How the Semiconductor Chip Shortage Could Harm America's Universal Broadband Ambitions


The cable industry's historic and ongoing role in providing robust and reliable broadband for Americans has never been more apparent than during the COVID pandemic. The passage of the Infrastructure Investment and Jobs Act, which provides over $42 billion to fund broadband projects, is a testament to the Biden Administration's recognition of the critical role that connectivity plays in everyday life and in helping America stay productive during this global health crisis. The goal of the legislation is to make high-speed internet available to unserved areas across the country. But the Administration's goal could be undermined by the well-publicized shortage of semiconductor chips—which are critical for high-speed broadband deployment—caused by disruptions to the supply chain. 

Semiconductors are essential components of broadband network equipment as well as customer equipment installed in the home. To meet the ever-increasing demand for bandwidth, most ISPs perform large-scale network upgrades every 18 months, requiring the purchase and installation of equipment that relies on semiconductors. And every consumer and networking device found in the home—modems, routers, mobile base stations and more—depends on multiple semiconductor chips to manage operational control, power supply, and network connections, and ultimately to provide seamless connectivity to households and businesses. 

According to a new report by Access Partnership, it takes over 7,000 chips in its servers, switches, and routers for a cable ISP to provide broadband service to just one household. To meet this demand, ISPs and broadband equipment manufacturers spend hundreds of millions of dollars each year on procuring semiconductors needed for this equipment. In fact, communications technologies, including broadband, accounted for up to 50% of all semiconductors in products in 2019. 

Despite the critical need for semiconductors to power broadband equipment, policies currently under consideration by the Administration would give the automotive sector preferential access to these valuable chips. These misguided measures threaten the ability of ISPs to reach unconnected Americans at a time when robust internet service has never been more important. 

The Access Partnership report finds that favoring the automotive sector will harm the Administration's broadband infrastructure ambitions due to the significant impact that semiconductors have in powering broadband networks and consumer devices. According to the report's findings, the shortage has resulted in three major impacts on the communications sector: 

  • Increased delays in production cycles from 16-18 weeks to 50+ weeks 
  • Higher input costs, in some cases more than 100 times above normal prices
  • Increased prices of at least 10-12% for some network equipment, which leads to increased costs for deployments

These factors—if exacerbated by preferential treatment of other sectors—could contribute to the following: 

  • Delays of broadband deployments to unserved communities funded by the Infrastructure and Investment Jobs Act
  • Costlier or delayed network upgrades
  • Delayed rollouts of 5G technology 
  • Adverse impacts on national security
  • Reduced availability of consumer devices

Notably, the report highlights that 74% of broadband providers reported challenges in obtaining equipment and an estimated five million American homes and businesses either missed out on or had significant delays in receiving new or upgraded devices in 2021 due to the chip shortage. The reduced availability of consumer devices, which leads to increasing costs, means that users may not be able to connect, and the situation may only become more difficult in the coming months, particularly amidst the latest wave of the pandemic. 

It's also important to note that even despite all of these challenges, America's broadband networks have remained resilient—thanks to the industry's decades of investment—and have kept consumers connected through the entire pandemic, whether for distance learning, remote work, or entertainment.

The report recommends that the Biden Administration should immediately ensure that it is balancing the needs of different industries in any broad semiconductor policy action that it takes, and to divert its energies towards other critical issues such as preventing price gouging in the spot market for semiconductors. 

In the long term, to prevent future chip shortages, the report recommends a more aggressive investment approach in domestic research and development and manufacturing capacity for semiconductors. This includes Congressional support for funding the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, which establishes appropriate incentives for domestic semiconductor innovation and investment. Doing so will allow the U.S. to better compete in the global marketplace and will create more opportunities for the semiconductor supply chain to better serve every sector of the American economy. 

In fighting for equitable distribution of semiconductor chips, the cable industry's priority is to meet the nation’s critical need for broadband services. But to do that, a collaborative and equitable approach is needed to distribute semiconductors across industries. Preferential treatment of the automotive industry will only yield devastating consequences for consumers everywhere, especially in rural communities where broadband is critically needed, and will severely impede the progress being made towards bridging the digital divide.