There are still far too many communities without broadband and funding agencies do not have enough money to fund all of the necessary digital infrastructure. It is time to start looking at different ways to expand broadband into unserved and underserved areas.
How can funding agencies get ten times the broadband coverage per tax dollar invested?
Current Investment Challenges of Broadband Planning and Expansion
Unserved and underserved areas exist because there is not enough of a business case (profit) for private sector providers to invest
Many of the unserved or underserved localities have limited resources (financial and staffing) and expertise to develop comprehensive broadband plans that are economically sustainable
Inertia and gridlock that leads to accepting the status quo after spending time and money on traditional feasibility studies that are fundamentally flawed in trying to make a business case where none exists.
Broadband Funding Program Challenges
When broadband funding is available, what evidence can be practically collected from localities and regions to determine whether:
Community leaders are staffed and prepared to develop and launch a sustainable solution? In other words, are they committed and ready?
The project is comprehensive and sustainable
Potential project risks can be identified to avoid failed projects, or unsustainable networks that do not resolve the lack of broadband access
The funding agency is investing projects that will generate the greatest benefits from each broadband investment dollar
Areas remain unserved or underserved because there is not enough of a return (profit) for broadband service providers to justify the investment. However, broadband is digital infrastructure and areas without broadband will lose citizens, businesses, and their tax base. How many communities exist today without roads, electricity, or water and sewer systems? Broadband is becoming as essential. Whether private, public, or private-public partnerships fund broadband, investments will need to be made and financed.
Infrastructure must address current and future needs. Governments invest in infrastructure because there are public benefits that private sector entities cannot monetize – these are externalities, or what we also call community benefits. Broadband, like roads, is essential infrastructure. Retaining businesses, jobs, and population are all benefits that broadband enables for a community / region, but are off-balance sheet to private sector providers.
Economic and community development agencies know they must address broadband gaps. Despite fiscal constraints and resistance to public investment in infrastructure by vested interests, States are allocating funding for broadband – $10million, $20million or $100 million are significant legislative wins. However, if the cost to expand broadband to unserved areas is $1.3 to $1.7 billion (as was with Tennessee), that will take at least a decade if reliant upon state funding at those levels – and no community can afford to wait that long for broadband. Anyone that can leave, will have left the community for better education, healthcare, public safety, economic opportunities, and overall quality of life. Businesses and high value individuals will be very difficult to retain, let alone attract. Struggling communities will continue an accelerating downward spiral.
In the absence of funding private sector investment, municipalities have tried to establish a municipal or utility-based ISP, taking on a bad business case while competing with incumbents. Often these projects are locked into the traditional mindset of building a municipal retail ISP as “The” solution. Some have been successful, most have struggled.
Funding agencies have tried funding projects proposed by providers to build-out to unserved areas. Preference is given to those projects that offer the greatest matching funding to State dollars. This may be straightforward and ‘checks the box’ for broadband service, but funding one provider to build-out to an area is a subsidy of public funds to one provider. While it may be compelling for practical reasons (such as extending a network footprint) this approach assumes that private providers can and will execute quickly with expansions. However, these projects are building to current demand and may not be able to meet potential broadband demand, nor future digital infrastructure needs. Furthermore, this approach continues dependency on private sector providers who may not be aligned with future digital needs, such as smart community services. Communities will continue to be challenged when community benefits from digital infrastructure significantly outweigh private sector ROI.
Investing in Digital Infrastructure
Another strategy is investing in digital infrastructure which enables funding agencies to leverage 10 times what they are currently receiving from their broadband investments. The 10-fold difference is funding a network build (e.g. $1M for Ammon, Idaho) versus investing in planning to self-finance digital infrastructure (e.g. $100K). Funding agencies can get greater leverage from their broadband investment dollars by helping communities take the right action to invest in their own digital infrastructure than they do by investing directly in that infrastructure themselves.
Funding agencies can play a critical role in their funding and policies. They can invest in communities rather than a network build. Broadband and digital infrastructure are not ends in themselves, but means to enable good-paying local jobs, grow local economic opportunities, and enhance local quality of life.
What can funding agencies do? A pragmatic, evidence-based approach is needed to make important decisions on broadband funding awards, while minimizing additional work for localities. Furthermore, with uncertainty on the level of broadband funding that will be available, an arms-length, objective process to assess and rank potential projects is needed to:
Prioritize where funding should be invested for projects that are essentially ‘ready to go’ because they can be self-financed based on economic feasibility and community returns on investment (retaining and growing local business and jobs, access to health and educational services, etc.). These projects would get help with planning, getting started, and implementing a digital infrastructure approach – which is a more efficient use of State dollars when planning costs one-tenth as compared to directly investing in infrastructure.
More efficient use of public dollars by investing in planning enables areas to self-finance their digital infrastructure allows the remaining available public dollars to be allocated to areas that have the greatest need, but who may not have the means to address their needs themselves.
Determine how funding be more efficiently and effectively spent (infrastructure, technical support, demand aggregation, etc.) based on each area’s identified needs, thereby maximizing community benefits per State dollar invested.
A funding agency’s role is most valuable in helping achieve economic and community development goals, while ensuring communities are ready and have the means to implement sustainable digital infrastructure plans.
Maximizing community benefits per broadband dollar invested
How can funding agencies determine where, when, and how to invest to address digital infrastructure needs of communities?
The first step is for communities to answer the question: Do the community benefits from a digital infrastructure investment outweigh the costs for the community/region?
Based on SNG’s long track record and unique experience in working with funding agencies in this way, we recommend the following:
Assess Economic Feasibility of broadband infrastructure and whether potential community benefits outweigh costs over longer term (e.g. 15-20 years)
Create a process for communities to self-opt in by providing a standardized input form localities can complete and provide the necessary information
Those communities that have provided their information will receive an assessment of economic feasibility for their community or region – an arms-length assessment to support their broadband planning. Additionally the localities will have a geographically based phased plan based on estimated demand — to ensure their broadband planning is demand driven.
Outcome from Assessing Economic Feasibility: The funding agency will have an assessment of potential returns from broadband investment for each community / region, which can be ranked in terms of cost-benefit ratios and project sustainability. Additionally, identified municipal cost reductions can be used as matching funds for grant applications. See example of job and business impacts assessed for Custer County, Colorado.
For communities that have participated in the economic feasibility assessment and their proposed projects prove to be sustainable, invite local leadership (council, broadband committees, etc.) to take the Community Readiness for a Digital Future
Leadership teams from each community / region take 10-15 minutes to complete an online survey with objective metrics to assess whether or not they are doing the right things needed to get their project across the finish line. It also uncovers different perspectives between stakeholders – is there alignment, or are there gaps in their perspectives and/or approach? Time, money, and political capital can be saved by uncovering and addressing previously unseen gaps.
Outcome from Assessing Readiness: The funding agency receives a readiness summary of communities and regions who may require broadband funding. This enables the State to have a clear picture of which projects are ‘ready to go’ and which projects may require more preparation and technical support, which can be accompanied with broadband funding.
Based on Economic Feasibility and Readiness findings, prepare a summative ranked list on impacts (increases in GDP, business and job growth, etc.) from State broadband investment dollars with details incorporated on the Readiness of each project – and if needed, how they can be helped to become ready and develop sustainable projects. This is critical input to the success of any broadband planning process at a community and regional level.
An implicit outcome of the steps described above is that communities will reveal their level of interest and commitment to act through their participation. While funding agencies can assist communities, it is essential that the local leaders are willing and able to take action. Funding agencies will know:
Which communities have the greatest need for assistance
What type of assistance they need
How motivated they are to take action on their own behalf
How ready they are to take action
What next steps will be most effective for communities ready for assistance
Every community has different characteristics and faces different challenges. Those with the most need may not provide the greatest impact at a State level, but the benefits and impacts at a local level can be a matter of survival for a community or region. With relatively small investments the state can assist such communities to own their digital future and, collectively, the impact on the State can generate significant economic impacts without impractical and limited investments in the broadband networks themselves.
States and localities know that they need to address their unserved and underserved areas, but with little or no available budgets and huge potential broadband costs to pay for ‘last mile’ they are challenged and rightly do not want to take on an unfunded mandate. What options do elected officials have to ensure their residents and businesses have the broadband they need? Also, can this be done quickly as those who need broadband the most are often the last to get it.
Business Case vs. Economic Case for Broadband
We already know that digital infrastructure investments can more than pay for themselves – see economic case of Ammon, Idaho. Making an economic case for investing work requires looking beyond the private sector business case to add municipal cost reductions, subscriber savings, economic growth, and smart community service benefits. Quantifying these economic and community benefits, SNG’s research shows that they can outweigh the costs of digital infrastructure. Additionally, what may not be financially feasible with a private sector expected return rate over 3-5 years may be possible when financing at infrastructure rates over a term of 15-20 years. Taken together, investing in digital infrastructure can become economically feasible – which enables communities and regions to address broadband gaps in ways they could not before.
The same analysis can be applied at a State or regional level to find out which unserved areas would require financing, rather than grants. No State nor regional development agency has enough funds to cover last mile costs required to ensure universal broadband access – for example, in Tennessee it was estimated to cost $1.3-1.7 billion to build fiber to achieve the FCC’s broadband definition of 25/3 Mbps. Without such funding, States have turned to private sector providers to incentivize broadband investments with matching funding. While this approach can get service to some unserved and underserved areas, there is still significant capital investment needed and funding one provider risks unbalancing the market and limiting competition.
On the other hand, just like road infrastructure and airports, public investments in infrastructure lower capital investment barriers for the private sector – enabling the private sector to reach new customers, provide enhanced services, and compete on a more level playing field.
Helping Localities Take Ownership of their Digital Future
A less costly and more far reaching alternative is for communities and regions to see how they can take their digital future into their own hands. This starts with understanding whether a digital infrastructure approach can be self-financed by assessing economic feasibility to see whether cost reductions outweigh a ‘build your own’ network approach. If the answer is yes, localities can themselves invest in digital infrastructure sustainably.
SNG’s research shows that municipal cost reductions alone pay for local investments in digital infrastructure by 1.3 times over 15 years – or put in terms of payback period, the network pays for itself in 15-20 years just in municipal cost reductions. There are additional community benefits of economic growth, subscriber savings, and smart community services that need to be added to the calculus when weighing community benefits against investment costs.
In summary, investments in local planning are a fraction of the potential capital investment required for last mile and offer a much greater return for every tax dollar invested. By providing technical assistance and funding for planning to uncover where digital infrastructure can be self-financed, funding agencies can get broadband coverage to many more unserved and underserved areas. Furthermore, helping localities own the process of digital infrastructure and transformationenables them to own their digital future as compared to simply funding last mile connectivity.
When cities and counties decide to invest in broadband networks, they face the same business-case challenge as private-sector carriers. The city or county has usually arrived at this point precisely because the private sector does not see enough of a business case for investment, so how is government going to do what business cannot? Government’s advantage as a network builder is not anti-competitive behavior: it is that government and the community gain economic benefits from the network that a private-sector company cannot tap.
Michael Curri – Founder and President, Strategic Networks Group – starting at minute 36 of the webinar Paul Leedham – Chief Innovation Officer/Director of IT, City of Hudson YsniSemsedini – CEO of Festival Hydro Inc and Rhyzome Networks JimStifler – Chief Economic Officer, City of Hudson
How can communities take control of their broadband future?
Many communities continue to struggle with inadequate broadband for their community. Residents and businesses cannot get the quality broadband they need, or any broadband at all. Municipalities are impeded or prohibited in providing new services and the local economy and overall community vitality suffers. Commercial ISPs are unwilling or unable to improve local broadband and yet resist attempts by communities or regions to take control of their broadband future.
Standing still is not an option. The status quo will not change unless communities take the initiative. However, the most common approach to solving the problem is for municipalities to build and operate their own municipal broadband network. Credit to those that do this, but in many cases this becomes a continual struggle to avoid operating losses and recover the investment, while operating in the face of strong resistance and competition.
Here is the root problem. Commercial ISPs do not invest in network expansion or upgrades because there is not enough of a business case to do so for your area. They do not see the payback they need from that investment and they have already captured the most lucrative part of your market. This model of replicating the traditional ISP model and competing in the free market, albeit with more robust broadband, is really an ‘old school’ approach and one that will always be a struggle. You need to ask yourself …
“Can we really build and operate a profitable, competitive network when the incumbent providers, who already have networks and customers, don’t see the business case to invest any further?”
Fortunately, there is a better way available to any locality serious about owning its broadband future. It starts by recognizing and embracing broadband as the essential infrastructure of the 21st century. This approach is now possible because of maturing technologies that allow you to build open access virtualized networks that not only provide the digital infrastructure your community needs, but also is a platform that opens a marketplace for internet service providers. You put local users in control rather of their future than having them held hostage to whatever is available, and you can do this without becoming an internet service provider yourself.
Let’s go out on a limb and say that there is no municipal leader who wakes up one day and says, “What I really want to do is to become an ISP”. This is only a means to achieve your true goal, which is to ensure that everyone in your community can get affordable, quality broadband if they want it. It is about providing internet access, but it is also much more than that. It is about everything you can do with digital infrastructure and smart community services that will make your community a desirable place to live and do business.
Report Leverages Survey Results to Uncover the Gaps and Challenges in Broadband Cities are Experiencing, and What They’re Doing About Them
Superior, Colorado – Today in conjunction with its underwriters (Corning, Fujitsu, Henkels & McCoy Group, and Power & Tel); Strategic Networks Group (SNG) released its extensive report on city activity regarding the current state of broadband service, smart city applications in use, and investments being made in its “Aspirational Cities” report available online at sngroup.com/cities. The report is a follow-up to last year’s comprehensive state-level research on broadband research. The cities research report can be found at http://sngroup.com/broadband-sustainable-development/.
“Our research examines, at the city level, the drivers for investment, financing used and needed, perceived current state as well as which broadband activities are being undertaken,” explains Michael Curri, SNG’s president and founder. “The study’s findings can help cities that have already taken steps toward broadband challenges as well as those cities considering upgrading their broadband.”
More than one hundred American cities participated with some highlights of the findings including:
Most participating cities do not have a broadband office and thus, may not have dedicated personnel that can focus on driving economic development, community vitality, and other strategic initiatives through broadband.
Nearly two-thirds of cities surveyed do not have any of these three key items in place to advance broadband’s benefits in their communities – funding to support broadband, a city broadband office, or broadband adoption and training programs.
Lack of city funding has been the one overwhelming element preventing cities from moving forward with broadband network investments. More than half of the cities surveyed also say a lack of external funding has prevented them from moving forward, suggesting they’re waiting for external solutions that may never come.
Only half of cities consider their broadband speeds excellent or very good.
“It’s apparent from our cross-selection of cities across the nation that leadership, investment, and strategies need to be put in place at the municipal level to ensure the competitiveness and effectiveness of today’s American cities,” said Michael Curri, SNG’s president and founder.
Rick Wilson, Projects and Programs Manager for Florida’s Walton County knew they needed better broadband in his region to increase quality of live and more importantly – promote economic advancement.
With a lack of adequate broadband service, Wilson headed to Austin in 2014 to find some answers at the Broadband Communities Summit.
One session he attended featured SNG’s Michael Curri who explained that:
Broadband enabled 39.7% of all new jobs from 2013-2015.
More than half of new jobs within small businesses can be attributed to the Internet.
Local economic growth and secondary investment enabled by broadband expansion is ten times the initial investment.
Michael Curri (left) with Rick Wilson and his team who received 2016 Cornerstone Award
Armed with this and more data, Wilson took a case to the country board of commissioners that investment in better broadband infrastructure was imperative.
“The economic development piece of our pitch was what convinced the board,” explained Wilson. “The name of the game in a rural county is how can we increase the economy and drive economic development. Investment became less about downloading movies faster and focused on economic advancement.”
The board unanimously approved a $1.5 million investment in a cash-strapped county AFTER a final budget had ben approved months earlier. Leveraging e-rate dollars brought a $20 million dollar fiber investment to Walton, an accomplishment that was heralded by both sides of the political aisle.
With the build underway, Walton County was recognized two years later at the same Broadband Communities Summit with the Cornerstone Award for the significant community advancements brought about by the current fiber build.
This webinar, held on June 28, 2017, and hosted by Strategic Networks Group, features Bruce Patterson, Technology Director, City of Ammon, Idaho, and Michael Curri, President, Strategic Networks Group, who cover…
The Ammon Fiber Network
– How the network came to be
– The Economic Case for Investing in Broadband
– Ammon’s Economic Benefits
– Uncovering the quantifiable benefits of a build, or debunk a case for broadband – quickly
The long-running debate over whether municipalities can build their own Internet networks is more rooted in ideological positions than pragmatism. Should a tax-supported municipality be using its resources to compete with private ISPs? Opinions are often rooted in ideals of whether to let the free market take care of it or to invest public resources. Moving past ideology allows the discussion to address the needs and concerns of both sides of the debate.
There are legitimate concerns expressed by opponents of municipal broadband (the private sector) which primarily revolve around the taxpayer risks of committing public resources to build and operate a network. Unfortunately opponents tend to paint a black and white picture, pointing to examples of municipal broadband failures and using this to reinforce a position that public entities should not be competing in the free market.
Broadband investment carries with it risk as they are by no means inexpensive to build. Some municipalities have been successful in rolling out a community broadband network while others have failed. But let’s be clear about the real issues driving municipalities in this direction.
No municipality wants to become an ISP. Municipal networks are the result of a city/town filling service needs where the private sector has not and/or will not. These communities recognize that if service gaps remain unaddressed, they will increasingly have negative effects on the local economy and the overall well-being of their community.
Unfortunately, the muni broadband debate always seems to center on whether or not the network can become a viable and sustainable ISP while competing with incumbents. The reality is that if there was a really good business case for building out and upgrading networks, the incumbents would have done so already. The rationale for municipal broadband networks goes beyond the traditional ISP business case and must also be based on economic development, social equity, and the ability to control a community’s own destiny in the digital world. Advancing communities through broadband is not in an ISP’s mission statement – nor should it be.
Evidence clearly shows that better broadband, when used meaningfully, brings communities tremendous economic benefits. Unfortunately this is generally overlooked when debating viability or sustainability as the go/no-go devolves to a narrow “business case” argument and assessing taxpayer risk.
Fortunately there’s another way to address municipal needs while mitigating many of the issues and risks – a middle way, both figuratively and literally. That middle way is to treat broadband as essential infrastructure, similar to providing clean water and roads with which municipalities are very familiar. Taking an essential service approach with broadband can also avoid directly competing in the retail ISP market. How would this work?
First, the municipality can invest in their own network for their own needs, something they have every right to do and often need to do for operational purposes. This can be a relative small initial investment to establish a core network to reduce costs to connect their own facilities as well as community anchor institutions, such as schools and libraries. The payback may be over a number of years, but the core network has a starting point.
Once the core network is in place it can be extended to serve residents and businesses that lack broadband at all or have to settle for low-speed, low-reliability options from incumbents. A big investment? Yes, if you consider the whole community. However, there is a viable model that reduces the payback risk using broadband improvement districts. Essentially, this is a neighborhood where property-owners opt-in to own the local network infrastructure. Households pay up front on terms that are financed in such a way that their monthly Internet costs are reduced from what they pay now. This is the model that Ammon, Idaho, is using.
This is a win-win scenario as additional municipal network investment is paid up-front by committed property owners who also save money monthly and receive significantly better broadband service. By offering only the infrastructure on an open basis the municipality can encourage other retail service providers to offer services at affordable rates over it. Property owners not only save money but have more competitive choice on a high capacity network.
The municipality benefits further by eliminating the risk of directly competing on a retail basis with incumbents. This also eliminates taxpayer risk by only building based on committed demand by property owners that opt in. By focusing on building infrastructure rather than being a retail ISP, regulatory constraints can be avoided.
In fact, not only do municipalities avoid competing with other ISPs, a major critique of municipal broadband networks, this approach actually increases competition among a wider range of ISPs – something that free-market proponents should welcome.
The end result is that the municipality gains sorely needed broadband infrastructure, building it in an inherently sustainable way without assuming the financial or political risks normally associated with the retail municipal network approach. Furthermore, this “pay as you go” approach can potentially work for even small communities that do not have the market size to support the retail municipal broadband model.
The reality is that there are still many communities, especially in rural America, that suffer from a lack of affordable broadband of any type or have what is fast becoming antiquated technology. Such communities are at a disadvantage and risk losing economically with erosion of their population and businesses. The incumbent ISP business case status quo will not change. Communities need to take action and assume control of their own broadband destiny with this essential infrastructure. There is a way forward.
One-of-a-Kind Offering Provides Initial Insights into the Feasibility of a Locally Owned Network by Weighing Costs and Benefits
Dallas, Texas – Today at the Broadband Communities Summit Strategic Networks Group (SNG) announced its new service, the Economic Feasibility Assessment. SNG’s Economic Feasibility Assessment is SNG’s lower-cost, relatively rapid alternative to the traditional feasibility study. It’s a preliminary step to inform and develop a plan for local broadband investment. The Economic Feasibility Assessment uncovers whether a community should invest by quantifying the benefits to be realized in a “what-if” scenario of a locally owned network. SNG investigates real community savings versus investment required and as a value-add offer a forecast for the economic growth a new network could facilitate. The economic investment estimates are provided by leading industry firm AEG.
“We’re delighted to partner with SNG in this endeavor to help municipalities quickly ascertain if they should move forward with a broadband network,” said James Salter, Chairman of AEG. “Too many communities feel stuck and forced to do a deep dive with a traditional feasibility study when the first step should be understanding the overall costs and potential local benefits a network could provide before taking that step.”
“We’re simply taking the time to quantity costs and savings as well as uncovering potential community benefits from broadband investments to see if initial analysis shows a return on investment,” explains Michael Curri, president and founder of SNG. “In less than a month for a fraction of the cost of a feasibility study, communities can quickly understand if they should move forward, abandon the premise altogether, or conduct more legwork.”
The Economic Feasibility Assessment includes:
Estimate of network investment (provided by Atlantic Engineering)
Potential municipal cost reductions compared to existing broadband costs.
Cost benefits for community anchor institutions (schools, libraries, hospitals, government buildings).
Cost savings for households and the accompanying consumer surplus for local spending.
Economic growth from increased business competitiveness and productivity.
About Strategic Networks Group (SNG)
Focused on economic advancement through broadband utilization, SNG is a group of broadband economists who develop strategies for most effectively leveraging broadband investments. SNG addresses broadband utilization from the individual organization level all the way up to working with more than 10 ten states across the United States. SNG looks to help make the most broad-reaching and transformational impacts that broadband can bring to enable businesses, communities and regions by delivering the data and analysis decision makers need to maximize broadband’s potential. Learn more about SNG at www.sngroup.com.
About Atlantic Engineering Group (AEG)
AEG offers a full suite of services that aid clients in the successful implementation of their broadband networks. We pride ourselves in innovative client deployments and even developed our corporate culture to support the exploration of all possible methods. Our end goal is to find the best solution for each client. Visit AEG inline at www.aeg.cc.
SNG Examines the Economic Impacts of a Locally Owned Network
In advance of SNG’s announcement next month of an exciting new offering called the Economic Feasibility Assessment, SNG’s analysis was featured in the pre-Broadband Summit issue of Broadband Communities Magazine. Included in Michael Curri’s article, “A Local Ownership Approach to Broadband” is a deep dive on a case example (Ammon, ID) and the benefits. It’s a deep dive to explain how a locally owned network can pay for itself, saving the municipality, businesses, and households money.
This article is based on the cost and benefits a locally owned network brought to the City of Ammon, Idaho. The Broadband Benefits Assessment is an application of SNG’s Economic Feasibility Assessment – a pragmatic alternative to longer and more costly feasibility studies. It is foundational to a sustainable project and first planning step because it answers the key question: Do the benefits of this broadband infrastructure investment for our community/region outweigh the costs? The Broadband Benefits Assessment applies this methodology to broadband investments that have already been made (i.e. ex-post).
The Broadband Benefits Assessment Report includes:
Cost summary of network investment.
Municipal cost reductions compared to prior broadband and telecommunications costs.
Cost reductions for community anchor institutions (schools, libraries, hospitals, government buildings) compared to prior broadband and telecommunications costs.
Cost savings for households and the accompanying consumer surplus for local spending.
Economic growth from increased business competitiveness and productivity.
Smart community service benefits.
Any community considering taking its broadband future into its own hands needs to understand and quantify the economic and community benefits such an investment would require. In some cases, municipal cost reductions alone outweigh the costs of building digital infrastructure.