Broadband internet is a lifeline for rural communities, enabling remote work, telehealth, and educational opportunities that were once impossible. Private equity funding has been flooding into broadband, partly drawn by the sweetener of $42 billion in federal funding from the Broadband Equity Access and Deployment program.
Broadband deployment is a high-cost business, and most internet service providers need outside financing to grow. But when we go looking, private equity is increasingly our only option. The problem is that, with sky-high return expectations and short timeframes, this money is unsuited to building in rural and low-income communities most in need of investment.
The result? Private equity-backed broadband looks a lot like the legacy telcos it is supposed to disrupt, skipping over poor, rural or low-density communities. This leads to the modern equivalent of redlining — swaths of America excluded by the math and logic of prevailing capital.
There are, of course, responsible private equity firms delivering real value. But as a vehicle for expanding broadband to underserved communities, this capital is structurally misaligned. The incentives that drive private equity — rapid returns, scale at all costs, and quick exits — run counter to the long-term commitment, trust, and responsiveness that equitable broadband requires. If we’re serious about closing the digital divide, we must channel mission-aligned capital into the sector.
Capital at a cost
Penn State professor Christopher Ali has contrasted the strong performance of local and public broadband networks with the troubling dynamics emerging in the growing number of private equity-backed networks.
Drawing parallels to the collapse of local journalism, Ali warns that the short-term, profit-maximizing strategies of private equity, or PE, applied to the broadband sector will mean: “gutting local services, firing local staff, and forgoing local upgrades. The result could be devastating for underserved communities, especially once federal funding dries up,” he says.
We’re still in the early days of broadband’s PE-ification, but I have already seen the kinds of compromises operators are being pushed to make. They include rigid cost thresholds and vetoes on projects where average household income falls below $50,000 — even in the face of strong community demand. I’ve seen mature projects abandoned because an opaque algorithm flagged a zip code as commercially unviable. In some cases, experienced leadership is sidelined and decision-making refocused solely on maximizing the number of homes that have broadband infrastructure built out to them at the lowest possible cost.
We need a different kind of funder
Broadband is a good business worthy of quality investment, even in harder-to-reach places. It delivers stable, utility-like returns and serves an essential and growing demand. However, getting it done right requires investors and operators who see broadband as long-term infrastructure, not a short-term asset to flip.
The capital we need:
- Understands the realities of rural broadband
- Respects the expertise and experience of local operators
- Is willing to accept reasonable — not extractive — returns
- Will invest for generational impact, not just quarterly gains
In other words, we need impact investors, community foundations, and CDFIs to get involved. The social finance sector, with its mission to do both well and good with money, is uniquely placed to kick-start a capital market for community-focused broadband. Internet access continues to be a force multiplier for outcomes across the board, in healthcare, education, rural development, job creation, and more. For those committed to social impact, broadband is a boost for the entire portfolio.
Finding alternatives to private equity
At Halo Fiber, we’re exploring alternative fundraising approaches. In one project we are in discussions with a construction firm willing to reduce upfront costs in exchange for equity or a share of future revenues — a model that lowers build costs and aligns our incentives. We also regularly pursue public-private partnerships that blend financing, foster local ownership, and improve customer adoption rates, all of which help make the economics work in communities that traditional investors overlook. But fundraising is an ongoing struggle and we’re always scrambling to assemble the right capital in a financing ecosystem that isn’t built for mission-driven internet service providers like us.
There are groups working to change that. Connect Humanity, a non-profit impact investor that I advise, provides flexible, catalytic capital tailored to the realities of high-need communities while holding providers accountable to community interests. They’ve shown that financial return and social impact can and should go hand-in-hand, and they have been working with CDFIs, federal reserve banks, and others to build momentum and bring more capital providers into community broadband. For funders and investors interested in this space, Connect Humanity is a great starting point to get up to speed and partner to do this work the right way.
An opportunity for mission-driven investors
I’ve spent a decade trying to connect communities most internet providers ignore — rural towns, tribal lands, and economically distressed areas. I’ve seen that the biggest barrier to getting broadband to all Americans isn’t technology, demand, or a lack of capable operators. It’s that the capital available to most providers is rarely aligned with delivering universal connectivity.
If we leave broadband financing to private equity, funds will keep flowing to the high-income ZIP codes at the lowest cost, leaving millions behind. There’s another path. The local internet service providers are here. The financing models exist. Communities are waiting. What’s missing is mission-aligned capital.
Impact investors: if you care about inclusive growth, this is your way in. The returns are real and the impact will be lasting. Be the investors who bridge America’s digital divide and avert another decade of missed opportunities.
Brian Snider is the CEO of Halo Fiber.
