With the COVID-19 pandemic drawing increased attention to the nation’s Digital Divide, many lawmakers want to spend billions of dollars to bridge it in the next “Phase 5” economic relief bill, which is expected later this month. For example, a recent bill calls for $100 billion in new spending—on top of the billions the United States already spends annually to shrink the Divide—to enhance broadband adoption, which is a sizable expenditure of $5,400 per household (on average) not already using broadband at home. Before Congress throws more money at broadband, and especially considering the exponential debt increase, perhaps lawmakers should take the time to look at what policies failed in the past and—learning from history—develop programs that may succeed.
Indeed, we have been here before. After the Great Recession of 2008, Congress passed and President Obama signed the American Recovery and Reinvestment Act. Included in that law was an earmark of $4.7 billion to expand access and adoption through the Broadband Technology Opportunities Program (BTOP) and $350 million to develop a broadband map. Of the $4.7 billion in BTOP funds, the bulk of the funding (along with matching grants) was directed at Sustainable Broadband Adoption (SBA), Public Computer Centers (PCC) and Community Anchor Institutions (CAI). Despite this tidal wave of cash, statistical analysis reveals no positive effect on home broadband adoption from BTOP programs. (With nearly $1 million in BTOP funds given to applicant One Economy to fund a soap opera allegedly encouraging broadband adoption, the results are unsurprising.)
The failed BTOP experiment provides an important lesson: For additional spending to shrink the Digital Divide, any new program must address the reasons Americans do not subscribe to broadband at home. The current political narrative swirling around Washington is that the primary reason households do not adopt broadband is that the price is too high. That political narrative is false. Price matters, but in this case, not as much as you might think.
I recently looked at the largest surveys on Internet adoption available to study the reasons for non-adoption where service is available. This survey evidence, collected by the U.S. Census Bureau, spans two decades. The survey data reveal that the primary cause for non-adoption is a lack of interest in what the Internet offers: 60% of respondents say they don’t need are or not interested in having broadband at home. A distant second reason (just under 20% of respondents) is the expense of the service and/or the devices required to use it. Despite claims to the contrary, over the past two decades a lack of interest has risen as a share of responses, while respondents pointing to the expense of service/equipment has fallen. While direct subsidies for broadband service may address the adoption shortfalls of price-sensitive consumers, these trends suggest subsidies may not fully (and perhaps not materially) bridge the Digital Divide.
Many non-adopters will respond to broadband subsidies that tackle the expense of service subscriptions, but many will not. Some Americans will remain offline, despite all efforts to the contrary, simply because they do not wish to be online. If subsidies are given only to low-income households, which is probably the plan, then the subsidies target only a small share of non-adopters, reducing the impact on adoption. Thus, throwing money, even in the billions, at the Digital Divide will not bridge it completely.
Direct subsidy to low-income households to cover the price of broadband is one of several policy options, but the data recommend sober expectations as to its effectiveness. A larger subsidy has a larger effect, no doubt, but commensurately it means a larger budget impact. Data show that extending existing broadband networks to unserved areas, on the other hand, could be more effective, with adoption rates in the range of 70% to 90% of homes passed by a network. Mechanisms for sensibly allocating infrastructure subsidies are already in place.