Pricing scheme hampers Virginia broadband expansion
Virginia was promised $1.5 billion to expand rural broadband in the Infrastructure Law, but Washington, D.C., bureaucrats refuse to hand over the money until the commonwealth embraces their illegal price-fixing scheme.
I had the honor to spend four years working on Capitol Hill. Never was this a greater honor than when I had the opportunity to work on the Infrastructure Investment and Jobs Act’s broadband title, the kind of opportunity Hill staffers only get once a career. You can take it from me that the National Telecommunications and Information Administration is violating the law by forcing Virginia to fix the price of internet service.
Commonly known as rate regulation, price fixing for internet service is bad policy and illegal under the IIJA. I remember one staff-level call in the summer of 2021 discussing allowing
NTIA to set rates for all internet service providers (ISPs) that participated in the grant program. As one of the most junior staffers on the call, I was intimidated by the seasoned aides with master’s degrees in public policy looking back at me on Zoom. This feeling evaporated when I casually mentioned that price fixing creates shortages and was met with blank stares.
Putting aside this failure of our elite universities to educate policymakers in basic economics, common sense tells us that price fixing creates shortages. If the government forces a store to sell a popular but scarce product at a low price, like the U.S. government did with gasoline in the mid-1970s, the store will run out. If the government forces a store to sell a plentiful product at a markup, like the government did with produce in the mid-1930s, no one will buy the store’s stock.
In the case of internet service, ISPs must spend on infrastructure, maintenance and upgrades as technology changes. ISPs must be able to react to changes in their costs and revenue to stay in business. Rate regulation undermines the entire purpose of the Broadband Equity Access and Deployment (BEAD) program, which was to get broadband to unserved areas.
Recognizing this, Congress included a provision in the final infrastructure law that prohibited NTIA from regulating rates for broadband: “Nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service.”
Put simply, it is illegal for NTIA to set rates for broadband service, nationally or locally. NTIA bureaucrats are nonetheless trying to bully states to do it for them by refusing to release funds unless states fix the price at $30 per month.
Which brings us back to Virginia. The Old Dominion’s BEAD plan has now been rejected multiple times for seeking to avoid this trap. As the Virginia Broadband Office director noted in a Dec. 6, letter, NTIA rejected the commonwealth’s application because “the low-cost option must be established in the Initial proposal as an exact price or formula.”
This despite NTIA Administrator Alan Davidson’s promise that his agency would not require rate regulation at a Dec. 5 hearing before the House Communications and Technology Subcommittee. By rejecting all applications the commonwealth has submitted until the desired price point is included, NTIA holds federal BEAD dollars hostage until state governments price fix for them.
Virginia has even proposed compromises between these approaches, but all have been rejected. NTIA may try to hide behind the fig leaf of state-level cut-outs, but its repeated rejections of reasonable alternatives betray the agency’s agenda. Gov. Glenn Youngkin deserves credit for standing on principle and refusing to roll over in the face of administrative blackmail by D.C. bureaucrats. Rather than violate the law by weaponizing BEAD funds, NTIA should refocus on its true role, which is to help states provide broadband to unserved areas. The success of rural broadband depends on it.