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

46 Pages Posted: 14 Apr 2011  

Jeffrey A. Eisenach

American Enterprise Institute; NERA Economic Consulting

Kevin W. Caves

Navigant Economics

Date Written: April 13, 2011


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.

Suggested Citation

Eisenach, Jeffrey A. and Caves, Kevin W., Evaluating the Cost-Effectiveness of RUS Broadband Subsidies: Three Case Studies (April 13, 2011). Available at SSRN: or

Jeffrey A. Eisenach (Contact Author)

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States

NERA Economic Consulting

1255 23rd Street, NW, Suite 600
Washington, DC 20037
United States
202-466-3510 (Phone)
202-466-3605 (Fax)


Kevin W. Caves

Navigant Economics ( email )

1801 K Street, NW
Suite 500
Washington, DC 20006
United States

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