$42 Billion Broadband Boondoggle Brought Internet to Zero Homes

"It’s time to repeal this especially wasteful component of the 2021 infrastructure law."

By Joel Griffith, American Institute for Economic Research

The Broadband Equity, Access, and Deployment Program (BEAD) allocated $42 billion to extend broadband access to all homes nationwide. Nearly three years after passage, 16 states still lacked funding approval. In its first three years, the program connected precisely zero homes to the internet.

The expressed objective of BEAD is to bridge the so-called digital divide — the lower levels of access and affordability for some rural residents, minority groups, and lower-income earners. Yet, the private sector is doing quite well at bridging this so-called divide. While the federal government dithered on allotting the $42 billion of BEAD funding, the percentage of Americans using the internet rose from 80 percent in 2021 to 83 percent in 2023 — an additional 13 million users. High-income household use has remained virtually unchanged for a decade — at 87 percent — while usage in low-income households earning less than $25,000 steadily rose to 75 percent by 2023. Even in rural areas, 72 percent already have fixed broadband coverage.

Even the remaining gap overstates the extent of the problems with access and affordability. Less than 10 percent of the overall population lacks internet service. Of the 24 million households with no internet, more than half (58 percent) either have no interest in being online or no need to be online. Lack of availability accounts for just 4 percent of those without home internet. In other words, fewer than 1 million households (fewer than 1 in 100) nationwide are offline solely due to lack of availability.

The per-household cost of the federal “solution” to this diminishing problem is steep. The $42 billion price-tag is sufficient to provide 12 years’ worth of Starlink service — $44,000 — for each impacted household. Even if we presume all the 24 million households currently without access will benefit from increased access and affordability, this comes to $1750 per household.

Meanwhile, the cost per taxpayer of BEAD is simply added to our massive federal credit card balance, a marginal negative impact so distant it is barely discernible. But that’s the ugly truth of dispersed costs and concentrated benefits. A handful of broadband infrastructure companies stand to benefit immensely from these widely dispersed costs. Taxpayers foot 75 percent of the cost of capital investments from which these favored companies will generate revenue for decades to come.

The private sector already has developed an alternative to high-capital expenditures for building our expensive infrastructure serving only sparse numbers of people in rural areas: Starlink.

Starlink covers the entirety of the lower 48 states at a cost of just $120 per month for unlimited residential use. Typical download speed easily exceeds the FCC’s 25 Mbps threshold for “unserved” and often exceeds the FCC’s 100 Mbps threshold for “underserved.”

Ironically, Biden claims this program is “not unlike what Roosevelt did with electricity.” At the founding of the Rural Electrification Administration in 1935, only one in ten farms had access to electricity. Incidentally, the number of US farms peaked in that year and agriculture comprised 21 percent of our workforce, lack of access to electricity posed a real impediment to growth. Contrast that with today when most families even in remote parts of the nation already utilize the internet — and fewer than 1 million are deprived due to lack of availability. Furthermore, in 1935, no practical substitute to hard, physical infrastructure — cables, poles, transformers, and power plants — existed, where today internet access via satellite link and portable equipment can substitute for physical broadband cables. Lastly, the funds provided by FDR’s administration were loans rather than pure giveaways of taxpayer money to favored companies. The differences in need, benefit, and mechanism between this wasteful broadband program and the rural electrification program are stark.

It’s also no surprise deployment of these $42 billion in federal funds has been slow or even nonexistent. BEAD funding comes with various attached requirements, including mitigating climate change, hiring those with criminal records, conforming to a prevailing wage scheme, and hiring and training local residents. In addition, the rules specify that recipients of the subsidies provide services at “reasonable prices” for “middle class families.” Failing to provide an actual price cap skirted the legislation’s ban on outright regulation of broadband rates. But this workaround acted as an even worse form of price control — one in which bureaucrats decide retroactively whether a price is “reasonable.”

Reliance on government funding will discourage private sector investment in broadband infrastructure, as companies might wait for government subsidies rather than investing their own capital. This could slow down overall broadband expansion and innovation in the long term, affecting consumer access and service quality. Rather than focus on investing in infrastructure where returns on capital will prove most profitable, companies instead must predict the geographies and market segments most likely to receive government subsidies. Reliance on federal or state broadband coverage maps can misallocate capital to areas where investments are less efficiently employed. A company spending its own capital on infrastructure would be a costly mistake if taxpayers will provide those resources instead (or provide them to a competitor). The promise of BEAD funds will likely deter private investment in areas where this funding is anticipated.

The marketplace shows an uncanny ability to improve affordability. For instance, across parts of South Florida, Breezeline was the only residential broadband provider.

Household costs topped $150 per month. This changed rapidly in 2024 as Verizon expanded home internet service to many neighborhoods, offering similar access at less than half their competitor’s price. Breezeline’s onerous pricing provided an incentive for Verizon to invest heavily in an alternative. Profit is a motivator for private investment, benefiting both shareholders and the public.

Why not simply allow the market to work? Rural residents with no access to broadband can use Starlink. Over time, private companies may decide that broadband infrastructure development in these areas is worth the capital investment. They are in a far better position to make this determination than bureaucrats doling out borrowed taxpayer resources. The track record of BEAD’s inefficiencies and delays caused by lack of intergovernmental coordination and funding compliance requirements should spell its end.

It’s time to repeal this especially wasteful component of the 2021 infrastructure law.

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