On Nov. 15, 2021, President Joe Biden signed a $1.2 trillion infrastructure package—the Infrastructure Investment and Jobs Act—that provides historic funding levels to improve public works, including roads, bridges, highways, internet access and the power grid, as well as to mitigate the effects of climate change. (The bill does not include funding for social policy, which is covered under separate legislation known as “Build Back Better.”)
This is one in our series of industry-focused outlooks analyzing the impact of the infrastructure legislation.
What the $1 trillion Infrastructure Investment and Jobs Act means for telecom: The Infrastructure Investment and Jobs Act will increase the number of high-speed broadband customers in the U.S. market, which will stimulate new competition among internet service providers. The legislation will also inject capital necessary to favorably shift the cost/benefit equation that has historically limited investment in rural areas, and will incentivize carriers to increase coverage of low-income households.
Large portions of the country continue to lack sufficient or affordable high-speed internet access. While this legislation will not be sufficient to close the gap entirely, it provides a critical boost which—in addition to emerging technologies like 5G and satellite broadband—may make a meaningful dent in the number of Americans without high-speed internet, while invigorating ISP growth.
Specific allotments for telecom:
There is roughly $65 billion for broadband infrastructure and affordability initiatives. Here’s a breakdown of that allotment:
Multiple major initiatives included in the infrastructure package will require internet service providers (ISPs) to begin assessing how best to accommodate broadband growth in new or less saturated markets.
Through its $42.5 billion Broadband Equity, Access and Deployment Program, the infrastructure legislation will support broadband buildouts in unserved areas (defined as those with broadband speeds of less than 25 megabits per second for download and 3 Mbps for upload) and underserved areas (those with speeds of less than 100 Mbps for download and 20 Mbps for upload). This program is set to be established within 180 days of the act being signed into law.
Another $14.2 billion allocated to the Affordable Connectivity Fund will create a permanent $30-a-month subsidy program to help low-income Americans afford internet access. Additional programs will assist with equity and inclusion, including computer training, devices and public computing centers at anchor institutions.
The specifics around geographic allocation of funding and carriers’ application requirements are still undefined, but carriers should already be planning for the potential network buildouts that best align with their footprint and growth strategies.
The lack of available, affordable internet access throughout large portions of the United States (often referred to as the “digital divide”) has had a significant impact on education, health care and economic opportunities across the country. Funding from this infrastructure package will serve as a catalyst for areas in which the cost of deploying broadband has historically outweighed the benefit for private sector investment. Given the nation’s reliance on high-speed internet for nearly every facet of life for the past two years, though, the urgency and necessity of broadband access has never been clearer.
There are an estimated 14 to 42 million Americans with limited broadband access, according to the FCC and the research group BroadbandNow. In addition to the social and equity benefits the bill will provide by helping to narrow the digital divide, there will also be significant economic opportunities for carriers and the communities they’re serving.
With those opportunities will likely come new reporting complexities and operational challenges. The funding will likely be contingent on carriers providing formal reporting to evidence the network performance requirements of the act, for instance. Operationally, the increase in customers might exacerbate complexities regarding revenue recognition, network maintenance and increased labor or automation requirements for some companies.
While the National Telecommunications and Information Administration works out the details for allocating and distributing funding, now is a good time for carriers to assess their business and operational support system capabilities for managing a larger/broader network and influx of customers, and their ERP’s ability to address the financial and regulatory requirements associated with the new funding.
A major challenge to the broadband deployment this legislation aims to achieve is the fact that many underserved populations are in remote areas that are difficult to access. This means expanding broadband coverage will not happen overnight; it will likely be years before we can reasonably close the digital divide. Given this fact, telecom companies need to continue exploring cost-effective solutions, including emerging technologies and public-private partnerships, that can be implemented in the short term.
Here are some questions that frame the path forward for companies in the telecom space:
