Memphis, Tennessee’s solution to the next big digital divide

The COVID-19 pandemic forced many Americans to rely on internet access more than ever for their jobs, education, health care, and other facets of daily life. Since then, there has been a bipartisan political consensus that government should ensure that broadband networks reach everywhere, that they are affordable to all, and that all can have the capacity to use broadband effectively.

Congress has responded with tens of billions of dollars for deploying new networks for unserved and underserved areas; an additional $14.2 billon to subsidize broadband services for low-income Americans; and another $2.8 billion to promote digital equity and inclusion, including digital literacy training. All this is on top of the Federal Communications Commission’s (FCC) Universal Service Fund, which supports rural institutions—e.g., schools, libraries, health facilities—that need broadband but have insufficient revenues to access it.

Some of these programs still require additional funding and institutional reform, but even if we do so, we will discover one more divide that all these current programs and proposed reforms will not close: While most Americans have a choice between a 21st century cable broadband network and a 21st century telephone network built with fiber, millions still only have a choice between a cable network and a far inferior 20th century copper telephone network offering service known as digital subscriber line (DSL). Currently, closing this divide—between communities with cable and fiber and those with cable and copper—is not a policy priority. But by the end of the decade, we will likely view the situation as more problematic.

We are fortunate that the average rate of fiber access across all U.S. states is steadily increasing. BroadbandNow found that in December 2021, the average fiber access rate was approximately 45.9%; by June 2023, it had increased to about 55.6%.​ By the end of the decade, fiber will reach approximately 62% of homes in the country. In rural areas, fiber will be the only wired provider, but the rest of the homes with access to fiber will also have a cable alternative.

From the perspective of the 2010 National Broadband Plan—written when there were no gig-capable networks anywhere—having over 60% of homes enjoying a choice between gig-capable cable and gig-capable fiber is great. But that still leaves tens of millions of homes with a choice only between cable and a lesser conduit such as copper, fixed wireless, or 5G wireless.

We don’t know what the consumer reality will be at the end of this decade. Maybe fixed wireless broadband will be a full competitor to cable. Maybe some other technology will enable new forms of robust connectivity. But the more likely scenario is that where cable does not have a fiber competitor, cable will be more expensive and less innovative.

That scenario is most likely to occur in low-income, historically disadvantaged communities of color. An example of this can be found in the FCC’s Broadband Map, which shows that Cuyahoga County, Ohio’s lowest-income neighborhoods are more likely than others to have to choose between AT&T’s DSL connection and Spectrum’s far faster speeds. According to a recent report, Spectrum costs $85 a month for basic Internet-only service—about $20 more than AT&T. The report further notes that “AT&T charges all of its home Internet customers the same monthly rate…There’s no discount for slower service.”

What will government do in response? One option is to do nothing, believing that the situation is tolerable. Another option would be to invest in fiber deployments, but it will be difficult to build support for such expenditures. For one, this would entail government investing public money to compete against private investment—something both Republicans and Democrats have generally opposed. For another, the harms in communities forced to choose between cable or DSL—though real—are still less than the harms of being in an entirely unserved or underserved location.

But what if there was a way to encourage fiber upgrades to those communities without direct government expenditures? Internet service providers (ISPs) have often complained that cities put up barriers and add costs to fiber deployment; what if cities reduced or removed those enough to change the economics and induce new fiber builds?

That is exactly what Memphis, Tenn. has done. The FCC map shows that only 24% of Memphis households have access to fiber, largely from AT&T. There is little indication that AT&T will expand that, leaving 76% of the city reliant only on Comcast for wired broadband.

To address that divide, the city recently passed an ordinance creating incentives for private investment in fiber, so long as the investor builds in low-income areas as well as more affluent ones. The primary incentives involve waiving future right-of-way fees and expediting city processes.

Based on the proposed ordinance, the city already has one private investor willing to commit to expanding fiber access to 85% of Memphis households, including a full investment in low-income areas. The city also anticipates that the effort will lead to a range of partnership arrangements among the city, philanthropy, the business community, and the new ISP to increase adoption—and therefore revenue—in low-income areas. Not only would this be a plus for the residents and the ISP, but the city anticipates the effort will also help transform city communications, public safety communications, and public services.

Some might suggest other alternatives, such as forcing telephone companies to build fiber networks where they currently only have copper, or regulating cable prices where a cable provider faces only DSL competition. Yet it’s unclear if any local, state, or federal authority has the legal authority to force a telephone company to upgrade its network. And while there might be legal authority to regulate prices, there is a bipartisan consensus that broadband price regulation is not an appropriate tool.

What Memphis and other communities face is similar to what the country faced in 2010, when there was competition between cable and DSL, yet that competition was not driving network upgrades to meet the future demands. A number of factors, including the entry of Google Fiber, changed the market dynamics and led to improved networks and intensified competition in most (but not all) of the country.

Communities still stuck with the inferior competition of cable versus DSL should study the Memphis solution. While it’s not the foremost digital divide problem that Washington, D.C. and state policymakers are currently focused on, it’s one that far-sighted leaders should prepare for.