Blair Levin & Gregory Rosston on Broadband Subsidies

Episode Summary

Executive Summary: The episode examines the $100B+ broadband subsidy push in the Infrastructure Act, arguing that while labor, supply chains, and inflation matter, the bigger issues are political design, state administration, and mapping. Blair Levin and Greg Rosted explain why broadband funding shifted from federal auctions to state-run processes after RDOF backlash, why states will likely favor competitive grants over pure reverse auctions, and why accurate address-level data and enforcement mechanisms will determine success.

Main Topics: Macro constraints on broadband buildout (Priority: 4/5): The hosts and guests discuss whether tight labor markets and supply-chain bottlenecks will limit how far broadband subsidies can go, concluding these are real but mostly second-order compared with program design and timing. Size and structure of federal broadband subsidies (Priority: 5/5): They estimate the total deployment-related broadband funding across federal programs at roughly $100 billion over 10 years, implying a major increase in investment in unserved and underserved areas. Why states were given control instead of the federal government (Priority: 5/5): The discussion links the shift away from federal administration to political backlash from the RDOF auction, especially its mapping problems and unpopular outcomes, which damaged confidence in FCC-led allocation. State implementation, incentives, and political risk (Priority: 5/5): The guests argue states will have broad discretion but limited expertise, and that governors will likely use the funds in politically visible ways, often through competitive grants rather than fully transparent market mechanisms. Reverse auctions vs. competitive grant programs (Priority: 5/5): The conversation centers on whether states can preserve the efficiency of auctions without calling them auctions. The guests expect states to use competitive processes that may be more political and less efficient than reverse auctions. Mapping, eligibility, and enforcement (Priority: 5/5): A major thread is that bad maps and weak provider reporting threaten program integrity. The guests urge address-level service data, cross-checking with existing sources, and disqualification penalties for false reporting. Rural co-ops and alternative providers (Priority: 3/5): The guests highlight rural electric cooperatives, wireless providers, and large incumbents as important participants that may expand broadband using government support and existing local infrastructure.

Key Arguments: Broadband spending will be delayed and phased over many years, so current labor and supply-chain concerns matter less than the long-run design of state programs. Congress tends to allocate large broadband sums only once per decade, so the current moment is a rare chance to invest at scale. Market forces are already driving some fiber buildout, especially where Wall Street values fiber more highly than copper/DSL, reducing the need for subsidies in many areas. The RDOF auction’s political fallout—especially mapping failures and unpopular winning bidders—made Congress and governors wary of FCC-run auctions. States are likely to prefer competitive grants because governors want control and credit, even if auctions are more efficient. States lack broadband-specific institutions and expertise, which creates a real implementation challenge compared with federal administration. Accurate broadband maps should start with provider-reported address-level service data and be validated against existing datasets and location sources. Provider misreporting should be punished by ineligibility for funds to create strong incentives for truthful disclosures. Rural electric co-ops are increasingly important broadband providers because they already have billing systems, crews, pole access, and community trust. Low-income broadband support is argued to be more important than some rural subsidies, though the political system tends to favor rural spending. Competitive grant design must solve both allocation and enforcement: how to choose projects and how to ensure promised builds are actually completed.

Data Points: Total broadband deployment funding: Approximately $100 billion over 10 years - Blair Levin’s estimate of combined federal broadband deployment programs, including BEAD, Treasury, ARPA-related, tribal, and USDA funding BEAD program allocation: $42.5 billion - Primary state broadband deployment program discussed in the Infrastructure Act Treasury broadband-related allocation: $10 billion - Additional broadband-related money referenced from earlier legislation State and local relief funding with broadband as eligible use: $350 billion - Broadband expected to capture part of this broader funding pool Expected broadband share of state/local relief: $30–40 billion - Guests’ estimate of how much broadband spending may come from the $350B state/local funds Projected annual spending level: $4.5–6 billion per year (raised as a benchmark) - Scott Walston’s estimate of annual high-cost-area spending under a 10-year subsidy horizon Wireless/fiber deployment timing: Over the next 5+ years - Greg Rosted emphasizes the money will be spent gradually, not immediately Map readiness timeline: Good maps likely not until 2023 - Greg Rosted cites a news report suggesting mapping problems will delay spending Household value of copper vs. fiber: Copper/DSL valued at about $1,000–1,500 per home; fiber at about $4,000 per home - Blair Levin uses Wall Street valuation differences to explain why companies are shifting to fiber

Pivotal Quotes: "You can't understand the anger at the auctions." — Blair Levin: Explaining why RDOF backlash made reverse auctions politically toxic in Congress and among governors "The states themselves cannot do much about that. But I do think the Department of Labor and the Department of Commerce ... should be ramping up in apprenticeship programs." — Blair Levin: On labor and supply-chain constraints, arguing federal workforce preparation is more relevant than state action "If you want to be eligible to receive funds, you have to tell us where you are currently providing service in the state." — Blair Levin: On data integrity and enforcement, proposing a strict reporting requirement to improve broadband maps and program targeting

Implications: Broadband success now depends less on headline funding and more on state execution: better maps, competitive design, truthful provider reporting, and strong enforcement. Expect uneven outcomes, political favoritism, and a big role for incumbents, co-ops, and wireless alternatives.