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 communities own the process of digital infrastructure and transformation enables them to own their digital future as compared to simply funding last mile connectivity.