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WSJ News Exclusive | The $53,000 Connection: The High Cost of High-Speed Internet for Everyone
Ryan Tracy

Nebraska's Winnebago Tribe has long been stuck with sluggish Internet
service. The federal government plans to fix that by crisscrossing the reservation with fiber-optic cable-at an average cost of $53,000 for each household and workplace connected.

That amount exceeds the assessed value of some of the homes getting
hookups, property records show. While most connections will cost far less,
the expense to reach some remote communities has triggered concerns over
the ultimate price tag for ensuring every rural home, business, school and workplace in America has the same Internet that city dwellers enjoy.

"The problem is, money is not infinite," said Blair Levin, a senior communications policy official in the Clinton and Obama administrations
who is now an equity research analyst. "If you're spending $50,000 to
connect a very remote location, you have to ask yourself, would we be
better off spending that same amount of money to connect [more] families?"
The U.S. has committed more than $60 billion for what the Biden
administration calls the "Internet for All" program, the latest in a
series of sometimes troubled efforts to bring high-speed Internet to rural areas.

Providing fiber-optic cable is the industry standard, but alternative
options such as satellite service are cheaper, if less reliable.

Congress has left it up to state and federal officials implementing the
program to decide how much is too much in hard-to-reach areas.

In Montana, laying fiber-optic cable to some remote locations could cost
more than $300,000 per connection, said Misty Ann Giles, director of
Montana's Department of Administration. Building to those places would
empty the state's coffers, she said: "That's when we might not reach
everyone."

'A lot of good'

Defenders of the broadband programs say a simple per-location cost doesn't capture their benefits. Once built, rural fiber lines can be used to
upgrade cell service or to add more connections to nearby towns.

"Ultimately, there is a lot of good that will come from the infrastructure
that we are building," said Alan Davidson, an assistant secretary of
commerce in charge of broadband programs.

For the Winnebago Tribe, the introduction of high-speed Internet is seen
as a means to spur economic development and to give young people a reason
to stay on the reservation, instead of leaving for a city.

The tribe lives in Nebraska after being forcibly moved several times in
the 19th century.

"Why wouldn't we as a tribe deserve the same Internet service that you
guys have in the cities?" said Sunshine Thomas-Bear, the tribe's historic preservation officer. "We are reliant on Internet service just as much as anyone else."

Part of the project involves drilling horizontally under the Missouri
River to connect land the tribe wants to develop near its WinnaVegas
Casino. The tribe is also starting an Internet company to run the network, creating jobs and competing with an existing provider known for slow
customer service.

In total, the roughly $35.2 million grant will connect 658 homes,
businesses and other buildings via about 235 miles of fiber, all of it
buried underground for improved reliability.

Spurning satellite

Thomas-Bear's family currently subscribes to Starlink, a satellite
Internet service from Elon Musk's SpaceX. She said the speeds are
sufficient, but noted the required equipment can cost hundreds of dollars.
"A lot of people aren't as lucky as me to be able to afford that," she
said.

The Biden administration has generally eschewed spending taxpayer money on satellite service, arguing that fiber networks are a better long-term investment to meet Americans' ever-growing demand for bandwidth.

At least four active federal programs are funding fiber broadband
projects, each with distinct rules. The Wall Street Journal reviewed these programs and found not only high-cost projects but also wide differences
in how much taxpayers are paying for each new connection.

The highest-cost program on a per-location basis was the Commerce
Department's Tribal Broadband Connectivity Program, which funded the
Winnebago project. It provided an average of about $13,300 nationally for
each location connected, a term that encompasses homes, businesses and institutions such as schools and hospitals.

The U.S. Department of Agriculture's ReConnect program is averaging about $9,000 per location.

By contrast, programs at the Treasury Department and Federal
Communications Commission averaged about $3,300 and $1,750, respectively,
per location reached, the data show.

Same place, different price

Some of the differences can be explained by the distinct geographic areas
the programs are targeting. While the FCC program included some suburbs
and excluded remote locations such as Alaska, the programs run by Commerce
and USDA specifically targeted far-flung regions with difficult
construction conditions.

"These are some of the most challenging locations that there are to reach
in America," said Andy Berke, administrator of the USDA's Rural Utilities Service. He cited one project in Alaska that involves a 793-mile undersea
fiber cable to reach remote villages.

Terrain isn't the only factor driving costs.

In the mountains of western Montana, broadband provider Blackfoot Communications is building two federally funded fiber networks.

One project will cost taxpayers about $4,000 per connection, and the other
will cost about $19,000-about five times as much. One project was funded
by the FCC and the other by the USDA, and each agency used different
methods for distributing funds.

The USDA program, known as ReConnect, was the more expensive of the two on
a per-location basis. Blackfoot chose the project area and suggested a
grant amount. There were no competing bidders-USDA simply reviewed and
approved Blackfoot's application.

The FCC program, the Rural Digital Opportunity Fund, used an auction
format that was designed to create competition for the federal subsidies.

The agency chose the areas up for auction and companies competed against
one another over multiple rounds, offering progressively lower bids.

A USDA spokesperson said the ReConnect program is designed for places
where a large public investment is necessary to make projects viable, and
added that in Blackfoot's case, the USDA-backed project funds a less
populated area than the FCC project.

On a per-location basis, the FCC program looks like a better deal for taxpayers, because the government is connecting more locations with less
public money.

But Blackfoot Chief Executive Jason Williams said he would think twice
before participating in a program like the FCC's again.

For both projects, the company is also ponying up its own funds, and costs
have risen since the 2020 auction due to inflation, he said. Some other bidders, including the nationwide top-dollar winner, have "defaulted" on
their bids, meaning they won't be building the promised broadband
networks.

Blackfoot plans to follow through on its promises, Williams said, but
"it's going to be draining on us financially."

Across the country, state officials are weighing how to design broadband programs as they decide how to distribute funds from the largest federal broadband program, a $42.5 billion kitty from the 2021 infrastructure law. Berke, the USDA official, said broadband projects such as the ones in
Alaska and Montana should be viewed through a long-term lens, making rural areas attractive for decades to come: "We want to make sure that people do
have a way to earn a good income and live in the place that they love."

Anthony DeBarros contributed to this article.

Write to Ryan Tracy at ryan.tracy@wsj.com




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