Why ‘Build America, Buy America’ might hinder the rollout of rural broadband

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Paul Atkinson, CEO of the Optical Network Business at STL, analyses some recent pieces of US public policy concerning its broadband market.

The disparity in broadband uptake between urban and rural households in the US is a growing concern. With remote working on the rise, and access to many government services now dependent on the internet, the digital divide between urban and rural areas needs to be narrowed. According to the latest figures, 9.3% of rural households in the US still have no access to fixed-line technology at broadband speeds, compared to just 0.7% of the urban population. This divide is wider still when it comes to optical fiber broadband, with rural penetration currently sitting at just 23%.

This issue is not unique to the US. Rural coverage does typically lag behind urban coverage because rural areas are less densely populated, which makes it more expensive to serve. That said, serving rural areas does remain a key monetization opportunity for service providers, particularly since the pandemic made online education, remote working, and rural home-buying more common. This monetization, however, can only happen if the support and investment to make it worthwhile is made available.

That support is coming. The Federal Communication Commission is currently pushing hard for universal broadband access for all Americans, and Congress recently approved more than $40 billion to accelerate the rollout of high-speed internet as part of the government’s Broadband Equity, Access, and Deployment (BEAD) program. However, there is a risk that the Build America, Buy America Act (BABA), which was enacted as part of the Infrastructure Investment and Jobs Act in 2021, may counteract the positive impact of this investment. For example, optical fiber is a key piece of the rural connectivity puzzle and is constrained by available supply. It is worthwhile to analyse the impact of BABA provisions on the roll out of fiber infrastructure in the US.

One step forward, two steps back?

The Build America, Buy America Act aims to maximize the government’s use of services, goods, products, and materials produced and offered in the US. Specifically, it requires that all raw materials, manufactured products, and construction materials used in government-funded infrastructure projects be produced at home, rather than imported from other countries.

While sourcing goods at home is a noble idea, in practice it brings about some serious limitations. Not least because it gets in the way of more proactive measures such as the government’s Broadband Equity, Access, and Deployment (BEAD) program. The BEAD program provides $42.4 million to expand high-speed internet access by funding planning, deployment, and adoption initiatives in all 50 states. But if the benefit of that investment is undermined by disrupted supply chains and a need to manufacture and source components locally, BEAD will not be as effective as it might otherwise be.

The need for more supply

As well-intentioned as homegrown production and supply is, there are questions as to how the manufacture and supply of fiber and optical fiber cabling might fare under the BABA Act. Pure digital and hybrid digital infrastructure are becoming increasingly crucial to moving countries forward. The United Nations Conference on Trade and Development (UCTAD) is busy creating new standards to help countries measure their performance and potential based on their digital economies. Restricting the supply of digital and hybrid digital components is likely to put the US on the back foot when it comes to rolling out critical digital infrastructure, such as that which supports optical fiber broadband.

Recent figures show that the international trade deficit in the US sits at around $67 billion, importing roughly 10% more than it exports. In 2021, the US was the number one importer of optical fiber cabling in the world, bringing in roughly 20% of the global supply. To put that into perspective, Mexico and Canada rank second and third, bringing in 9.6% and 5.6% respectively.

Hindering the supply of optical and digital solutions by incentivizing products with end-to-end manufacturing in the US (as stipulated in BABAA)  will only slow down  the rollout of fiber optic broadband to rural America. Both Congress and the Biden administration are focused on a dual purpose when it comes to infrastructure rollout – expanding infrastructure while increasing US manufacturing output – but, particularly when it comes to the rollout of optical fiber connectivity, these dual purposes seem contradictory.

Paul Atkinson is an industry expert with more than 30 years of experience across multiple industries. Prior to STL, he was the Managing Director and Group CEO at IXOM. He has deep expertise in the optical space and was associated with the Prysmian Group for over 20 years as the CEO of affiliates and regions across the world. During this stint, he has led multiple successful business integrations and was pivotal in delivering non-linear growth across business lines and geographies. Paul holds a degree from Melbourne Business School and Monash University.

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