Bridging the Digital Divide: What Has Not Worked But What Just Might

Abstract

America has spent billions trying to close the Digital Divide, but adoption disparities along many dimensions persist. The COVID pandemic has rekindled the strong interest in broadband adoption, with many in Congress now proposing to spend billions more to shrink the adoption gap. In this POLICY PAPER, we first offer an economic analysis of how best to spend broadband subsidies. As might be expected, the analysis prescribes that money should be spent where it is most effective (per dollar) at increasing adoption. Second, we offer an empirical analysis of past broadband adoption programs by quantifying the effect of several programs established by the American Reinvestment and Recovery Act of 2009. Applying a Difference-in-Differences model to Census data on adoption, we find no positive effect on home broadband adoption from programs funded by the Broadband Technology Opportunity Program (“BTOP”). Third, we discuss the potential benefits of direct subscriber subsidies considering the successful private sector programs offering low-cost broadband plans to low-income and other qualifying households. Direct subsidies to end-users will increase adoption, but surveys and empirical evidence prescribe sober expectations on their effectiveness at achieving universal adoption. Subsidizing broadband infrastructure deployment in unserved areas is a direct approach to increase broadband adoption, but even so the costs in some regions may outweigh the benefits.