Light Came First, and What Rural Electrification Teaches About Broadband

In the early 1930s, if you lived in a city you could flip a switch and the room lit up. If you lived on a farm ten miles out, you could flip the same switch, and you would be flipping a piece of decoration. Same country, same decade, same dollar. One family read the evening paper under a bulb. The other read it by a kerosene lamp that had to be trimmed, filled, and watched, because the thing it was lighting your house with could also burn the house down.

Now notice that nobody in that story was lazy, or backward, or stubborn. The farm family wanted the light. They would have paid for it. What they could not do was get a private company to run the wire. The story of how they solved that problem is, I think, the most useful lesson in American history for anyone who wants to close today's gap in rural internet service without building a bureaucracy that outlives its usefulness. Let me tell it straight.

Why the wires stopped at the edge of town

The private electric utilities of the 1920s were not villains. They were businesses, and they made a business calculation. A wire has to be strung from pole to pole, and the cost depends on the number of poles. In a city, a mile of line might serve scores of customers. On a farm road, a mile of line might serve a handful. The revenue per mile was a fraction of what a city line brought in, and the farm customers also used less power, since they had few appliances to plug in. A utility that ran a line to every farm would lose money on it.

So the lines stopped where the profits stopped. By the middle of the 1930s only about one farm in ten had central-station electric service, while most urban homes did. That figure, widely cited by historians, is the heart of the problem. You cannot persuade a company to take a loss, and you cannot persuade a family to move to town. Something else had to happen.

1935 and 1936: the federal answer

In 1935, President Franklin Roosevelt created the Rural Electrification Administration, the REA, by executive order. The next year Congress made it permanent with the Rural Electrification Act of 1936, sponsored by Senator George Norris of Nebraska and Representative Sam Rayburn of Texas. A Nebraska progressive who had spent decades fighting for public power and a Democrat from Texas wrote the bill together, which tells you something about what this issue was in its day: a commonsense project, not a partisan one.

Here is what the law did, and what it did not do. It did not send federal employees out with hard hats and shovels to run wires to every farm. It did not have the government own the power lines. Instead, the REA made loans: long-term, low-interest loans to local organizations that would build and operate the systems themselves. The first and best borrowers were electric cooperatives.

A cooperative is a business owned by the people it serves. Farmers in a county would get together, sign up their neighbors, form a co-op, borrow from the REA, build the lines, and run the system. Each member got a vote. Any surplus went back to members rather than to outside shareholders. The government supplied the capital at a cost that a sparse customer base could carry; the community supplied the work, the organization and, crucially, the obligation to repay.

Let me stress that last point, because it is the whole difference between a smart policy and a handout. These were loans. The cooperatives were expected to pay them back, with interest. Borrowers who failed to pay would have lost their systems. That discipline forced the co-ops to be run like businesses, charge enough to cover costs, and keep their members' trust.

What happened next

The results were dramatic. The cooperatives spread across the country, and in the years following the Act, rural electrification went from an unusual thing to a normal one. By the early 1950s the large majority of American farms had electric service. Electric pumps replaced hand pumps. Milking machines, refrigerators, power tools, lights in the barn, and radios in the kitchen changed how a farm worked and how a farm family lived. Historians usually count it among the largest quality-of-life jumps in rural history, and I think they are right. It changed the speed of work, the safety of the house, and the hours a family had to read and talk.

The commercial utilities, for their part, did not disappear. Some of them were opposed at first, arguing that government should not compete with private business. In many places they built rural lines themselves when the program showed that rural customers were worth serving. That is one of the quiet lessons of the story: the program made the unprofitable profitable, by helping to create the demand and the density that made the investment make sense.

In 1949 Congress extended the same loan model to rural telephone service. And in 1994, in a reorganization of the Department of Agriculture, the old REA's functions were folded into a new agency called the Rural Utilities Service, which still lends for rural electric, telecommunications and water systems today. The old program survived by changing its name. That alone is a lesson about how federal programs live on.

The steelman: the case against doing this again

I should give the other side its due, because it is not a silly argument. The case against a new rural-broadband program goes like this:

1. Technology moves faster than programs. The electric wire was a stable technology for decades. Internet service is not. A fiber line built today competes with wireless, satellite and whatever comes next. A government that picks a technology and subsidizes it can end up building a monument to the last war.
2. Subsidies distort. If government pays to build a network, then private competitors are discouraged from building at their own expense, and the taxpayer may fund a network that would have been built anyway.
3. The record of federal telecommunications subsidies is mixed. Critics have long argued that programs funded through the Universal Service system have been complicated, have suffered from waste, and have sometimes paid for service in places that already had it.
4. Maps and eligibility are hard. If you cannot say with confidence which addresses lack service, you cannot target the money.

Those are real problems, and a conservative who ignores them is not being serious. Any honest proposal for rural internet has to answer them.

The answer: copy the method, not the bureaucracy

Here is the conclusion I draw. The 1936 model worked because of its structure, and the structure has five parts that are worth copying:

1. It was a loan, not a grant. Borrowers had to repay. That made them careful.
2. It was local. The people who built and ran each system lived where it was, and they owned it. They answered to neighbors, not to an agency.
3. It targeted the gap. The money went where the private market would not go, not where it already did.
4. It was technology-neutral about the owner and demanding about the result. The government did not care whether the borrower was a co-op or another kind of local entity, so long as the lines got built and the loan was repaid.
5. It could end. Once most farms had service, the job was largely done. A subsidy with no finish line is a bureaucracy in the making.

The difference between subsidizing a sparse-area network and building a bureaucracy is the difference between a loan that gets repaid and a payroll that grows. A well-designed rural program pays for the last, hard-to-reach miles, where costs per customer are highest, and then gets out of the way.

Who really paid, and who got the benefit

Let me do something conservatives should always do with a government program: follow the money. Under the 1936 model, the taxpayer's share was the capital advanced at a favorable rate and the willingness of the federal government to wait a long time to be repaid. The members paid the rest. They paid monthly bills, they paid dues and, in the early days, many of them paid in labor, because neighbors who could swing a post-hole digger often did. The farmer did not get a free light bulb. He got access to a service, at a price he could afford, and then he paid it for the rest of his life.

That is a radically different relationship from a program that mails out money. It treats the recipient as a customer and an owner, not a dependent. It is why electric cooperatives, eighty years on, are still run by boards elected by their members and still describe themselves as owned by the people they serve. If you have ever sat through a co-op annual meeting with a folding chair and a potluck, you know that it is democracy at its smallest and most stubborn.

There is also a lesson about timing. The program worked partly because it arrived when the cost of building was falling and the demand was obvious. A farmer in 1938 did not need to be persuaded that a refrigerator was better than an icebox. The promise of broadband has a harder sell in a few places, where the question of what a family would do with a faster connection is less obvious to them, and a smart program has to be honest about that. The test is whether people sign up and stay signed up when the introductory price runs out.

Where the 1996 law fits

The modern federal layer on top of all this is the Telecommunications Act of 1996. Section 254 of that law set out principles of "universal service": the idea that quality services should be available at reasonable and affordable rates in all regions of the country, including rural and high-cost areas. The mechanism is the Universal Service Fund, paid for by a charge on telecommunications service. It supports high-cost areas, low-income consumers, schools and libraries, and rural health care providers.

Notice the difference from the 1936 model. The 1996 approach is less about loans and more about ongoing support payments, funded by a fee on telecommunications bills. Supporters say it spreads the cost of connecting everyone across the whole user base. Critics say a fee on every customer's bill is a hidden tax that has grown in ways Congress never voted on directly. I think both of those points can be true, which is why the structure matters more than the slogan. A support program that is regularly reviewed, with clear goals and a real exit plan, beats one that runs on autopilot.

More recently, the Department of Agriculture's Rural Utilities Service and other federal agencies have run broadband loan and grant programs, and Congress has appropriated large new sums for state-led broadband efforts. I will not recite figures, because they change. What I will say is how to judge them: ask what has actually been built, how many households can actually connect, what it costs per connection, and who is accountable if it falls short. A promise to spend money is not a wire in the ground.

What your family should ask

If you live in a rural area and you are being told that help is coming, here are questions worth asking your county commission, your electric cooperative and your state broadband office:

• Who owns the network, and who answers to me if it fails?
• What speed and price are promised, in writing, and for how long?
• Is the money a loan or a grant, and what happens if the provider fails to deliver?
• Does the plan reach my road, or only the road next to it?
• Is my local electric cooperative involved? Many cooperatives, which already have poles, rights-of-way and the trust of their members, have become broadband builders. That is the 1936 model coming back around.

The reason the electric cooperatives are well placed is that they remember the lesson. They are owned by their members, they know where the sparse miles are, and they are used to borrowing and repaying.

Why this matters beyond the wire

An internet connection today does for a rural family what the electric line did in 1936. It means a child can do homework, a farmer can check markets and weather, a small business can sell to customers in other states, and a patient can see a doctor by video. Rural hospitals struggle with a different but related set of problems; Eleven Questions About Why Small-Town Hospitals Struggle and What Helps looks at what policy tools are available to them, and the telehealth question depends on connections like these. The farm economy that the safety net of From the 1933 Farm Act to Freedom to Farm, How the Safety Net Got Built was built to stabilize is also a business that increasingly runs on data. And if you want to understand the other half of rural energy, the grid that the co-ops built is the grid described in How the Power Grid Really Works and Why Supply Must Match Demand Every Second.

The point is not that government should do everything. The point is that conservatives have a record of designing programs that work through local ownership, repayment and discipline, and those are the principles to defend when someone proposes a new spending program with a new acronym.

The bottom line

• The farm families wanted electricity and would pay for it; the market would not wire them. That gap, not laziness or sentiment, is what the 1936 law fixed.
• The winning formula was loans to local, member-owned cooperatives. Repayment, local ownership and a clear job to do made it work.
• Today's version should copy the method, not the bureaucracy. Fund the last hard miles, require results, and build in an end date.
• Be skeptical of the next big announcement. Ask what has been built, who owns it and who is accountable. Money announced is not service delivered.
• Ask your own electric cooperative and your state broadband office what is planned for your road. The answer may be closer to home than you think.