^{Democracy & Technology Blog} Study disputes need to subsidize rural broadband

The telecom reform proposal under consideration in the Senate Commerce Committee would create a $500 million account as part of the Universal Service Fund to subsidize broadband deployment in rural areas. The anecdotal evidence for some time has been that rural areas actually are not far behind urban areas as it is. Part of the reason that there is not much of a lag is small rural telcos have been able to finance broadband upgrades with USF.
In a paper released Friday, the Congressional Budget Office sheds some much-needed light on the rumors. CBO claims that broadband is in fact permeating rural areas at a “rapid pace,” and cites a finding from the Pew Internet and American Life Project that “rural areas are only about two years behind urban areas in their broadband subscription rates.” (See “Factors That May Increase Future Spending from the Universal Service Fund,” Jun. 2006.)
CBO confirms that USF is in fact already subsidizing broadband deployment, since current telephone equipment eligible for the subsidies is capable of providing voice and data services.
The proposal in the Senate to expand USF may be bad for innovation, since new technology could be forced to subsidize obsolete technology. The CBO study provides evidence that the popular notion of a rural broadband divide is actually a myth, and not a justification for expanding USF.