Money in the Pipeline or Money Down the Drain? How to Think About Broadband Spending

Logan Kolas Sep 23, 2021

Widespread internet access promises to connect Ohio families and their businesses to their doctors, teachers, employers, and workers—improving the quality of life for millions of Ohioans. And while this transformative technology is critical for success in the 21st century, policymakers must ensure that taxpayer dollars are protected and used to bring service to unserved areas.

Ohio, along with other states and Washington, are awash in taxpayer dollars set aside to expand access to broadband. In the state’s new budget, Ohio set aside $250 million for broadband expansion. Brendan Carr, a commissioner on the Federal Communications Commission, has said Washington has $800 billion in infrastructure funds that can be used to expand broadband. And now lawmakers in Congress are considering sending states more than $42 billion to expand and improve access to broadband—with each state slated to receive a minimum of $100 million. Using conservative estimates, that is more than $350 million in taxpayer dollars that Ohio may have to expand access to broadband service. 

To ensure that Ohio uses this windfall wisely and protects taxpayer dollars, state policymakers need to resist temptations to spend this money on government-owned and controlled networks (GON), consider “reverse auctions” to distribute taxpayer-funded assistance, hold recipients of taxpayer funds accountable if they fail to meet their commitments, and explore additional ways to bridge the digital divide such as satellite broadband.

Avoid Government-Owned & Controlled Networks

Ohioans who rely on GONs deserve greater accountability from their broadband providers as do the taxpayers who fund these networks. A last-minute change in Ohio’s budget removed important protections that would have limited these government-run networks to truly unserved areas. With reporting suggesting that the Washington infrastructure package will not ban these important types of protections, Ohio lawmakers should revisit their implementation and ensure they are in place for any future broadband programs funded with state or federal tax dollars. In addition to increasing the transparency of how these networks are paid for, officials charged with overseeing them should be required to submit business plans and be subject to regular audits, so taxpayer are made aware of problems well before any projects go belly-up and taxpayers are left holding the bag.

Take Advantage of Reverse Auctions to Expand Broadband Access

Lawmakers should consider using reverse auctions to build out taxpayer-funded broadband projects. Reverse auctions allow qualified companies to bid against each other for government contracts and allows competitors to see each other’s bids and present counter bids for less money. Companies would determine what profit margins they are willing to accept, and companies would be accountable to complete the project as they committed to under their bid. Research (here and here) has shown that reverse auctions provide incentives for companies to provide broadband at lower costs, and has led to greater broadband access and less government waste, making these market-based auctions a win-win.
Hold Contractors Accountable 

Failing to complete broadband expansion projects after receiving taxpayer money is the worst-case scenario. To increase accountability, lawmakers should explore withholding payments from contractors until a project is completed, increasing the penalty for falling short on coverage promises, and shortening the amount of time companies have to complete projects. These accountability measures will help ensure that promises made are promises kept—something that government often fails to achieve.

Empower the Free Market to Achieve Better Service & Lower Prices

Finally, Ohio should use a portion of federal tax dollars to expand its pilot program with Starlink satellite broadband or to create installation vouchers that would allow Ohioans to pick the satellite broadband service that provides the best service for their needs. This would incentivize private companies to compete to provide better service at a lower price.

Internet access is a key ingredient to make Ohio an emerging technology leader and to give Ohioans the opportunity to succeed in the 21st century economy. By increasing accountability and transparency for government-owned and controlled networks, using reverse auctions to fund expansion projects, holding contractors accountable to fulfill their commitments, and exploring new and innovative ways to bridge the digital divide, Ohio lawmakers will ensure that taxpayer dollars are being effectively used to connect Ohioans with life-improving, high-speed internet.

Logan Kolas is an economic policy analyst with Economic Research Center at The Buckeye Institute.