much talk, U.S. President Barack Obama has finally delivered a concrete plan
for how he will fund his plan for government-funded internet expansion.
The only thing is the published details [press release] concerning the plan jump all over
the place. But never fear, we're here to break it down for you, exactly
where the Obama administration (claims) the money for Nation wireless and
broadband is coming from and where it's supposed to be going to (and when).
I. Time Frame
First the time frame -- according to the release, the National broadband plan
will be executed over the next 10 years, with much of its success criteria
targeting improvements at the five year mark.
(This gets rather long... there's a quick cheat sheet at the end)
Funding for the initiative begins with the auction of 500 MHz of wireless spectrum over
the next decade. That measure is supposed to raise $27.8B USD in today's
money. Presumably this figure is after broadcasters' cut
from incentives auctions (more on that in a bit), but the release wasn't
exactly clear in this regard.
The National Telecommunications and Information Administration (NTIA) has
already found 115 MHz of unused government spectrum to put towards the auction
(hopefully this isn't a case like when the U.S. accidentally sold the spectrum it used for B-2 Stealth Bomber communications).
The NTIA is currently evaluating another possibly auctionable 95 MHz of
spectrum. That would bump the total to 210 MHz. And the NTIA thinks
it may be able to squeeze out a few more small chunks of spectrum by having
government networks make more efficient and full use of their allotted
President Obama hopes to get the remaining 250 to 300 MHz of spectrum via
incentive auctions for broadcast TV companies who are sitting on unused
spectrum. The U.S. Federal Communications Commission does not have the
power to hold these auctions. In order to hold the divided Congress will
have to approve of the plan.
Under the plan, most of the collected spectrum would be sold to companies like
Verizon Wireless or AT&T, while a small amount would be reserved for
unlicensed use. To "spur innovation" $3B USD of the auction proceeds
would be funneled to research grants for "emerging wireless technologies
and applications". This fund would be dubbed the Wireless
The next source of funding would come via a revamping of the Universal Services Fund (USF).
That fund currently pours $4.3B USD into the landlines. Under the
President's plan, that funding would be phased out and replaced with support
for funding broadband expansion and services in rural and low-income areas.
That funding could provide as much as $30-40B USD over the next decade,
depending on how fast landline subsidies are turned off.
Under the proposal a "one-time investment" of $5B USD would also be
added to the pool. This investment would go towards expanding rural 4G
President Obama is also calling for $10.7B USD, including $500M USD from the
WIN fund, to develop a modern public safety network to inform the public in the
event of a terrorist attack, national disaster, etc. Of that funding
$3.2B USD would go towards reallocating the D-Block of spectrum, which is
currently reserved for emergency communications. Under the plan their
might be auctions to telecoms, if those telecoms are willing to work to fund
and support coexisting emergency broadcast systems on their chunk of purchased
In total $7B USD would go towards directly deploying the network. And the
$500M USD from the WIN fund would go towards research and development of new
public safety broadcast technologies.
In short, this aspect of the funding would necessitate $10.2B USD on top of the
The remaining $9.6B USD from the auction would be put to use cutting a chunk
out of the growing deficit.
The follow "cheat sheet" sums up the plan:
+/- $25-30B USD
(USF transfer -- no more or less funding than current)
+$27.8B USD (auction
proceeds, after partners' "cut")
- $ 5.0B USD (4G deployment
one time expense)
- $ 3.0B USD (WIN fund)
- $10.2B USD (Public safety
$9.6B USD (leftover funding; used to cut deficit)
III. What America Gets Out of the Plan
According to President Obama, $5B USD of the funding will be used to expand
wireless coverage from 95 percent of Americans to 98 percent of Americans.
Most of these 3 percent live in impoverished or remote areas that don't
make sense for the profit-driven telecoms to come to. That said, these
regions often perform vital functions to our nation's economy like
The additional 3 percent of Americans equates to roughly 9.2 million people.
That figure is substantially more sedate than the previous promise by the
FCC and Obama administration to cover 100 million people with 100 Mbps internet.
The additional coverage will all be high-quality 4G networks. (e.g.
The benefits of the public safety network are obvious. The government
will be able to prevent some of the loss of life and property that
occurred in events like Hurricane Katrina. And the public will be less
likely to endure the fear and uncertainty that it did on the infamous 9/11
attacks in 2001.
The transferred $4.3B USD a year in USF funding will help deploy broadband to
many other rural Americans, without further expanding the budget.
And the WIN fund will likely go a long ways to support research at universities
and wireless startups across the country.
A final upside that must be considered is the positive effects of auction off
the 4G spectrum. While 500 MHz isn't
going to radical alter how we consume wireless data, it will go a long way
towards relieving congestion and delivering faster service. In fact, that
much spectrum would nearly double the amount currently available to the
The Obama administration claims that, at the end of the day, broadband and
high-speed wireless access will spur new business development in rural areas
and help Americans enjoy a better standard of living. These seem like
good things and could lead to an increase in the GDP and, in turn, government
IV. Analysis -- Super-Star or Fantastic Flop? The Outlook for the Plan
So what's the verdict on the plan as a whole?
Probably the best aspect of it is that if it sticks to its promises, it will
actually cut federal spending, rather than increase it. And the key parts
of the plan will largely be executed by private sector, which will please
proponents of the free market.
Also, it's hard to argue that the government should take no action
to try to expand wireless and broadband availability. Much like high-speed
rail, the U.S.'s competitors are spending to expand this infrastructure, and if
the U.S. doesn't keep up, it risks becoming a second-class power. And the
private sector, due its focus on profits, has expressed little interest in
preventing this from happening. So at the end of the day the government
has to step in, but the questions are "in what way?" and "how
The big problem with the plan is that it is perhaps overly optimistic.
The $10B USD could cover 9.2 million Americans with 4G,
if it was applied very efficiently. However, government efforts,
including those of the Obama administration (and its predecessor the Bush
administration) seldom showcase such fiscal responsibility.
In all likelihood the plan will end up either costing more than the Obama
administration's optimistic figure, or it will deliver less results.
Either way, people won't be happy.
In other words, this plan is good, but it's not great. It's a concrete
vision, but if we've learned anything from history it's an overly optimistic one.
In the end "yes we can" will likely become, "well we did
-- sort of". The effort will help the U.S. keep from falling behind
in the world tech race, but will it be enough? It's hard to say.
And it is equally hard to predict what the reaction across the political
spectrum will be to Obama's vision.