Invest in Digital Infrastructure, not Just Broadband Networks

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.

Digital Infrastructure
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.

The challenge with a Digital Infrastructure Strategy for Communities and Regions is that they need help in understanding how this model can work and they need technical assistance to take initial steps. The starting point is assessing potential municipal cost reductions, subscriber savings, local economic growth, and smart community service benefits. When these community benefits outweigh digital infrastructure costs, it is possible to self-finance. For example, when telecom and internet costs can be reduced by 86% (see economic case of Ammon, Idaho) those municipal cost reductions are existing budgets that can be reallocated to finance the digital infrastructure investment.

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:

  1. 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.

  1. 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.

  1. 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.

Leave a Reply