Congressional lessons learned: Prioritize private risk capital investment

There is always a temptation for Congress to act during a lame duck session to show it is hard at work doing good for the country. Congress, however, should learn lessons from prior legislation and tread carefully.

As we have seen during the current administration, good intentions don’t guarantee good results. The Broadband Equity, Access and Deployment Program (BEAD) was signed into law in the fall of 2021 and committed to spending $42 billion to bring high speed broadband to rural America. Instead, three years on not a single home has been connected.

BEAD has failed for multiple reasons, not the least of which are the bureaucratic rules and processes that the administration imposed. These include union outreach requirements (Requirement 4), prevailing wage (Requirement 11), planning for climate change (Requirement 15) and de facto rate regulation disguised as affordability (Requirement 20). Delays have been constant and have led to disappointment and discontent. The administration does not expect the program to launch in earnest until 2025 when the next administration is in office.

No matter the intentions, Congress must be cognizant of what can happen when agencies implement legislation and put their agendas in play. Congress can avoid these risks by prioritizing private risk capital investment and innovation over government centric solutions.

Embracing private risk capital investment requires confidence. Risk capital is invested in developing innovative technologies with no guarantees – it is risk taking with a belief that it will pay off. It is how new technology is developed and current technology is improved.

Risk also aligns incentives. To achieve a payoff, capital must be deployed efficiently and produce a high-quality product or service that satisfies consumer need.

The results of private risk capital investment in broadband stand in contrast to BEAD. The United States has some of the world’s fastest and most resilient broadband networks. Internet service providers (ISPs) have invested a whopping $2.1 trillion since 1996 and $102.4 billion in 2022 alone. According to the Ookla Speedtest Global Index, the United States has the 5^th fastest wireline broadband, ahead of every European Union country.

ISPs did this with no guarantee of customers or return on their investment. It was a confident act and produced highly successful and innovative broadband networks that consumers value.

This investment and innovation empowers others to invest and innovate. Streaming has developed at a rapid pace and Nielsen data shows that it has surpassed cable as the most watched viewing platform in the US. But streaming once had its doubters. In 2010, the CEO of Time Warner assessed Netflix’s prospects as “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.”

Since then, Netflix has become a leading industry power with 66.7 million subscribers in the US and award winning content. Other streamers have also succeeded, as evidenced by YouTube and its content creators such as Mr. Beast and his 329 million subscribers. The NFL and other sports continue their migration to streaming platforms such as Prime, Peacock, and ESPN+.

Streaming is succeeding not only because of the risk capital investments streamers have made in innovative programming and platform technology, but also because of the risk capital investments that ISPs have made in the high capacity and resilient broadband networks that enable quality streaming experiences. It is a virtuous cycle of consumer benefit. Risk taking and acts of confidence abound.

As BEAD shows, well-intentioned legislation can be fraught with burdensome bureaucratic process. But there’s no better source of progress than the technological advancement derived from private risk capital investment and the resulting innovation.

When private risk capital investment and innovation are at work, beware the Albanian army.