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Biden broadband plan runs headlong into ‘Buy American’ mandate

President Joe Biden made clear in his State of the Union address last month that as the US spends billions of dollars on new broadband connections, “we’re going to buy American.”

But that aspiration is easier said than done. While there seems to be enough domestic fiber optic cable to connect communities, the electronic components such as routers that transform glass strands into data highways are made mainly in other countries.

Cable providers, chip makers and wireless carriers are pleading for relief from the requirement to “buy American,” saying they can’t build new networks without foreign electronics. Otherwise the broadband buildup that Biden has set as a priority will be delayed by years as domestic sources are developed.

“Everybody’s sorting this out,” said Michael Romano, executive vice president of NTCA-The Rural Broadband Association, a trade group. “It’s not clear there’s much, if any, American equipment that would satisfy Build America Buy America as it stands today.”

The Build America Buy America Act was enacted as part of the Infrastructure Investment and Jobs Act in 2021, and requires any infrastructure projects to use domestically sourced materials in order to receive federal assistance. That applies to the $42.5 billion Broadband Equity, Access and Deployment Program (BEAD), the flagship Biden initiative for building new networks to connect the 30 million Americans the administration estimates are without fast internet service.

Broadband has been seen as a necessity nearly on par with electricity or water since the Covid-19 pandemic shuttered schools and offices, making a fast internet connection a prerequisite for education and work for millions of people. Biden has estimated that 35% of rural America still doesn’t have access, placing a huge disadvantage on a large swathe of the population.

Congress and the administration have adopted or enlarged a passel of programs totaling more than $90 billion to extend internet service, including the BEAD program that backers call a once-in-a-generation opportunity to ensure all Americans are connected.

The BEAD program would offer subsidies to companies that in turn build networks to reach more households. Recipients of aid are expected to include smaller providers represented by the likes of Romano’s NTCA, as well as major cable companies such as Comcast Corp. and Charter Communications Inc., and carriers AT&T Inc. and Verizon Communications Inc.

Biden has pushed to focus federal government spending on American products since his first cabinet meeting in 2021, saying that would bolster jobs and support communities. At the same time he is confronting a trade imbalance in manufactured communications electronics, which are concentrated in Asia. Gear needed for broadband networks include wireless radios, cell towers, active electronics such as customer equipment, and switches, routers and user terminals, much of which is manufactured outside the US.

Administration officials have offered mixed signals on the possibility of issuing waivers for those products.

“The bar has been set very high,” said Alan Davidson, administrator of the National Telecommunications and Information Administration. The Commerce Department branch oversees several broadband programs including BEAD.  “It’s not an impossibly high bar, but it’s a high bar,” Davidson said at a March 15 event in Washington.

Still, the agency is set to issue a waiver for another broadband subsidy, the $1 billion Middle Mile Grant Program that helps fund lines between local networks, said a Commerce Department official briefed on the matter who spoke on condition of not being named because the action isn't final. The waiver is justified, the agency has noted, since the fiber optic cable is assembled in Mexico, while about two-thirds of the value in network devices is derived from components sourced from Asia.

Companies need to be assured they will get permission to buy foreign electronics before they’ll break ground to lay new broadband lines, said Dave Stehlin, chief executive officer of the Telecommunications Industry Association. Members of the trade group include chipmakers Cisco Systems Inc. and Qualcomm Inc., Nokia Oyj and Ericsson AB.

“A waiver has to be in place by then,” Stehlin said in an interview. “No service provider’s is going to dig a hole, lay a fiber cable, and hope and pray as they wait for the electronics. They’re going to wait until they have everything lined up. So the longer we wait, the longer it is before these unserved and underserved people actually have broadband.”

Most of the value of new broadband networks lies in the labor and materials such as fiber and towers, with electronics making up less than 10% of network value, according to the Information Technology and Innovation Foundation, or ITIF, a non-profit policy group.

That means spending will go largely into US paychecks and ledgers, regardless of the source of electronics, said Joe Kane,  ITIF’s director of broadband and spectrum policy.

“You’re going to get a lot of the benefit of Build America provisions even if you allow waivers,” Kane said in an interview. “It’s not as if we’re saying, ‘Oh we’re going to ship all the BEAD money overseas.’ ”

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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