Closing the Digital Divide: Evaluation of FCC’s Connect America Fund

Yurong Jiang, Duke University

The still-unfolding IT revolution has been a key driver of the remarkable performance of the U.S. economy since the 1990s. However, getting on the rising tide requires a high-speed internet connection. The COVID-19 pandemic has further intensified the existing digital divide by driving most essential activities online. 18 million Americans that lack high-speed broadband connection are falling behind. The Connect America Fund is the largest on-going federal support for broadband buildout to unserved areas. This paper provides the first econometric assessment of the Connect America Fund between 2014 and 2018 using county-level data. It does not find robust evidence in support of the program. While subsidy recipient counties do not see substantial improvement in terms of the number of high-speed providers, the elasticity of the equilibrium subscription rate to total subsidies is near zero. Solely tackling the supply side shortfall is clearly not sufficient to produce a desirable outcome in the broadband market. As billions of taxpayer’s money is expected in the next decade, it is necessary to address the sluggish demand to make sure the newly deployed infrastructure is not standing idle.

Read the full paper here.

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