Congress Spends Big on Closing the Digital Divide

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The pandemic galvanized federal support for broadband. Now get ready for a tidal wave of spending on telecom gear. The biggest federal effort ever is underway to connect all Americans to high-speed broadband. There’s $42.5 billion to deploy web service, mostly fiber-optic networks, to locations lacking it. 2021’s bipartisan infrastructure law funded the plan. Here’s an early outlook on the huge project.

About 8 million locations lack broadband — web speeds of 100 megabits per second. The problem is concentrated in the most rural areas. All 50 states are moving with urgency now to finish up plans to tap fed money from BEAD — the Broadband Equity, Access and Deployment Program. 19 states have more than $1 billion each to fund new network build-outs. Texas has the most, with $3.3 billion, then California ($1.9B), Missouri ($1.7B), Michigan ($1.5B) and North Carolina ($1.5B). The least is Delaware ($0.1B).

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Major web providers are eager to gain users, at least in targeted areas. AT&T, Charter/Spectrum, Comcast/Xfinity, Verizon, Cox, CenturyLink, etc., will likely take part. All are eager to gain users who could become long-term customers, though they are wary of building expensive networks that won’t reliably return a profit. Providers must fund at least 25% of the project, more in some places. Stringing fiber cable on poles or trenching it to remote spots and through tough terrain can be very expensive. Costs of materials and labor have gone up in recent years and permitting delays, which are a real concern, are costly. Still, the once-in-a-lifetime network subsidies will be hard to pass up.

Local, small providers will be relied on in many rural spots. Many will understand the location, workforce and demands of building a local network. However, a risk is that smaller providers overpromise to gain funding and then fail to deliver over the long haul. One federal pandemic broadband program for rural areas now has over $2 billion in default, out of a total pool of $9 billion, after some providers realized the proposed business models wouldn’t work. The Federal Communications Commission is still figuring out what to do about the failed projects.

Building for BEAD projects starts in 2026 when most of the money starts flowing. Fiber is strongly prioritized, but there’ll be some wireless projects, including satellite. But those wireless options will be the exception, not the rule. 

Meanwhile, sellers of fiber-optic cable and broadband electronics will cash in on historic demand. Because of “Buy America” rules for fiber and certain equipment, vendors such as Nokia and Corning recently expanded U.S. manufacturing capacity. Other vendors to benefit: CommScope, Vecima Networks, Adtran, Superior Essex and PPC Broadband.

States see huge potential for economic development, especially in rural areas, to lure remote workers, keep young residents from moving and create jobs. Farms and other remote businesses could potentially benefit from new, faster networks that cross their paths. The funding can connect libraries, community centers, hospitals and similar locations. 

Perhaps the biggest challenge is a looming workforce shortage across the U.S. Jobs in high demand will include land surveyors, fiber technicians, project managers, telecom engineers, electricians, network operators, foremen and laborers. The broadband projects will compete for workers with other major infrastructure works, from roads and bridges to semiconductor plants and energy projects.

There will be efforts by states, companies and industry groups to get the word about jobs paying from $60,000 to $100,000-plus, most jobs not requiring a college degree. Louisiana, for example, aims for 3,000 state residents to receive broadband-related certifications by 2025 and another 2,000 by 2027. Corning and AT&T have an expansive program to train fiber optic technicians. Broadband Nation was launched by industry groups to highlight available telecom jobs. But finding tens of thousands of trained or certified workers will be a constant issue. 

Note that getting unconnected folks online is about more than just building networks. “Deployment is one part of it, but it's not the biggest part of it," says Jessica Dine, a former policy analyst at the Information Technology and Innovation Foundation (ITIF). Besides affordability issues, non-internet users often lack interest or digital know-how. States are planning digital literacy programs that educate residents about the web. 

The unprecedented program won’t escape delays and even some failures. The federal agency tasked with overseeing the program, the National Telecommunications and Information Administration (NTIA), is already working to streamline permitting, a big potential roadblock that risks extending timelines. And for sustained success, Congress also needs to reform federal programs that help subsidize internet costs to low-income households and high-cost areas.

Still, with enough money to meet connection goals by 2030 or so, the promise remains huge for likely the last major effort of its kind.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.