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Policy Papers

Using Reverse Auctions to Stretch Broadband Subsidy Dollars: Lessons from the Recovery Act of 2009

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Twelve years ago, the federal government awarded hundreds of grants for broadband infrastructure with stimulus funds from the Recovery Act of 2009. In this study, I review the subsidy allocations from the Broadband Technology Opportunities Program and compare actual outcomes with those that a reverse auction or random lottery may have yielded. My analysis shows that a reverse auction might have connected nearly twice as many buildings for the same total subsidy dollars relative to the results from the grant review process. Moreover, the grant review process used by the NTIA did only slightly better in subsidy-dollars-per-building-connected than a random lottery probably would have. Lessons from the Recovery Act are drawn from public data on proposed and awarded projects from application files for stimulus funds. I conclude that the government likely overpaid for broadband by using grant review rather than a reverse auction. The analysis strongly implies that future broadband grants be distributed using market-based methods to get better returns on investment from infrastructure funds.

Read the paper here.