Yesterday we talked about the billions of dollars US states and the federal government are pouring into training workers for new economy jobs like making batteries to power electric vehicles. It's all part of a massive push to boost the economy and revive US manufacturing and of course, to keep up with China. Today we take a look at another huge pot of money.
Kammon and I are make an equally historic investment connect everyone in America. Everyone in America the high speed Internet. We're announcing over forty billion dollars to be distributed to fifty states, Washington, DC and territories to deliver high speed in it a place where there's neither service or it's too slow.
About seven percent of US households and businesses lack basic broadband Internet. Bloomberg's Todd Shields is here to tell us how the federal money is being spent and who it'll help.
We need broadband to participate in daily life now, which is increasingly true every year. Online applications for jobs, for job listings, for government for benefits for work, as we all discovered during the pandemic, for schooling as we discovered during the pandemic, and a.
Bit later in the show, one State's ambitious plan to wire itself for the future.
Well, right now, Vermont is fifth from the bottom in terms of states in terms of internet performance.
When we're done, we'll be number one.
No other state has set a goal to get fiber optic internet to every address.
I'm Westksova today on the big take closing America's digital divide. Todd, how long have you been covering the telecommunications industry? Now?
About twenty years now, maybe a little over that.
So you've seen big programs come and go, But this one's pretty big. Forty two billion dollars for broadband internet around the country.
Yeah, it's the biggest funding in one single slug. Although the FEDS push money at broadband every year in various forms. There's an ongoing nine billion dollar program. There was a twenty billion dollar auction to build wireless facilities wireless broadband, which didn't do too well. And this is an attempt to once and for all fill in the gaps left by all those other programs.
What's the difference between broadband and not broadband?
You know, it's like, what was it justice the potter who said that he knows at about obscenity. You know it when you see it. If you're using your Internet and it's bulkying and it's slow and it's cruddy, and the video stops and you can't download your kids homework, you probably don't have broadband. But there are some numbers
behind it too. For many years now, I think since about twenty twelve, the definition by the Federal Communications Commission for broadband has been twenty five to three twenty five slash three able to download twenty five megabits per second upload three. That's widely criticized. It's too slow and not meaning. Many applications demand more. If you have multiple users in a household, you'll clog up fast with twenty five to three connection.
It's pretty common these days just to have two hundred, three hundred.
And four exactly exactly. So now we get to the bad program, and that stands for the Broadband Equity, Access and Deployment Program, the big forty two billion dollar program, and the requirement there is one hundred, twenty one hundred down twenty up. Is what is going to be happening with the bad program? Well, first of all, they're going to fund places that lack old fashioned twenty five to three.
But the speed they're looking for to acquire bid grant funding, if you take that money as a subsidy, if you use bid grant money to subsidize your construction, you must deliver one hundred and twenty one hundred megabits down twenty up on the premise that that's what broadband is today, that's where the line is today, that's how fast it has to be to be useful to all households.
So they announced us in June forty two billion dollars. Can you tell us how does it work?
What happened was Congress in twenty twenty one, when they're passing a lot of big spending bills, passed a very large bill known colloquially as the Infrastructure Bill, and it included this forty two billion dollar program for broadband. They've spent a time since late twenty twenty one devising the program, including a new fangled attempt to figure out where exactly the need is. And we can talk about that what
the problem was with the previous attempts. But the Federal Communications Commission worked hard to try to get a better picture of where we need to spend money to close the so called digital divide.
And how many Americans who don't have service now or have really slow service are going to benefit from this new program.
Well ballpark, about ten or sixteen million homes will have new or improved service for this. About ten million homes are unserved right now by the definition that we're using, and four and a half million are underserved, meaning they have kruddy Internet that could deserve an upgrade. So sixteen million homes. How many people? So when each house? I don't know, but that sounds to me like forty sixty
million Americans or more. It's a considerable number. Broadband. Over the years I've covered it has moved from being something that could sometimes be treated as a luxury. In fact, one former FCC chairman got into trouble for replying to questions about the digital divide by saying.
You know, I think there's a Mercedes divide. I'd like to have one I can't afford. I'm not meaning to be completely flipped about it, because I think it's important social issue, but it shouldn't be used to justify the notion of essentially the socialization of the deployment of the infrastructure. Because what I get afraid of is that there is a real risk. Consequence to that is if you force if the standard is you can't have it. You can't
produce it unless you produce it. For all always, I'm very worried it doesn't get produced.
That was Michael Powell speaking at his first news conference as FCC chair in two thousand and one.
That kind of rhetoric is long long gone. Everybody knows it's a necessity. We've got this big chunk of money to try to, if you will, supply the missing bits of knitting so that everybody in the country has it.
So let's dig into the big question that you raised at the top there, which is how do you figure out where it's most needed? Where is it most needed?
Yeah, this is a sort of a gnarly question. So with broadband, you run fiber or a line down a neighborhood, and in cities or in suburbs, you get you know, pick your number per mile, dozens, hundreds, a lot of connections that you can then sell service to to cover the cost of your operation. Out in the countryside, you run a line down a country road, maybe you get a home every mile, maybe a home every five miles.
In places like Montana, even less at Alaska, so it becomes prohibitively expensive to provide service via a wire There have been attempts to provide service via wireless, that too runs into problems because all the wireless areervices rely on wires in the ground, usually fiber. It comes out of a tower. At the base of the tower is a fiber connecting it to the backbones of the Internet. So you can't just put a wireless tower out there in the middle of nowhere. It's got to have something coming
out of the base. So even a wireless solution is a way to lower the cost. You don't have to run wires everywhere and buy rights away and dig cable, but it's not the solution. To figure out where service is needed. The Federal Communications Commission for a long time used a method where they would just ask providers, do you provide service in a certain census block? One home in the block, the color in the whole block is served. This,
of course overstated how many places were served. The understated how many didn't have service, leading to a lot of guesswork.
And this was a way that the industry could sort of make it look like they provided broader service than they actually did.
Yes, yes, it did two things. It overstated the service they did so they provide us. So from a pr standpoint, that's good, we serve the watch am a call at valley, We're great. It also had the effects since subsidies are aimed at areas. Historically, they're aimed at areas without adequate service. If you say I serve you know, West whatever town,
subsidies won't come in there. So a competitor won't be using federal or state dollars to build where you already have service that may or may not be good and may or may not be extended to everybody. So there is an incentive built in there for the companies to overclaim their service. Let's say they have an area that only half the homes are served, find a way to
color them all served. No competitor can come in with federal money and use the federal money to serve the remaining half that you don't, And.
So once they build it, a competitor can't use that same wire.
Correct, it's a federal subsidy. It's not the federal government that pays to put down the lines. The federal government helps the private companies and they can be very big companies, such as AT and T and Verizon and Comcast and Charter, the latter two being cable companies. The federal government provides subsidies that those companies then use to defray the cost
of building lines. And the argument is, if the marginal cost of pushing out of a concentrated area where there's lots of customers, you can use the subsidy to defray the marginal cost. So they make it worthwhile to get some edge areas that were not worthwhile from a straight profit and lost standpoint before the subsidy.
They got to divvy up all this money, and my guess is not every state's going to get the same amount.
Oh no, there are big differences between what the states get. The leaders are places like California and Texas. Texas is getting over three billion, California is getting over a billion. Interestingly, Missouri is I believe, in number three place with over a billion. And what happens is they count the number of locations deemed by the Federal Communications Commission to be unserved in the first place. Then they find to have a formula between the fifty states to deliver the money.
Every state gets at least one hundred million. I know that. But if you're a big state with a lot of people without service, you get more money than a little state that's pretty well covered with service. How did they.
Decide, like, how do they actually know where the people are who most needed.
Yeah, so here's where we get into what's known as the broadband map produced by the FCC. They said, no, we're gonna do better. We're gonna go and this is the Director of Congress in the big twenty twenty one legislation. They said, we're going to go ahead and have you report your service at every basically almost structure in the US. The jargon is broadband serviceable location. So a home would be that, a gas station would be that, an outbuilding
such as a barn probably wouldn't be. But broadly speaking, it's like any place where you could expect to find internet service. Now, the downside of that is an apartment building is one broadband serviceable location. There might be you know, one hundred apartments in there, all of which it's one hundred homes, but just one location. But give it all that. The analysts have tried to figure out exactly how to bring all that out in the wash. Now, the FCC has a map. You can see dots on the map.
You can zoom into your neighborhood and see what service is purported to be offered at your house or your address. So you take that data and put it in a spreadsheet and combine it with available funding and mix it around, and you come up with the grants announced June thirtieth, the state by state grants. What happens now is the states have till December to devise their plans and get an initial Oh that's good, No, it isn't, and then some of the money may start flowing by next spring.
After the break. Can the US build new broadband infrastructure with only American made parts?
So tied?
You talked about how these providers now have to meet increased standards for broadband speed in order to get this money. What's involved in building this level of broadband? Is it harder to build faster lines than slower lines? What kind of equipment is?
Yeah, well, here we get into yet another argument in this area. The one word answer to what is involved is fiber. Fiber is fast. It's like a glass cable if you will, that fancy moves it to speed of light. Is resistant to deterioration, It won't rust, it won't usually not break. Fiber is also seen as very adaptable. The
signal travels far. When you want to upgrade fiber, you just need to upgrade the gadgets, the electronics every I don't know, half mile mile that you don't have to come back in a lot of places in the network.
So it's sort of future proofed in a way that as the equipment itself gets faster and faster, the fiber cable can handle all that increase speed.
That is exactly correct, So that gives fiber a huge leg up. And the NTIA, the Commerce Department unit the National Telecommunications and Infrastructure Administration, favors fiber in the deployments the way they have written the rules for the BEAD program.
Earlier this year, in President Biden State of the Union, he made a really big deal in talking about this that they were going to buy American for all this equipment.
And when we do these projects, and again I get criticized this, I make no excuses for it. We're going to buy American, We're going to buy American parks.
Is it possible actually to build an entirely American made system with no foreign parts.
It's probably not possible with no foreign parts. The question becomes will the government grant a waiver to allow some foreign parts, and if so, how many? And part of this is the buy American thing, and part of it is rivalry with China, which operates on many levels. There's worries about the security for electronic parts used in China, especially in the wireless networks. And then there's old fashioned we should buy it in America to get the jobs,
to get the exports. That issue, as far as I know, hangs in the balance. The infrastructure companies have all said, geez, we're in a tough spot here. You'll want this fast, but we can't do it fast without foreign parts. Can you please give us a waiver? And the waivers hanging fire. We don't know how big it's going to be, what it'll cover, So that issue awaits It'd be hard to believe that they'd let the whole program founder on that requirement.
I would think creative minds will find a way to have a waiver that lets it go for without giving away too much of the buy America store.
So expanding broadband to millions more Americans than have it now is also going to be a pretty big opportunity for all of these broadband providers. So who stands to make the most, especially because in some areas, individual providers are essentially going to corner the market.
Yeah, well that's kind of the way it goes, right. These providers have what's known as a footprint. It's where you provide service, and competing providers historically are reluctant to come into your footprint because think about it, even if you have forty percent of the homes in a footprint, the guy who's coming in, the next person, the next company in, will have to either fight for your customers or serve just the other part, the other half of
sixty percent of the market. So the incentive to come into somebody else's footprint is not as great as finding greenfields if you wear where there's no good service. So all that said, there will be opportunities within the provider's footprints to fill in areas that subdivision that was missed for some reason, that little town over the hill that we didn't run the line across the mountain to that
kind of stuff. So there will be those opportunities for the big providers and folks on Wall Street to Crunt some numbers, and the ones I read most often are AT and T. Verizon and Frontier are the big traditional telephone operators that may make some money off of this. In cable land, Charter especially has been an eager participant in the federal programs. Charters the number two US cable provider, and there are some thoughts that Comcast won't leave this
money on the table. You might as well assigned some officers to at least look right. And there's b billions out there.
So for some of the people who will be receiving the service for the first time, of course this is a great thing, but it also means that they have one provider and there isn't the kind of competition you have in more densely populated areas where you can choose between say Exfinity and Horizon.
Yeah, so no, there would be no price controls if that's where you're going.
Has the government set requirements about how much these providers can charge or don't they charge anything they want?
Not that I know of. There's some competition out there that doesn't count for in terms of BIAD grants. You know, Elon Musk is out there. There are satellite providers that will offer service that's expensive and a little bit bulky. I don't know. Maybe the limiting factor is they either do or don't take the service. You need a certain take uprate to make money off of it. But that hasn't been a big feature in the debate. That's interesting to me that hasn't been.
Obviously, we have a twenty twenty four presidential campaign heating up, and Joe Biden is going around the country touting this build Back, Better Plan, the Inflation Reduction Act, all of this money, but kind of everybody wants.
Credit for this thing. Yes, it's interesting. The Republicans who voted against the big broadband bill are putting out press releases saying, hey, this is great. We're getting federal broadband dollars in the millions for our state, and now we'll bring broadband to you. This is a wonderful thing. Now I can mount a defense of that. Gee, the bill was too big and I would have voted for it just the broadband proposals alone. Or were they sticking a finger in Biden's eye in twenty twenty one and want
everybody to forget about it now? You know, I don't know that you could spend that a number of different ways, but anyhow, that's what's going on. Everybody's saying this is great.
How does this fit into Biden's larger I guess you'd call it an industrial policy about jobs and bringing manufacturing back to the US.
Yeah. He has been talking about broadband almost from day one in the context of these larger programs, trying to do things like bring bills under control. I know the SEC is just moving a proposal, for instance, to have cable state clearly price so that you know what the fees are. It's a kind of a consumer empowerment thing that was pushed by the White House. The Biden administration has been working broadly to increase consumer knowledge about communications products and to reduce bills.
So todd the money has been set aside. The companies are getting ready to start building new connections all around the country. How long until we actually start to see homes getting this service?
Late twenty twenty four, I imagine, is the first time you'll see fruits of this in the terms of somebody's home gets lit up for the first time. I think it's a five year plan for spending all the money, So beginning in twenty twenty four and rolling forward from there. So it'll take a little while past the next presidential election as for sure, but you can imagine there's some urgency to start putting some shovels in the ground before the next election.
Todd, thanks so much for coming on the show.
You are quite welcome.
When we come back. Vermonth's plan to wire every house in the state for a high speed Internet. I wanted to find out how states are preparing to spend all this federal money, so I asked Christine Halquist. She's the executive director of a government body called the Vermont Community Broadband Board. Halquist has a big goal for the state's broadband rule out.
Our goal, which was set out by our legislature a couple of years ago, was to get to one hundred percent of our addresses connected to fiber optic Internet. It's a bold goal where a little state, six hundred and fifty seven thousand people we can achieve those bold goals.
We've been talking all about the digital divide across the US, and what does that look like specifically in Vermont. What communities are most in need of getting this upgrade to broadband service.
I will say that Vermont is probably very typical of rural America. You know, if you look at folks that aren't connected today, they're from the far flung towns that have lower densities, that really never had a business case for the private providers to come in. So with that, it represents a much higher percentage of low income folks.
If you look at.
The area served today versus not service, it's about double the number of low income folks. It isn't just about getting people connected, it's about providing the devices and the skills and the training in order for those people to partake in our digital economy, which that's what the economy is today. So what a companies. The digital divide is the economic divide. And I'm actually very happy with the Infrastructure Investment in Jobs Act because it's really made to
focus on equity. If you look at the acronym broadband, equity, access and deployment, equity is a key component.
You take out equity and it's bad.
In how many in Vermont right now don't have broadband service?
Well, you know, that's that depends how you ask the question. Right Our rule is if it's not fiber, it's not broadband. You know, This is a debate that's been going on for a long time in the telecom community.
If you're looking in the.
Rearview mirror, you'll hear some of the existing telecom providers say, oh yeah, people are only using twenty five megabits per second.
That's a speed, right, It's like.
Twenty we're only going twenty five miles an hour, So we don't need these big highways. So you know, we're investing money that only happens once in a one hundred years, right, So let's invest in a forty year network.
That's why we're committed to fiber.
The reason I'm given that long answer is because we only have thirty percent of vermontitors connected to fiber right now.
So what are you hearing from residents about this big plan to introduce broadband across the state.
Well, we're hearing two things.
One is a level of excitement, yes, you know, especially from some of the more technical users. Yes, absolutely the right thing to do, get fiber to everybody. But on the other hand, there's others that say, holy cow, it's going to take you five years to get there.
You know, what about us?
You know, it's it's okay for the town that gets it first, Right, they're going to be happy. But the town that gets it last, they're not happy. That is what we're struggling with.
How are you going to try to deal with that?
Well, we're doing a lot of outreach, a lot of work.
You know.
I will point out that FDR in nineteen thirty five signed a executive order to get everybody with electricity. That was nineteen thirty five in Vermont. The last town to get electricity was nineteen sixty four. That was Victory, Vermont. So that was a long time. Right, we're talking at thirty years. We're going to do this in five.
How do you decide who gets it first?
Well, the good.
News is physics decides who gets it first, not politics.
Just you go to the closest to the furthest is that how it works.
That's right.
You got to you got to build out because you can't get to those outside areas without connecting the inside areas. So thank god, physics is what I can fall back on here.
So what kind of labor is going to be required to build out all of this broadband infrastructure? Are you going to be creating a lot of jobs across the state.
Yeah, The labor thing is definitely a thorny issue, and it's going to be a even thornier as these forty two and a half million dollars roll out throughout the entire country and we all start competing for the same labor pool. You know, when we try to get construction workers, we're reaching from the same labor pool that all of New England and New York State is pulling from. So we began working on this labor issue over a year ago, almost.
Two years ago.
Now we put together a workforce development team will be the first state to carry out this national apprenticeship program for fiber optic technicians. But we need a lot of folks to do this, and of course, you know, we're looking at even before COVID hit, we were in Vermont, we were looking at labor shortages, and now the problem
has been exacerbated significantly. That's both a problem and an opportunity, you know, because we're going to have to look for labor and places that maybe we haven't looked for before, such as people on parole coming out of corrections. So it's an opportunity for people to get into a profession rather than take a job.
So let's talk just a little bit about these jobs. What kind of jobs are going to be required, what are these opportunities, what they look like.
Right away?
We need outside and inside fiber technicians, and the outside work is a particular challenge. If you look at the outside work, you know, Vermont is a pretty tough place to work in the winter, and we have a lot of mountains, and we have a lot of trees, and you know, in these areas, half of our poles are running cross country, so you know, people go into the
woods for a whole day, a teenam of four. You know, we need people who can work independently, who can work from heights, who have pretty good creative problem solvings, and can work well together. So it says it's a tough job and it's not for everybody.
And how many people do you figure you're going to need to hire to wire the whole state?
About six hundred people to train for these technicians to get two hundred out, you know, typically you train three to get one. There's a lot of accompanying jobs such as tree clearing, folks, flaggers. So overall we're looking at a total of six hundred additional people in the state, which that's probably not a lot for a state like New York. But we're the second smallest state in the nation.
So you said this is going to take about five years. Paint us a picture of what Vermont's internet service looks like five years from now as opposed to right now.
Well, right now, Vermont is fifth from the bottom in terms of states in terms of Internet performance. When we're done, will be number one. No other state has set a goal to get fiber optic internet to every address, and you know, I will say part of our job is to maximize the positive social impact of that, but there are going to be negative social impacts that you know,
our legislatures working aggressively on. You know, one of the things about Vermont is if we get that connectivity, we have a housing crisis, and of course it'll drive the cost of housing even further up.
Vermont's a beautiful place.
The real estate agent's one of the first questions they hear from people who want to buy houses is are we connected to the internet. You know, I'll take Newport, Vermont. It's probably got one of the most beautiful lakes in the nation. Excuse my bias, but that said, you know, there's not connectivity around there, and once they get that connectivity, I can see people flocking to Newport front.
And that would drive up housing crisis now.
Drive up the costs.
And of course the people in Newport, Vermont are the ones that are struggling most financially. So you know, we don't want to drive out working for monitors.
So that's one of the downsides. What are some of the upside impacts?
Oh, well, the upside, of course is our whole world has moved to telehealth, tele education. You know, we've done a lot of outreach to different communities. You'll find young people in their you know, fourteen fifteen year olds say hey, I don't want to move out of state. I want to stay in this state, but connectivity is important to me in my future. So you know, the benefits are we want our young people to stay in our state,
and it provides an opportunity for growth. And by the way, it provides opportunity for those high intellectual margin businesses to locate here in Vermont.
Christine, thank you, I appreciate your time here. Welcome, thanks for listening to us here at the Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Bergerlina. Our senior producer and the producer of this episode is
Katherine Fink. Hilde Garcia is our engineer. Our original music was composed by Leo Sidrin. I'm West Kasova. We'll be back tomorrow with another Big Take. Do Do dot bar