The $40 Billion Broadband Plan That Misses the Mark
Check the American Action Forum’s post in the Democrats’ “Better Deal” broadband plan. It’s got more holes than Swiss cheese.
In arguing for this buildout, the Better Deal plan suggests that rural broadband deployment is just an extension of the Rural Electrification Act (REA), a 1936 program to build electricity infrastructure in rural U.S. areas. While the programs are similar in that they aim to provide rural communities with new technology, the similarities largely end there.
REA was a loan program. Most current broadband proposals, on the other hand, are grant programs. As the 1937 Report of Rural Electrification Administration noted, there is quite a difference in establishing loans at fixed 20-year terms at 2.88 percent interest as compared to block grants that will help build out a broadband network.
Most important, the REA was actively involved in reducing the price of electricity to achieve economies of scale in rural areas. The REA created an engineering department that helped to lower the cost of electricity lines and construction methods. As REA administrators noted, “Sometimes a difference of a fraction of a cent per kilowatt hour in the wholesale rate will represent the difference between a sound and unsound project.” By 1939, the Rural Electrification Administration reported that the cost of building rural electricity lines decreased more than $500 per mile, or over a third of the cost. Nothing of the sort is included in this Better Deal.
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