural customers. For instance, even though next-generation wireless technologies enable coverage of large areas with limited infrastructure investment, the CBTF entirely excludes these services from its map of broadband availability. The task force also appears to have ignored California’s $14.5-billion budget deficit.

New technologies should develop around the needs of consumers, not the bias of bureaucrats. By injecting public funds into the market, government assumes authority to legislate how the public connects to the Internet. Lawmakers will use this authority to favor providers who lobby for subsidies and create a network of rural broadband monopolies.

If broadband should be treated like roads and electricity, should the Internet be managed by Caltrans or PG&E? Only in the absence of government interference can the state achieve service which is both universal and competitive. The resulting new innovations will satisfy unmet demand and maintain California’s status as the nation’s broadband leader.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.