States 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 States 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 incorporate municipal cost reductions, subscriber savings, economic growth, and smart community service benefits for that community / region. Adding these economic and community benefits together, 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 level to find out which unserved areas would require financing, rather than grants. No State 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.
Helping Communities Take Ownership of their Digital Future
A less costly and more far reaching alternative is for the State to focus on assistance to help communities to 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, further assistance to fund technical assistance and support to assess market demand and potential growth enables communities to invest in sustainable digital infrastructure.
Such State investments in communities are a fraction of the potential capital investment in last mile and offers a much bigger return to the State than spending millions in matching funding to cover the same area. By providing technical assistance and funding for planning to uncover where digital infrastructure can be self-financed, the State could get digital infrastructure to many more unserved and underserved areas per State dollar. Furthermore, helping communitiesown 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 municipalities take control of their broadband future?
Many municipalities continue to live with inadequate broadband for their community. Residents and businesses cannot get the quality broadband they need or any broadband at all. Municipalities are impeded in providing new services and the local economy and overall community vitality suffers. Commercial ISPs are unwilling or unable to improve your broadband and yet resist any attempts by municipalities to take control of their broadband future.
Standing still is not an option. The status quo will not change unless municipalities 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.
Here is the root problem. Commercial ISPs don’t invest in network expansion or upgrades because there is no business case to do so for your community. They do not see a payback from that investment and they have already captured the most lucrative part of your market. 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?”
This model of replicating the traditional ISP model and competing in the free market, albeit with better and more available broadband, is really a backward-looking approach and one that will always be a struggle. Fortunately, there is a better way available to any municipality serious about owning its broadband future. It starts by recognizing and embracing broadband as the essential infrastructure of the 21st century. It is enabled by maturing technologies that allow you to build open access virtualized networks that not only provide the high-speed platform your community needs, but also enables even more competition from internet providers. You put the users within your community in control rather 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 a high-quality broadband infrastructure that makes your community a desirable place to live and do business.
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