Should the Federal Government Launch “Rural 5G?”

Internet speed and connectivity by way of cellular networks has greatly improved in recent years. The 2020s seem poised to be the era of “5G” connectivity in America’s top cities. Simultaneously, internet access in the rural U.S. remains relatively poor, making life hard for residents as more aspects of commerce and daily life shift to the internet.This has led to calls for federal programs—echoed in the recent monolithic infrastructure bill—that would build out high-speed rural internet. But rather than bolstering economic opportunity, that would subsidize a land-use model that has long been unsustainable anyway. 5G, which stands for Fifth Generation, is the latest upgrade to wireless internet, reflecting enhanced capacity to speed up latency and download times. It works by clustering cell towers close together, making 5G ideal for urban settings.Billions of dollars worth of private investment are now going towards 5G from publicly-traded providers like T-Mobile and Verizon, and firms that build and maintain the infrastructure. And there are targeted examples of where it’s being deployed. In the National Landing area of Northern Virginia, where Amazon located HQ2, the real estate developer JBG Smith announced a partnership with AT&T to blanket the neighborhood with 5G connectivity. As cities navigate a future of flexible “hybrid” office work combining in-person and remote work, this might become a strategy in other cities, too.The infrastructure bill championed by Congressional Democrats and the Biden administration includes hefty subsidies for broadband, to the tune of $65 billion. In recent years, the push has grown increasingly bipartisan, however, as Republicans shift to a more populist stance to satisfy their rural base. Some Trump administration initiatives directed private sector broadband investment to rural communities. This included some regulatory streamlining, but also public financing, according to Megan Nelson with the American Farm Bureau Federation. USDA’s ReConnect Initiative made $1 billion available to communities perceived to be in need of internet access. Federal agencies have implied that rural 5G rollout should be a priority. A 2019 USDA white paper argued that “the increased speed and capacity from forthcoming 5G mobile coverage depends upon network densification, requiring the extension of deep fiber or intensity of infrastructure for similar services to build adequate networks throughout rural America.”Reducing regulatory barriers to increase access is good—these constraints prohibit innovation and make it more challenging to serve consumer demand. But subsidies for rural internet access have a highly distortionary effect on American land use. Federal and state governments have a long history of directing technology investment to rural America. New Deal-era electrification is the most famous example, and the one to which rural 5G is often compared. It has become an article of faith to many Americans that this helped modernize the country and lift millions out of poverty. But there is an alternative school of thought which says that these subsidies—anti-market to their core—instead, slowed America’s progress. Stretching infrastructure across a sprawling rural landscape—whether it is electrification, water lines, roads, or broadband—is expensive, and could not be supported by the people living there. Instead this paradigm is often propped up by urban taxpayers who support the rural largesse, as Brookings notes here in their report, Why rural America needs cities:

“Nationally, many of the states that receive the highest per-capita rates of federal investment have greater shares of their population in rural communities, such as South Carolina, North Dakota, and Louisiana. Meanwhile, many of the states that receive the lowest rates of federal investment have greater shares of their population in urban centers, including Delaware, Illinois, and Ohio. This pattern holds for state government spending, too.”

This subsidized increase of rural living standards has kept many Americans in disperse areas with little economic opportunity. It also leads to environmental problems, as studies consistently show that urbanized populations have smaller environmental impacts than dispersed ones.Many Americans recognize rural areas’ waning prospects, and have moved to denser areas. “Between 2006 and 2016, annual rates of population change in rural areas fell from 0.7 percent to below zero,” writes John Cormartie for the USDA’s Economic Research Service.It is when accounting for these forbidding economics and demographic shifts that lawmakers need to have a hard conversation about the costs versus benefits of rural 5G. Even in urban settings it’s expensive, with the private sector poised to spend $275 billion on 5G rollout by 2025, according to projections from Accenture Strategies. The USDA analysis cites Deloitte projections of $130-150 billion to provide sufficient 5G connectivity to rural America. In other words, even if all $65 billion from the infrastructure bill went to rural areas specifically, it would  only cover half the expense, and that’s assuming no cost overruns.A better alternative would be to wait and see, at a time of vast private sector investment, just how willing private companies are to enter these areas, and which type of services they build. At least two industry observers believe rural internet access is an inappropriate application of 5G technology, and instead call for more conventional broadband. There may also be a role for modest state-level subsidy.It doesn’t seem like an appropriate use of federal resources to subsidize new and advanced technology in declining rural areas, at the expense of U.S. taxpayers who live far from there. This article featured additional reporting from Market Urbanism Report content manager Ethan Finlan.