21st Century Redlining: Internet Inequality and Profiteering

In 1954, the US Supreme Court ruled that racial segregation is unlawful. And yet, nearly 70 years since Brown v. Board of Education of Topeka, the practice is alive and well. In fact, in most major US cities, this insidious legacy of Jim Crow is intensifying. 

Much of today’s segregation is a direct legacy of the nearly century-old racist practice of “redlining.” The term comes from maps of US cities drawn by the Home Owners’ Loan Corporation (HOLC), a state-sponsored entity established in 1933 as part of Democrat Franklin Roosevelt’s “New Deal.” The maps shaded poor neighborhoods—often those with large Black and other ethnic minority populations—in red. Banks and insurance companies used HOLC maps to systematically withhold investment from the redlined areas. Today, the practice of redlining has been extended by the communications monopolies to “virtual” real estate.

The rise of “digital redlining”

An October 2022 report from The Markup publicly exposed several major companies engaged in “internet redlining.” The investigation showed how monopolies like AT&T and Verizon systematically offer lower-speed internet service in poor neighborhoods with a greater proportion of non-white residents. Not only that, they provided this inferior service for the same price—or more—than what they charged for faster speeds in richer, whiter areas. Maps showing where faster internet is and is not available are virtual replicas of the old redlining maps.

Maps of internet speeds in Kansas City, Missouri overlaid on the HOLC map of the city show how closely “virtual redlining” mirrors neighborhood redlining. / Image: fair use

The discriminatory practice of redlining is well-documented. Principally, it involved banks and insurance companies either denying credit and insurance to those residing in redlined neighborhoods, or charging them massively inflated interest rates and premiums. So-called “restrictive covenants” in title deeds contractually restricted the sale of real estate in all-white neighborhoods to Black people and sometimes to other racial and ethnic minorities. These covenants were declared unconstitutional by the courts in the late 1940s and definitively banned by the 1968 Fair Housing Act. 

Nevertheless, systematic neighborhood segregation continues to this day. A 2019 Berkeley study found that more than 80% of US cities were actually more segregated than they had been in 1990. These neighborhoods are separate and nowhere remotely equal. Living in such places correlates directly with inequalities in health and access to education and food.

Although it seeks to place the blame on the private sector, the “original” redlining was sponsored and enforced by the federal government. The Federal Housing Administration (FHA)—another creature of the Roosevelt administration—mandated segregation in the public housing it built and funded. The FHA refused funding to any housing developments that were not explicitly segregated, while heavily subsidizing whites-only housing. The government and private real estate developers were in cahoots, working hand-in-glove to create the segregated cities we know today. 

Roosevelt’s HOLC and FHA were part of a conscious effort by the capitalist state to shield the big banks and real estate barons from the consequences of the Great Depression, and to ensure that the working class paid the price for the bosses’ economic crisis. The history of redlining illustrates yet again that the capitalist state is a tool of the ruling class ultimately serving the interests of private profits. 

In dozens of major cities, residents have only one option for internet provision, due to companies like AT&T, CenturyLink, and Verizon staking out regional monopolies. This allows them to limit their infrastructure and maintenance expenses, while boosting profits without fear of being undercut by competition. In this way, the functioning of the so-called “free” and “competitive” market actually involves a significant degree of planning. Unlike socialist planning, however, which will allocate major resources to the neediest areas in order to end inequality, the planning of the profiteers is geared toward minimizing investment and maximizing profits. 

Unlike socialist planning, which will allocate major resources to the neediest areas in order to end inequality, the planning of the profiteers is geared toward minimizing investment and maximizing profits. / Image: pixabay

These monopolies are able to dictate higher prices to consumers, such that many are simply priced out of the market. One study estimated that in 2021, there were at least 42 million people in the US without access to broadband, with those in rural counties clearly overrepresented. Private corporations do not consider it a good investment to try to bring rural areas into the 21st century, because doing so is unprofitable. For this reason, coverage in rural counties depends heavily on whether or not their state has a program to subsidize broadband set-up with taxpayer money. 

The COVID-19 pandemic clearly illustrated just how critical having a home internet connection is, while exposing the widespread lack of technological necessities among the poorest layers in the country. A 2020 survey found that 16% of eighth graders don’t have a desktop or laptop computer. The figure jumped to 25% for students eligible for free or reduced-price lunches. This was one of many factors behind the “learning loss” experienced by children all over the world during the pandemic.

Biden’s “affordable” connectivity

The Affordable Connectivity Program (ACP) was included in the 2021 Infrastructure Investment and Jobs Act to address this “digital divide.” The ACP is supposedly intended to help low-income households afford the cost of internet service, through discount coupons sent directly to qualifying households for up to $30 a month. But this is meaningless without price controls. 

With the ACP, the capitalist state has tacitly admitted that while the internet is a necessity, not everyone can afford it. At the same time, it refuses to treat the internet as a public utility and does not regulate its price. Instead, the communications monopolies set prices based on their quest for ever-greater profits. With little to no competition in many areas, the internet profiteers can simply charge those households $30 more per month—or in the case of CenturyLink, $100 more. 

The ACP received a single lump-sum budget of $14 billion in 2021 as part of Biden’s infrastructure package, and is set to run out of funding in 2024. This is a pitiful sum compared to the $75 billion and counting the US has sent to Ukraine to prolong the proxy-war with Russia. As always, even the most sclerotic reforms under capitalism inevitably “run out” and get rolled back. 

As a result of the ACP’s impermanence, internet providers will expect their customer base in low-income neighborhoods to drop off when the program ends. This further downgrades any incentive they may have to make investments—such as laying down fiber optic cable—which could better provide quality service to those receiving the soon-to-be-withdrawn assistance.

In contrast to cable and DSL, fiber optic is faster, more reliable, and requires less maintenance over time. This is why it is used to transmit signals between continents through the 550,000 miles of fiber-optic cables laying on the ocean floor. But on dry land, installation is piecemeal. Fiber optic installation increased in 2020 and 2021, when companies saw it as a means to make a quick buck off those working from home during the pandemic. But another recession is now looming, inflation is still high, and raw materials are more difficult to secure. All of this means the potential returns on investment in fiber are not high enough to entice the capitalists, so further installation is projected to slow in the coming years. 

Fiber optic cable
Fiber optic cable is faster and more reliable. But the capitalists are in no rush to invest in upgrading infrastructure. / Image: pixabay

Even the largest internet service providers see no reason to bear the upfront costs needed to install fiber optic systematically.  Where fiber-optic cables are installed, much of the cost is shifted to the consumer. Elsewhere, investment is haphazardly divided between governments and the private sector. A report from The Conversion explains that due to a lack of funding at the federal level, and as the capitalists are reluctant to invest, some states are stepping in to fund fiber-optic installation themselves. But as they accept the limits of capitalism as a starting point, the study can only recommend that individual states increase their funding for internet infrastructure projects, while providing more economic incentives to spur private investment. 

In other words, they propose taxpayer-funded handouts to the same profiteers who rake in hundreds of billions in profits. We have already seen the government’s abysmal track record of investing in the country’s infrastructure, showcased by the crumbling roadways and rusted bridges littering the country. Internet infrastructure is proving no exception to the rule. 

Even in the richest country on earth, capitalism cannot provide quality housing and internet access for all. Of course, there is no technological barrier to ending segregation and inequality, only a social and political one. A workers’ government would abolish redlining in any form and take concrete measures to equalize access to all the necessities of life, including access to the internet. Like all other utilities and big monopolies, the infrastructure that makes the internet possible would come under state ownership, to be managed and controlled democratically by the working class to meet everyone’s needs. This is just one example of how socialism would rapidly transform life as we know it.

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