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President Obama wants to "get broadband to every community in America," and Congress is poised to include funding to upgrade and expand broadband Internet networks in the American Recovery and Reinvestment Plan. As trade groups and labor unions lobby for funds to expand telecommunications systems, questions remain about how specific
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incentives and oversight policies will spur development and create jobs while avoiding waste and fraud. Panelists at this event will discuss the proper role of stimulus funds to increase high-speed Internet access and the broader role of government in Internet policy.
| 2:15 p.m. | Registration | |
| 2:30 | Welcome: | Robert Hahn, AEI |
| Panelists: | Robert Crandall, Brookings Institution | |
| Michael Katz, New York University | ||
| Robert Shapiro, Sonecon | ||
| Gigi Sohn, Public Knowledge | ||
| 4:30 | Adjournment | |
Keep Digging: Does Rural Internet Access Qualify as Shovel-Ready Economic Stimulus?
WASHINGTON, FEBRUARY 12, 2009--When $6 billion in subsidies for rural broadband access was added to the economic stimulus bill by House Democrats, the relatively small figure barely made a dent in the $800 billion cost of the package. At the American Enterprise Institute, however, that part of the stimulus bill was given much-needed attention by a panel of telecommunications experts moderated by Robert W. Hahn, executive director of AEI's Reg-Markets Center.
"Having [broadband] access changes the way all of us work, play, and live," Hahn said. Fifty-five percent of U.S. households already have broadband lines, and most of the other 45 percent have at least some access to high-speed internet, although 10 percent of these do not realize the option exists. At issue, then, was whether those who lack in-home broadband access have declined it as part of a personal cost-benefit analysis or whether their situation is an example of market failure that requires government intervention.
Setting stimulus aside, Robert Crandall of the Brookings Institution said, "there is no dearth of spending on broadband today." AT&T and Verizon, the two largest telecommunications companies in the United States, are already spending billions of their own dollars on increasing their respective market shares through broadband use and are likely to continue that effort with or without an influx of federal money. Crandall went on to say "there is almost no economic analysis" that shows success in previous federally subsidized rural communications access programs, and consequently Crandall saw "little reason to provide a specific, targeted subsidy for broadband services."
Michael Katz of New York University's Stern School of Business suggested provocatively that Congress may even be harming the environment by promoting and subsidizing rural broadband access. Living in remote areas encourages an "environmentally hostile lifestyle," he said through inefficient energy use and rural development. "Studies have shown that living in a city is a good thing," Katz said. It takes less energy to heat a multi-unit dwelling, and localized public transportation is far more environmentally friendly than a long car commute from a rural location. Katz said that it would be a mistake to encourage a multibillion dollar subsidy that is simply "lining the pockets of rural telecos and rural landowners" while distorting environmental incentives.
Robert Shapiro of the Georgetown University Center for Business defended the proposed stimulus package in theory, but he admitted that it has been rushed through Congress. "We do things when we're very ill that we would never do when we're healthy," he said, and government intervention is appropriate in the case of certain market failures. But, Shapiro said, there has been no structural market failure with regard to broadband access. Instead, the data reflects a "digital lag" rather than a "digital divide" in technology adoption, which would suggest that, left to its own devices, the market will eventually produce broadband access for the relatively small segment of the population that lacks it today.
Public Knowledge's Gigi Sohn said the proposed stimulus bill represents "sausage-making at its worst" but that "access to a broadband connection is essential to full participation in our society." Besides, she reasoned, the money is going to be spent anyway, and deploying broadband will create at least some jobs. Whether the jobs it produces would be created anyway with private investment, or whether they would represent the most efficient allocation of economic resources, is the question at the heart of the debate over not just rural broadband access but fiscal stimulus itself.
--JOSH EBOCH
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Speaker biographies
Robert Crandall is a senior fellow in the economic studies program of the Brookings Institution and the founder of the consulting firm Criterion Economics. Mr. Crandall’s current research focuses on competition in the telecommunications sector and the development of broadband services. Previously, he served as the assistant, acting, and deputy director for the Council on Wage and Price Stability. He is the author of numerous articles and books, including Competition and Chaos: U.S. Telecommunications since the 1996 Act (Brookings Institution Press, 2005), Broadband: Should We Regulate High-Speed Internet Access? (Brookings Institution Press, 2002), and Who Pays for "Universal Service"? (Brookings Institution Press, 2000). Mr. Crandall has taught economics at Northwestern University, MIT, the University of Maryland, George Washington University, and the Stanford in Washington program.
Robert Hahn is a senior fellow at AEI and executive director of the Reg-Markets Center. He is also a senior visiting fellow at Oxford University's Smith School. Previously, he worked for the Council of Economic Advisers and served on the faculties of Harvard University and Carnegie Mellon University. Mr. Hahn frequently contributes to leading scholarly journals and general-interest periodicals, including the American Economic Review, the Yale Law Journal, Science, and the New York Times. He is the author of Reviving Regulatory Reform: A Global Perspective (AEI Press, 2000) and several other books. In addition, Mr. Hahn is the cofounder of the Community Preparatory School, an inner-city middle school in Providence, R.I., that provides opportunities for disadvantaged youth to achieve their full potential.
Michael Katz is the Harvey Golub Professor of Business Leadership and a professor of management at the Stern School of Business at New York University. He teaches courses in competitive and corporate strategy. Previously, Mr. Katz was the Sarin Chair in Strategy and Leadership at the Haas School of Business at the University of California, Berkeley. He served as the deputy assistant attorney general for economic analysis from 2001 to 2003 and as the chief economist of the Federal Communications Commission from 1994 to 1996. Mr. Katz has published numerous articles on the economics of network industries, intellectual property, telecommunications policy, and antitrust enforcement. He is a member of the editorial boards of Information Economics and Policy, the Journal of Economics & Management Strategy, and the Journal of Industrial Economics. He also serves on the computer science and telecommunications board of the National Academies.
Robert Shapiro is the cofounder and chairman of Sonecon, LLC, a private firm that provides advice and analysis to seniobusiness executives, U.S. and foreign government officials, and nonprofit organizations. He is also a senior policy fellow at the Georgetown University Center for Business and chair of the U.S. Climate Task Force. Previously, Mr. Shapiro was the under secretary of commerce for economic affairs from 1997 to 2001. He was the principal economic adviser to the Clinton presidential campaign and a senior economic adviser to the 2000 Gore and 2004 Kerry presidential campaigns. In 2008, he advised the Obama campaign and transition. Mr. Shapiro is widely published and his most recent book is Futurecast: How Superpowers, Populations and Globalization Will Change the Way You Live and Work (St. Martin’s Press, 2008).
Gigi Sohn is the president and cofounder of Public Knowledge, a nonprofit organization that addresses the public's stake in the convergence of communications policy and intellectual property law. She is also a nonresident fellow at the University of Southern California Annenberg Center and a senior fellow at the University of Melbourne Law School. Ms. Sohn has taught at Georgetown University and at the Benjamin N. Cardozo School of Law at Yeshiva University. Ms. Sohn was appointed by President Clinton to serve as a member of the Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters. She serves on the board of the Telecommunications Policy Research Conference and Broadcasters' Child Development Center. She is a contributor to the Huffington Post and has been published in the Washington Post, Variety, CNET, and Legal Times.
