The cost to connect the unconnected

With the Biden infrastructure debate in full swing, the cost to connect the rest of the unserved with broadband has taken center stage. The last version of the Accessible Affordable Internet for All Act proposes $80 billion in subsidies through reverse auctions to close the digital divide once and for all. What existing data do we have on the situation? Well, the $80 billion number comes from a landmark 2017 Federal Communications Commission study by Paul de Sa which says it will take that much to close the digital divide, which was 14% at the time. Because the hardest to connect areas are the most expensive, he estimates that you could close the first 12 percent with $40 billion, and it would take the other $40 billion to close the final 2 percent. My understanding is the cost model used for this study is not public information. However, the FCC released “reserve prices” for the Rural Digital Opportunity Fund auction. The FCC would be unwilling to subsidize deployment to a given area above this set reserve price. While the $9.2 billion committed and the $16 billion budget get the most attention in RDOF, if you add up the reserve prices from all the eligible areas, it would take $26.5 billion to serve them, assuming they weren’t bid down at all from their reserve prices.