December 18, 2020
The plain truth is that rural America has always had a market failure problem.
In the 1930s, the problem manifested as woefully inadequate telephone and electrical service. The spaces were just too wide open, the potential customers too few, for companies to invest in America’s in-between places.
In response to this market inefficiency, a federal government led by Franklin Roosevelt stepped in and created the Rural Electrification Administration (REA). Within 20 years, phone service was available to 65 percent of rural residents and electricity extended to 96 percent. With the help of Washington, DC, modernity was extended to the heartland.
And now, when market orthodoxy is almost an unassailable truth and the federal government is less trusted than ever, another market failure stares us in the face. This time the technology is fast internet service (broadband), which was a concern before Covid-19 and is now a need arguably on par with electricity in 1936.
“The strength of High-Performance Broadband is that it will—if fully accessible to all in America—help solve some of our most critical challenges and help people overcome key barriers regardless of where they live and who they are,” reads an editorial published by the Benton Institute for Broadband and Society this past October.
It’s not that the federal government has simply entrusted rural internet service to companies that don’t provide it, though there is some of that. Since 1995, the Rural Utilities Service (successor to the REA) and Federal Communications Commission have doled out billions in subsidies. What the feds have not done is replace stop-gap funding mechanisms with a comprehensive plan that solves particular problems associated with inadequate rural broadband almost all urban dwellers never have to face.
At the time of the Benton Institute editorial, the most obvious critical challenge was Covid-19 and it remains so, even with the prospect of a vaccine on the horizon. It’s worth looking specifically at the ways Covid-19 has elevated the importance of broadband, particularly with regard to healthcare.
Most obviously and importantly, the pandemic has boosted the importance of telehealth as a means of bringing clinician and patient safely together. What was an industry experiencing modest growth is now a healthcare sector boosted by rocket fuel.
“Between April 2019 and April 2020, national privately insured telehealth claims’ increased by 8,336 percent (as a proportion of total medical claims),” says the Health Affairs Blog. “While those ratios eventually tapered in the proceeding months as in-person visits rebounded, there’s no doubt that more patients and providers are relying on telehealth than ever before.”
Of course, safety is only the most pressing concern when it comes to telehealth. Before the pandemic, remote patient visits were driven by the pursuit of lower costs and greater convenience—factors that will once again rise to the top when Covid-19 is managed. The difference, when we arrive at that longed-for future date, will be that telehealth will have proliferated and wormed its way more deeply into common clinical practice.
All of that seems like progress, except that true progress doesn’t exclude millions of Americans. With limited broadband in rural areas, the blessings of telehealth will currently not fall on a large segment of the population.
According to Health Affairs, “The lack of broadband in rural areas is one of the most striking inequalities in US society. Due to the lack of broadband availability, tens of millions of rural Americans aren’t able to ‘see’ their doctor over the internet in the same way urban Americans can. Making matters worse, financially strapped rural hospitals are being shuttered by the dozens.”
It would be a mistake to see the failure of rural hospitals as uniquely a healthcare issue on either the cause or effect side of the technology equation. On the one hand, slow internet makes telehealth visits more difficult and sometimes impossible. On the other, slow internet also makes living in rural areas and earning a decent living very challenging, which dramatically limits the rural hospital’s potential patient base.
According to Alex Marre, a regional economist for the Federal Reserve, access to broadband improves wages, lowers unemployment, grows the population and boosts home values, all of which creates a more stable base of support for local hospitals.
So, is there a market solution for what to date is a market failure? In a word, no. Well, not yet, at least. While government may not be the broadband provider in the short or long term, some government involvement is probably a necessary component of the overall solution, especially with regard to money.
Another solution might be cooperatives, which helped extend the reach of electricity in the 1930s and have seen some broadband success in the modern era.
As CEO of Oklahoma Electric Cooperative, Patrick Grace leads an effort started in 2018 to extend fiber broadband to cooperative members. Working toward providing broadband to all 43,000 members, OK Fiber currently offers 100 Mbps speeds for $55 a month and 1 Gbps speeds for $85.
But what was true of electricity access also holds for broadband. Absent sufficient dollars, fiber networks take a long time to implement, regardless of how well managed the cooperative. For rural areas, time is of the essence, and concerted action may create a rural renaissance where there is currently steady decline.
Returning to the Health Affairs Blog:
“Federal investment in rural electrification helped ignite investment across the country. Manufacturers didn’t have to locate near big cities, instead, they could build factories in rural areas where land was cheaper. Electric machinery and refrigeration made farms and ranches more productive. Today, in an era where remote work is increasingly common, rural and urban Americans alike need broadband to stay connected and productive.”
Again and again, we see that public health is an interrelated web of contributing factors. It’s education, and it’s housing, and it’s family support, and it’s job security. In the 1930s public health could undoubtedly be tied to electricity. In modern times, the equivalent is access to high-speed internet. The market has had sufficient time to provide a solution. Time for the public sector to come up with a comprehensive plan that includes private industry.