The Broadband Stimulus: A Rural Boondoggle and Missed Opportunity
The American Recovery and Reinvestment Act included $7 billion for broadband development. We highlight two endemic problems with the rural subsidy programs managed by NTIA: 1) There is little economic rationale for subsidizing rural areas; and 2) NTIA's mechanism for selecting projects appears to have been largely incoherent. The rationale for rural subsidies has been debunked by scores of economists 芒聙聯 the programs turn out to be inefficient income transfer mechanisms and do not tend to increase subscriptions, but Congress forced NTIA to award subsidies. In its awards, NTIA adopted a system that led to awards differing by more than a factor of 100 in terms of expected cost-effectiveness. Had it adopted a more reasonable framework, many more households could have been connected for the same money, or the same number of connections could have been realized for a fraction of the cost.