Evaluating the Cost-Effectiveness of RUS Broadband Subsidies: Three Case Studies

Abstract

The American Recovery and Reinvestment Act (ARRA) appropriated $7.2 billion to subsidize broadband deployment, including $2.5 billion to the Rural Utilities Service (RUS). Prior investigations have shown that RUS’ broadband subsidy programs were not cost effective, and often funded duplicative coverage in areas already served by existing providers. In this study, we analyze three large projects subsidized by the ARRA-created Broadband Initiatives Program (BIP). These projects received a total of $231.7 million in Federal support (including subsidized loans as well as grants), or about seven percent of total RUS’ subsidy obligations. The evidence indicates that RUS’ history of funding duplicative service has continued under BIP, and that the current program is not a cost-effective means of achieving universal broadband availability.