Michigan House Democrats introduced House Bill 6051 in the lame-duck legislative session to require prevailing wage and fringe benefits be paid to workers on broadband infrastructure projects in Michigan. The proposed prevailing wage requirements would apply to “new construction, improvement, maintenance, expansion, alteration, or demolition of lines, cables, or other hardware of a broadband service that is performed by a broadband developer.”

Prevailing wages under Michigan law are the minimum rates of pay that must be paid to workers on construction projects supported by taxpayer funds. These wage rates are derived by the Michigan Department of Labor and Economic Opportunity from wage rates contained in collectively bargained agreements.

Traditional wireline broadband, much of which is provided by cable companies such as Comcast and Spectrum, requires a great deal of infrastructure. Customers must be connected with a physical wire, which is buried underground or attached to above-ground poles.

Building out this infrastructure is labor intensive, so a prevailing wage mandate will have a large impact on the cost of extending it to new customers. By comparison, Michigan’s prevailing wage law adds 8.5% to 13.5% of road construction costs.

Not everyone gets their internet connection through a wire. Satellite internet services are rapidly becoming more competitive with traditional wire-based broadband, giving households and businesses a choice in how they receive their internet service. HughesNet and Viasat have been around for a long time, but most of their customers are in remote rural areas not reached by wireline providers. New satellite services are emerging, including Elon Musk’s Starlink, that are even more competitive with wireline broadband.

Connecting to a satellite internet service requires far less labor to reach new customers than wireline broadband. That’s because customers receive the service through satellite signals delivered to their homes. Many Starlink subscribers pay between $299 and $599 for the Starlink equipment and install it themselves. Starlink also helps connect new subscribers to independent contractors that install the equipment for a fee, in much the same way that satellite TV dishes are installed.

Starlink, which was launched in December 2020, reached 2 million subscribers in September 2023. Only a year later, Starlink surpassed 4 million subscribers. The company appears to be reaching customers not well served by wireline broadband providers, because 84% of its customers are in rural areas. Starlink’s success is attracting new competition from another company with deep pockets, with Amazon’s Project Kuiper satellite internet service launching next year.

If Michigan’s goal is to encourage more people to switch to satellite internet, imposing prevailing wage requirements on wireline services is likely an effective way to make that happen. MIHI, the Michigan High-Speed Internet Office, claims that “31% of Michigan households do not have an affordable, reliable high-speed internet connection that meets their needs.” While the MIHI estimate is greatly overstated, some households and business, mostly in less populated areas, have limited or no access to high-speed internet service. But making broadband infrastructure more expensive won’t help them. It can only slow the time it takes to get wireline services to them, forcing unserved customers to turn to satellite providers as the only alternative.

Presumably the sponsors of House Bill 6051 intend to increase wages for members of the Communication Workers of American union looking for contracts to build future wireline broadband infrastructure. But that won’t happen if the increased cost of wireline infrastructure delays the expansion of wireline service and raises its price. Indeed, Minnesota is already finding that wireline companies want nothing to do with onerous requirements on broadband construction, even with state subsidies available.

The sponsors of House Bill 6501 might as well call their bill the “Elon Musk Enrichment Act,” because the most obvious beneficiary of a prevailing wage law for broadband infrastructure is Musk, along with Amazon’s Jeff Bezos. Their gains will come at the expense of wireline internet companies and their workers in Michigan, as the state pushes more internet subscribers to Starlink and Project Kuiper.

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