Beltway Pols Worry About “Overbuilding” in Underbuilt Market

 

As the Biden administration fleshes out the details on the President’s proposed American Jobs Plan, which includes as much as $100 billion to fund expanded high-speed Internet connectivity and bring much needed competition to the broadband market, opponents (mostly Congressional Republicans and lobbyists for the big telecom companies) are tossing the word “overbuilding” around, ostensibly as a warning against wasteful government spending.

Case in point: U.S. Sen. Roger Wicker of Mississippi, the ranking Republican on the Commerce, Science & Transportation Committee recently told Bloomberg News, “The president’s broadband proposal opens the door for duplication and overbuilding.”

Meanwhile, many of his constituents in his home state point to how broadband infrastructure has actually been underbuilt by incumbent providers, leaving the Magnolia State and its broadband hungry residents in the digital dust.

Ideology vs. Reality 

“For a poor state like Mississippi, being left behind by a 21st century economy is tantamount to economic death. Senator Wicker's concern about overbuilding and duplication is certainly not the case for the families and small businesses he represents across broad areas of this rural state in economic distress,” is how Oleta Garrett Fitzgerald, Children's Defense Fund Southern Regional Director and head of the Southern Rural Black Women's Initiative, responded to Wicker’s assessment.

To put it mildly, she doesn’t feel that the state has adequate Internet access networks today.

“Our families, schools, and small businesses require resources only available to us from the federal government as Mississippi's tax base is not sufficient to meet the challenge ahead for Internet services that are quality and affordable. Much like rural electrification, Senator Wicker could help by ensuring that buildout makes business sense to Internet service providers across a large landmass and low populated areas, and that it is affordable. Our families, schools and businesses located in these areas can then have what is comparable to electricity in today's world to be competitive.”

And yet, Wicker persists, having recently written a letter to Treasury Secretary Janet Yellen, urging her to better coordinate federal broadband investments “to make sure funding is not going to areas that already have broadband service.”

A Persistent Talking Point

It’s the echo of a familiar argument made for years now by those who see no problem with monopoly power in the broadband market, which has left millions of Americans yearning for alternatives to the high-cost, second-rate Internet service they’ve been stuck with for decades now, if they have access to broadband at all.

Whenever and wherever government funds are used, or proposed to be used, to subsidize the high capital costs of building high-speed Internet infrastructure, you can count on big telecom friendly politicians and lobbyists trotting out the “overbuilding” talking point.

On the surface, it sounds reasonable to riff on the Reagan-esque tune that goes like this: get “big” government out of the way, remove regulations, and the incumbent providers will bridge the digital divide. Viola, the “invisible hand” of the free-market magically solves the problem. No one is supposed to notice that some of the biggest telephone monopolies crying “overbuilding” have raked in billions of dollars in federal subsidies over the years to upgrade and expand their networks but have largely failed to do so. The cable companies built their networks with decades of monopoly protection from governments and now argue that government trying to fix the broken market is unfair. 

Hijacked Terminology

“Overbuilding” is a term engineers use to describe building something on top of something else, which in some cases may not be necessary or is overly elaborate. But, as John Sallet, former FCC General Counsel and Deputy Assistant Attorney General in the Antitrust Division of the US Department of Justice, makes clear, the term “overbuilding” has been hijacked and used by anti-government ideologues to obscure reality.

In a detailed study he authored for the Benton Institute for Broadband and Society, Sallet notes: “There is a tendency to call the construction of new, competitive networks in a locality with an existing network ‘overbuilding’—as if it were an unnecessary thing, a useless piece of engineering.”

Sallet goes on to say that “what some call ‘overbuilding’ should be called by a more familiar term: ‘Competition.’ ‘Overbuilding’ is an engineering concept; ‘competition’ is an economic concept that helps consumers because it shifts the focus from counting broadband networks to counting the dollars that consumers save when they have competitive choices.”

One of the most strident voices warning about “overbuilding” is former FCC Commissioner Mike O’Reilly. Testifying before the Senate Commerce Committee in March, O’Reilly argued that federal subsidies were “impeding private sector broadband efforts and potentially threatening the viability of smaller or mid-sized companies.” Welcome to the upside-down, where the threat of competition in a supposedly competitive market could ruin competition, as we laid out in a recent article published in The American Prospect.

"Overbuilding" = Competition

One of the challenges with those deeply concerned about the potential for unnecessary duplication of networks is that the government, including the FCC when Michael O’Rielly was a Commissioner, has refused to collect accurate, relevant data about where broadband is available. In the absence of such data, especially reliability data, it is not possible for any person in a state capital or Washington, DC, to claim with certainty what investments are needed in any given community. 

When you hear or see the term “overbuilding” in the context of building broadband networks, know that in the real world that word means competition in a market that has been underbuilt by the big incumbent providers.