Can blockchain save broadband for rural health care?

June 6, 2018


Some rural health care facilities and their broadband providers are complaining about inadequate broadband subsidies. At issue is the Federal Communications Commission’s (FCC) Rural Health Care (RHC) Program, which the 1996 Telecommunications Act directed the FCC to create.

For fiscal year 2017, applicants for subsidies requested $521.33 million. They are receiving less than 75 percent of the requested figure because only $388.22 million is available. (There is a $400 million funding cap and about $12 million in program expenses.) Some program participants are upset because they signed contracts assuming that they would receive 100 percent of their requests, so some venders are losing money. Some are worried that they will have to do without broadband.

What can be done? The FCC has a notice of proposed rulemaking to consider raising the cap, prioritizing applicants, and better controlling waste, fraud, and abuse. But it has always seemed a stretch to have a telecommunications regulator in charge of subsidies for health care. Maybe rural health care facilities and broadband providers can use blockchain and smart contracts to take care of this themselves.

 

How does the RHC work?

 

The RHC provides funding to eligible health care providers (HCPs) for telecommunications and broadband services. It is currently made up of two active programs: the Healthcare Connect Fund and the Telecommunications Program. The Healthcare Connect Fund provides a 65 percent discount on broadband services and equipment and, for consortiums, network facilities that they construct and own. The Telecommunications Program provides subsidies in amounts intended to ensure that the rural HCPs pay no more than their urban counterparts for telecommunications services. The FCC uses the Universal Services Administrative Company to run the programs. The subsidies are funded by fees assessed against interstate telecommunications providers.

What are blockchain and smart contracts?

 

Smart contracts are self-executing contracts. Embedded in software tied to a blockchain, the contracts execute when certain conditions are met. In the case described below, the smart contract would automatically tap bank accounts of funders when subsidies are needed, and the subsidies would be supplied automatically once approval of the subsidy amount was recorded.

 

How might these be used for rural health care subsidies?

 

An industry association made up of internet service providers, edge providers, and telecommunications equipment providers (and perhaps others) could establish a blockchain managed through what is called proof of stake, which in this case could mean that they agree that the companies that provide the most funding have the most say in how the blockchain and smart contracts work. This provides accountability and disincentivizes fraud.

Only members of the association would be eligible to provide services that receive subsidies. This would address free rider problems.

 

When a rural health care provider qualifies for a subsidy per the blockchain rules (the association could use simpler qualifications than what the FCC currently uses), the provider would short sell tokens in the blockchain in an amount equal to the qualified subsidy. (The tokens should be dollar denominated.) Once the committee that oversees the blockchain and smart contract software verified that the short sell qualified (recall that this is staffed based on proof of stake), the association members would buy the tokens according to smart contracts, thus funding the exact amount of the subsidy needed.

 

This approach has several advantages over the current RCH: It would not have funding shortfalls; funds would be provided nearly immediately; smart contracts could ensure that health care providers did not prematurely sign service contracts; proof-of-stake oversight would align incentives, expertise, and accountability; and the system could be more adaptable than government regulations.

 

Would there still be problems?

 

Yes. Agriculture has industry-sponsored programs, such as the Beef Checkoff, that collect money from producers for industry-wide efforts, such as the “Beef: It’s what’s for dinner” program. Problems have included enforcing payments from producers, monies being misappropriated for lobbying, and embezzlement. Blockchain, proof-of-stake, and smart contracts should help remedy these problems.

 

If the rural health care, broadband, and edge providers are sincere in their concerns that the FCC’s program is too slow and inadequate, perhaps they should look to themselves to offer forward-looking solutions that will enable the provision of broadband for rural health care. Legislation or FCC rule changes might be needed for this to replace the current system, but it could operate as a stopgap in the case of FCC delays or funding shortfalls. In this latter case, the smart contract would need to respond to FCC decisions.

 

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