How do you reliably and accurately identify areas that are unserved, underserved, or future ready with broadband?
As Form 477 data is often inaccurate or overstated, the State of Oregon has hired SNG to conduct a Statewide Broadband Assessment to collect data from end-users on what services are available to them and combine that with data on broadband infrastructure to develop a more accurate broadband map and a more granular understanding of broadband gaps. This will be submitted to the Oregon State Legislature in February 2020 to help legislators make better, evidence-based decisions on legislation, programs and funding so that all Oregon households and businesses are able to effectively participate in an increasingly digital economy.
We need data and insights on broadband market potential and the returns from investing in broadband. At SNG we call this the economic case for broadband – that broadband investment solutions need to be self-sustaining and not subsidized to be effective long term. Both private and public investors need data and insights to assess a broadband market and its potential to net a positive return on investment. For this, the right information is needed and SNG has developed a holistic approach to gathering the data and developing the intelligence needed to make sustainable broadband investment decisions.
In presenting at the 2019 ISE EXPO in Fort Worth, Texas, we had a good discussion about the billions it will take to address unserved and underserved areas in the next five years. There were localities, cooperatives, and providers in attendance and we discussed how pivoting to a digital infrastructure approach pays for broadband investments.
Broadband is more than fast internet service – it is about having the digital infrastructure in place to enable your residents and businesses to stay and thrive – otherwise they will leave, or suffer decline. This is a decision that cannot be put-off, or pushed to the next group of elected officials – the longer it takes, the greater the losses to the local economy and quality of life.
An example of these types of economic losses and negative community impacts can be found in the Broadband Impact and Market Demand Assessment SNG conducted for Custer County, Colorado where without broadband 45% of households would relocate (20.7% Definitely and 24.7% Very Likely) and 18% of businesses would close down.
Choice for Localities
Localities, co-ops, and utilities have a choice to make:
– Wait until service providers see enough returns to justify investing
– Or, invest in digital infrastructure and transformation to connect people, economies, communities
Consequences of that choice are:
– Loss of jobs, businesses, population, GDP from lack of broadband
– Or, growth in digital assets and local capacity … retaining base and sovereignty
Localities need the expertise, resources, and commitment to see how they can get started with broadband and invest in their digital future. They need to start with answering the ‘why’ of broadband and digital infrastructure. The value from broadband and digital infrastructure comes from how it is used – driving utilization drives perceived value of technology. Plus, investments in digital infrastructure can pay for themselves
Additionally, States investing in broadband need to rethink 10 year broadband investment plans. Although they may be financially easier to budget, what localities can wait 5-10 years until they get the broadband they need? – businesses, youth, and those can leave will have left – they will have to leave to survive.
As a local leader or elected official, you may need to decide whether or not you need a survey, or a study for your broadband initiative. If the value isn’t clear, or if it doesn’t get you closer to your goal, why spend time and money on a ‘survey’ or another ‘study’? Don’t do it just because another community has.
Understand which communities have achieved their broadband goals and how they got there.
If you have areas that are unserved or underserved with broadband, private sector providers have not seen enough of a business case for them to invest. Low density, tough terrain, insufficient take rates to make a business case, etc. are realities that must be overcome and will require more than re-packaging of your market, or expounding on ‘we have a great community’. If service providers have a better return on their investment elsewhere, that is where they will invest.
To get broadband deployed to your unserved or underserved areas there are generally three options going forward – 1) entice a provider to deploy in your area by subsidizing their business case; 2) build your own network to compete directly with other incumbent providers; or, 3) build your own digital infrastructure which multiple providers can then use to provide services (like municipal roads which are built, owned and maintained by the municipality, but anyone can use them).
Regardless of which option communities choose, elected officials would want to be in the best position to negotiate and to decide the best path forward for their community by understanding the broadband investment options, the market potential, and the community returns on investment (ROI).
As a builder of broadband networks explained, ‘take rates’ and ‘revenue generation’ are really the opposite of what a community wants to achieve. A community needs to focus on the development of a sustainable model that does not restrict, but enables sustainable future growth. What communities nor providers don’t know is what broadband can do to sustain and grow what the community already has, as well as how that growth has been suppressed by lack of or slow broadband investment
For these reasons assessing broadband demand is not a survey, but necessary due diligence on the market potential and choosing your broadband strategy (bringing providers to serve your areas, or building your own) while ensuring the best return for your community.
We know that providers already have their expected take rates and will use their spreadsheets in developing their own business case. However from SNG’s extensive research, the majority of the community benefits from broadband are off-balance sheet to providers – which means providers under-value their return on investment as compared to community returns on investment (i.e. community benefits). We call this an economic case for investing in broadband – some people call it a government business case. It’s the same reason we have public investment in roads.
For those considering a public-private partnership, if you know that you have a strong market potential (current and future demand) for broadband and value-added services, this will strengthen your position on negotiating how much your community needs invest to make a successful business case. On the other side, if your unserved and underserved areas do not show a strong demand then you may want to limit your risk, or take actions to build up demand. It is also possible that some areas have higher demand than others, which can allow you to be more tactical with the timing and prioritization of broadband deployments.
Data points on market potential inform your investment case for whether you choose to negotiate with an ISP by developing an RFQ or RFI for a public-private partnership, or if you decide to build your own digital infrastructure. We’ve written about this issue in our recent post: Where do we put our efforts to get connected with broadband?
SNG has recently launched the Digital Economy Demand Checkup offering with a regional ISP (who were the ones that requested we do this) and we think it will be of interest to communities everywhere because it:
- Gives local residents and businesses a vehicle to express their need and willingness to sign-up for better connectivity – contact lists for those who want to sign-up can be shared with the provider, finance last mile deployment, inform broadband deployment priorities, etc.
- Provides elected officials with proven tools to collect needed data points to answer the following questions:
- What is the current broadband demand as compared to expected demand from provider’s spreadsheets?
- What is the potential demand that can drive additional revenues for providers, as well as community benefits?
- What are the issues or barriers that need to be overcome to drive demand and meaningful use so that local businesses and residents fully leverage technology?
We are able to address these fundamental investment case issues in a cost effective way with our Digital Economy Demand Checkup. Not only do we identify current demand, but also potential demand and market potential. We don’t know of anyone else that can benchmark demand to increase service provider revenues and maximize local economic impacts. For example, with a municipal service provider we identified a 64% increase in revenues for no additional capital investment. This represents an increase of 47% in Average Revenue Per User (ARPU).
SNG was recently asked by residents from a neighborhood just outside Nashville, Tennessee, where to best put their efforts to get connected with broadband. They have lived in a location for 10 years and it is not serviced with high-speed internet even though they are near where it stops on either end of their community. Asking the incumbent providers in their words “has proven futile” to getting better service. However they have many neighbors who would be interested in better internet service because many have businesses and work from home and they don’t want to move.
At SNG, we understand this challenge, which too many residents and businesses face across North America because of their perceived addressable market, expected revenues vs. cost to service their market, low density, etc. Approaching private sector providers can be ‘futile’ if those providers do not see enough of a business case to invest in your area and when providers have better returns elsewhere.
The challenge to get broadband deployed in unserved or underserved areas is to enable a positive case for investment. Driving awareness and utilization of broadband with local residents and businesses drives local economic growth and community benefits – which makes a case for public investment to bridge broadband gaps.
Two Options Going Forward
There are generally two options going forward – either 1) a public-private-partnership to entice a broadband provider to deploy in your area by subsidizing their business case; or, 2) build your own digital infrastructure which multiple providers can then use to provide services (like municipal roads which are built, owned and maintained by the municipality, but anyone can use them).
Subsidizing a Service Provider’s Business Case
If you choose to subsidize a provider’s business case to bridge their gap between their costs and their expected returns on capital, then local dollars should be used to build infrastructure that the locality owns (like a tower, backhaul fiber, etc.). This retains local ownership and negotiation capability which may be needed if there is poor broadband service because the provider is exercising a market dominant position. Retain ownership and control of your digital future.
In working with providers, there is also the option of conducting a broadband demand assessment to identify people ready to sign-up to new service, as well as assess potential demand for online services. This is local market demand research. Private sector providers are often reluctant to spend their retained earnings on such research, especially if they are unsure there is a business case for them. By quantifying current and potential broadband demand up-front and sharing that with private sector providers, they can apply that data to their business models to see if there is a business case for them that previously ‘flew under their radar’. Having a contact list of people who are ready and committed to sign-up makes that business case for the provider even stronger.
In both these broadband public-private-partnership instances, local funds subsidize one service provider. This may be a tactical, less complicated, and a less involved way for a locality to move forward – who in their right mind would want to take on more work, especially a broadband initiative! However, performance agreements should be negotiated and periodically reviewed to ensure local residents and businesses are getting the broadband they need – and want.
Investing in Digital Infrastructure
The other approach is the locality investing in their own digital infrastructure which is more involved, more complicated, and longer term. But this approach addresses the issue of local ownership and control of essential infrastructure – as with other infrastructure like roads, or electrical where community benefits are significantly greater than a private sector business case. At SNG we call this the economic case for investing in broadband. The example of Ammon, Idaho, proves that it is possible for a locality to own their digital future while also allowing multiple providers to provide competitive, robust internet services that meet the needs of local residents, businesses, and organizations.
Deciding where and how to get started depends on the addressable market of the locality (i.e. broadband market potential), the local champions available to drive the process, the local organizational capacity to support a broadband initiative, and whether local residents, businesses, and organizations (government, education, health) have an understanding and vision of how they can benefit from using online practices. The table below outlines a roadmap to get started with broadband and SNG’s suite of services that have been designed to help you make the right decisions based on your needs and circumstances, no matter what stage you are at in the process.
Where and How to Get Started with a Broadband Initiative
If you are interested in assessing at what stage your locality is in the process of getting broadband – because it is a process – we have the Digital Needs and Readiness Assessment that your local broadband champion can take online. When they completed the 10 minute online survey, a report will be generated and automatically be emailed to them. We developed this tool specifically to help local leaders understand at what stage their locality is and to help them prioritize their community goals and priorities. SNG’s goal with this is to help local leaders make better informed decision on how they can and need to move forward in a way that is pragmatic, clear, and cost-effective.
SNG Research Brief – Broadband Impact on Household Income
Household uses of the internet are often seen as lifestyle enhancements or conveniences, such as online entertainment, social networking, paying bills, or simply browsing for information on topics of inetrest. However, a significant number of households also use the internet to generate income, ranging from small amounts of supplementary income to full time home business income.
More than entertainment and social apps
SNG’s research of more than 18,000 households shows that 89% have a personal web presence and, while the majority use this for personal or professional networking, more than 30% of these households use their web presence to generate income. Overall, more than 50% of households report that the use of broadband has enabled them to increase their household income in one way or another. 29% earn substantial supplementary income of between $1,000 and $20,000 annually, while another 12% earn more than $20,000 annually. At whatever level of additional income, it can make a huge difference to the lifestyle of most people, and households are finding ways to use the internet and their broadband connections to make it happen.
The two most obvious ways that the internet and broadband connections can be used to generate household income are teleworking and home-based businesses. These create income directly from employment and from business activities respectively. However, even excluding these households more than 41% of the remainder still generate additional household income online in amounts large and small.
It is no surprise, then, that more than 50% of households see the ability to work from home as a significant benefit of broadband, and 37% say that the opportunity to earn additional income is a very significant benefit. While there are many other lifestyle benefits from broadband that rate higher across all households, one should not underestimate the significance and impact of how many households use broadband to create household income.
When you have income generation, access to the internet with quality broadband becomes much more than a “nice to have”. Households see the value in this and community leaders need to recognize this as well. In fact, the likelihood of relocating for quality broadband is significantly higher for those generating income online compared to households that do not. These are innovative households that communities can ill-afford to lose.
Broadband enhances the workforce
While earning additional household income is significant, the majority of working households still have one or more members employed at jobs, either at an employer establishment or by teleworking. Having access to quality broadband helps households improve their employment in two important ways. First, broadband provides access to online training and education for enhancing skills and learning new ones. Second, with access to a world of opportunities the internet helps people find better jobs, including the ability to telework rather than relocate.
More than 45% of households use the internet for education or training courses. Of these, 45% strongly agree that online education provides access to more learning opportunities and more than 30% say that online training enabled the completion of a degree or certification. It is significant that broadband can make such a potential difference to the livelihood of one in seven households.
Of those households that had a member finding new employment, 73% said that using the internet helped them to gain better employment in higher-skill or higher-wage jobs, with 20% of those households using telework.
Broadband enables people to enhance their skills wherever they live and to find better employment while remaining in their community. These benefits of broadband do not impact every household since not everyone is equally motivated to follow these paths, but broadband makes it possible for those who do.
See what broadband means for a rural county and how they got the support and funding to build the digital infrastructure they need to thrive – Custer County Broadband Impact and Market Assessment.
Find out more about SNG Solutions for Local Economic Development.
SNG Research Brief – Teleworking
Teleworking is not for everyone, nor is it available to everyone in their job. However, a growing number of people telework part or all of their work week. We define telework as working at your job from home in a formal arrangement with the employer during normal working hours, as opposed to simply accessing the workplace remotely on an occasional basis or while traveling.
Teleworking offers tremendous potential for people to be employed in the type of job they want and to live in the community they prefer, but to telework effectively people need robust and reliable broadband connections. So, what is the current state of teleworking and what is its impact on teleworking households and the community? SNG has compiled important teleworking insights from research of over 18,000 households.
Nearly one in four households (24.4%) include one or more teleworking members. An additional 38% of households access the workplace from home on an occasional basis. These numbers increase to 31% and 46% for employed, working-age households. The vast majority of those employed use home internet for work reasons to some degree.
There is a significant difference between urban and rural households in accessing the workplace from home. Occasional workplace access is 6 percentage points lower for rural households, and teleworking is 9 percentage points lower. There can be a number of reasons for this difference, but one factor is the availability and quality of broadband in urban versus rural communities, as discussed in our research brief on household broadband. While teleworking offers the same benefits whether in an urban or rural community, it can be of particular value to rural residents who have a more limited range of local employment opportunities than their urban counterparts.
44% of teleworkers spend at least 4 days per week working from home, with an average of 3.2 days per week teleworking. The average one-way commute avoided is 60 miles (100 km) with almost one-third of teleworker living more than 60 miles from their employer workplace. Those with more distant commutes tend to telework more days per week. Nearly 75% of teleworkers say that reducing their time commuting is a very important benefit. This not only reduces commuting time, but reduces costs for fuel and car maintenance while reducing traffic, road wear, and fuel emissions.
Not just a convenience
Teleworking is not merely a convenience and cost saving for households, although these are important benefits. More than half of teleworkers strongly agree that their ability to telework in their job helps in achieving their career goals. 40% strongly agree that they would not have their current job were it not for teleworking and 31% strongly agree that they would need to relocate for their job if they could not telework.
For those currently teleworking, their ability to do so is an important factor in being able to remain in their community while employed in a job that meets their goals. Having access to quality broadband is essential for people to effectively work from their home office. In fact, the likelihood of household relocation to get quality broadband service is more that twice as high for teleworking households than for non-teleworking households, with 47% saying they would definitely relocate for broadband versus 22% of non-teleworkers. (For more on this, please read our research brief on Broadband Importance to Household Location.)
An unsung community asset
The significance of this for communities is that those households who may want to telework and have the opportunity to do so may need to either forgo those employment opportunities or relocate out of the community if they do not have the quality of broadband they need. By the same token, those who may want to locate into the community for its other attractions will be inhibited to do so if the available broadband does not allow them to telework effectively. While teleworking only impacts a portion of the population, it is a significant portion and a lack of quality broadband can have noticeable consequences for attraction and retention of households.
Not only is the teleworking household segment a significant percentage of the community, it is a highly valuable segment. Teleworking households have significantly higher incomes than non-teleworking households, with 47% having a household income of more than $100,000 per year compared to 20% of non-teleworking households. 86% earn more than $50,000 per year.
Households with higher incomes spend more locally, own more valuable properties, and pay higher taxes locally. While communities cannot create teleworking employment opportunities for residents, ensuring that they have the quality broadband needed sets the stage for having more residents telework and stay in the community, as well as attracting new teleworking residents.
Teleworking delivers benefits not only to those teleworking but also to the community by giving residents the option to find or keep the job they want while remaining in their community of choice. By working from home, teleworkers spend more time in their community, buy more locally, and are more engaged in the community. Communities that ensure they have quality, robust broadband provide a platform for teleworking and open up more opportunities for their residents and for attracting new residents.
See what teleworking means for a rural county and how they got the support and funding to build the digital infrastructure they need to thrive – Custer County Broadband Impact and Market Assessment.
Find out more about SNG Solutions for Local Economic Development.
SNG Research Brief – Household Broadband
Access to robust and competitive broadband is essential for any community to survive, let alone thrive. Unserved or underserved areas continue to exist in many localities, whether because of limited or no choices for service providers, outdated technology, etc. This research brief provides some insights and data points on the current state of access for households, with focus on rural communities and how they compare to urban areas.
From SNG’s research of over 19,000 households across the North America we are able to reveal some of the important findings that proponents of broadband need to know. These insights are from household data collected directly by SNG rather than statistics provided by service providers or other agencies.
While fiber deployment and use are increasing, cable remains the dominant broadband technology overall with 23.6% of households, followed by DSL at 19.6%. However, the picture changes when you compare urban and rural areas.
While cable dominates urban markets, DSL is still the most used technology in rural areas – which suggests that this is due to the lack of other available options. Fiber use is low for both urban and rural households. For rural areas in particular, the lack of cable and fiber options drives up the use of mobile wireless and satellite as an alternative.
Broadband Service Priorities and Satisfaction
From a user perspective, technology is only relevant for its impact on connection speed, reliability, and price. Understandably, much emphasis is put on speed of connection, since this is how services are sold. However, when it comes to how households prioritize their selection of service, reliability is cited as highest priority with 88% of households compared to 77% who say speed is a high priority and 66% who say affordability is a high priority. These priorities are almost identical between rural and urban households.
So, if that is what households expect, then what is available and how do they feel about the connections they have?
More than half (54%) of households have only one broadband provider available, clearly indicating a lack of choice for most households. For rural areas nearly 62% of households have only one broadband provider to choose from, with implications for competitive service price and quality.
This is reflected in rural service speeds, price, and satisfaction. On average, rural households get approximately half the download speed as urban households and just over one third the upload speed. When it comes to meeting current FCC speed recommendations, 28.7% of urban households meet or exceed the recommended 25 Mbps download and 3 Mbps upload speed, while only 17.2% of rural households do so. Even looking at the old FCC recommendation of 10 Mbps down and 1 Mbps up, just over one third of rural households meet those speeds.
More than 61% of rural households get less than 10 Mbps download speed for an average cost of $70 per month. Overall, rural households pay a monthly cost of $4.38 per MB compared to $2.32 per MB for urban households, almost double the cost. Rural households have less choice and slower speeds and spend more for the same or poorer service.
As a result, 70% of rural households subscribing to less than 10 Mbps download speeds are dissatisfied with the value of their service for the price they pay, and 69% are dissatisfied with the speed of service. In addition, 64% of households are dissatisfied with the reliability of their service. The satisfaction levels are only slightly better for urban households with less than 10 Mbps download, with 68% dissatisfied with value, 58% with speed, and 68% with reliability.
This is partly explained by the different mix of technologies deployed in rural areas. With a higher proportion of DSL and satellite connections used in rural areas the quality of speed and reliability is reflected in overall satisfaction levels, resulting in lower satisfaction with value for the price of the service. Fiber connections generate the highest satisfaction levels by far, followed by cable service. Very few households are fully satisfied with DSL or satellite services, and yet for some these are their only options for broadband connectivity.
34.7% of households say that their fiber connection is “worth every penny” for value satisfaction, compared to 7.6% for cable, 4.6% for DSL, and 2.0% for satellite. Another 48% say the value of fiber is “acceptable for what I pay”, versus 38% for cable, 27% for DSL, and 15% for satellite. Similar satisfaction levels by technology are shown for connection speed and reliability. More than any other technology, fiber is clearly a solution that meets household priorities and expectations.
The Implications for Households and Communities
Households without good broadband available to them may choose not to take any of the options forgoing the speed and reliability they need. Households in this situation will not use the internet to its fullest capacity, missing opportunities for them to fully benefit from what the internet can offer – such as new income opportunities, remote access to health care and education. This negatively impacts community well-being as inadequate broadband risks losing population and difficulty in attracting new residents and businesses. This is particularly challenging for smaller, rural communities where SNG research has shown that they are more likely to lack quality broadband and have the most to lose in terms of population decline, especially among youth.
See how a rural county got the support and funding to build the digital infrastructure they need to thrive – Custer County Broadband Impact and Market Assessment.
Find out more about SNG Solutions for Local Economic Development.
Is quality broadband important to households?
Hopefully, the obvious answer to most people is yes. But just how important is it? And what does it mean for regions and communities that may not have quality broadband, or enough of it?
We can debate how and why it may be important, and even measure that, as SNG has done over many years. But there is one measure that sums it all up and the results are significant. Assuming you could never get broadband service, how likely is it that you would leave to relocate to a community that offers broadband? We have asked thousands of households that question and the results are both expected and surprising.
Insight #1 – Younger people are more likely to relocate for broadband than older people
Forty percent of people in the 18 to 34-year age bracket would definitely relocate, with another 20 percent very likely to relocate. Fewer than 7 percent would not consider relocating for broadband. The likelihood of relocating diminishes for older cohorts, but more than one third of people 65 years and over would definitely or very likely relocate.
Certainly, the availability of quality broadband is only one factor in making a decision on where to live … or not live, but when almost two thirds of people in the prime of their working life … and often with young children … may relocate to another community to get better broadband, that can have huge impacts on communities that are lagging.
Insight #2 – Higher income households are more likely to relocate than lower income households
58 percent of households with incomes over $100,000 would definitely or very likely relocate for broadband. Lower income households are less likely to relocate which may not be surprising, but even 42 percent of households with income below $50,000 would definitely or very likely relocate. Even more supposing is that these statistics change very little even for very low-income households below $20,000.
High-income households do have more options to choose to relocate than their low-income neighbors, but this is exactly the cohort that communities can least afford to lose. Not only is there risk to losing the younger workforce, but also the high-income earners (and local spenders).
Insight #3 – Long-standing residents are more likely to relocate than newer residents
Perhaps the most surprising finding from SNG’s research is that households that have been in their location for more than 5 years have a higher likelihood of relocating compared to newer residents. Fifty-one percent of long-standing residents would definitely or very likely relocate for broadband, compared to 36 percent of newer residents. It is a fallacy to assume that because people are well-established in the community they are less likely to relocate.
Long-standing residents may cross all age groups and income levels, but they also represent the established base of the community with longer and deeper social connections. The risk of losing such residents can have tangible effects on the social fabric of the community.
In summary, it is less necessary to know how and why people use broadband than to know how they feel about the importance of broadband in their lives. The willingness to relocate for better broadband and its potential impacts should be something that all community leaders recognize and pay attention to. Find out how households in your community, region, or state feel about broadband – how they are using it, and what they need – by doing your own Broadband Market Demand Assessment.
There is a choice … attract and retain youth, high-income earners, and long-standing residents … or risk losing them to neighboring communities.
How can funding agencies get ten times more broadband coverage per tax dollar invested?
– invest in planning and technical assistance
56% of rural businesses and 49% of rural households would likely relocate to get the broadband they need. Thousands of communities risk economic and social decline without broadband. What role can funding agencies play?
No funding agency can make the investment to bridge all the gaps in broadband and digital infrastructure, even with matching dollars or public-private partnerships. The best roles for public funding agencies are to help localities plan effectively so that they can support their own investments and partnerships, or fill digital infrastructure funding gaps where needed by making an economic case for investing. By helping localities pivot to approaching broadband as digital infrastructure investments that pay for themselves over time, funding agencies can better leverage their efforts and funding budgets.
The up-front broadband demand aggregation, planning, and design is a fraction of the cost of network implementation. By funding the up-front planning and technical assistance, a locality can uncover existing budgets that when reallocated can finance digital infrastructure investments. These up-front efforts can be one-tenth, or less, of a total digital infrastructure project cost.
The result – the funding agency help more locally driven projects get off the ground toward success on their own, allowing scarce public funds to be spent more effectively and to help with infrastructure costs for those small communities that cannot do it on their own.
Read more at 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 and last mile connectivity to individual premises. It is time to start looking at different ways to deploy broadband into unserved and underserved areas.
How can funding agencies get ten times more broadband coverage per tax dollar invested?
Localities without broadband will lose residents, businesses, and their tax base. How many communities exist today without roads, electricity, or water and sewer systems? However, areas remain unserved or underserved because there is not enough of a return (profit) for broadband service providers to justify the investment. Whether private, public, or private-public partnerships fund broadband, investments will need to be made and financed for such localities to survive, let alone thrive. A pivot in approach is needed to approach broadband as digital infrastructure.
Current Investment Challenges with Broadband Planning and Investment
- 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 private sector business case for broadband where none exists.
Broadband Funding Program Challenges
When broadband funding is available, how can funding agencies 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 pitfalls, or unsustainable networks that do not resolve the lack of broadband access
- Public funds invested will generate the greatest local economic impacts and community benefits
Broadband, like roads, is essential infrastructure. Retaining businesses, jobs, and population are all benefits that broadband enables for a locality, but are off-balance sheet to private sector providers. That is why broadband needs to be approached as digital infrastructure – it has become an essential service. Governments invest in infrastructure because there are public benefits that private sector entities cannot monetize – these are externalities, or what we at SNG also call community benefits.
Economic and community development agencies know they must address broadband gaps if their localities are to remain viable. For example, despite fiscal constraints and resistance to public investment in broadband by vested interests, States are allocating $10million, $20million or $100 million to broadband, which are significant legislative wins. However, if the cost to expand broadband to unserved areas is $1.3 to $1.7 billion (as was with the State of Tennessee), it will take at least a decade if reliant upon state funding at those levels – and no community can afford to wait five to ten years for broadband. Anyone that can leave, will have left 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 localities 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 directly 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. In many States municipalities are prohibited or severely restricted in taking this retail ISP services approach.
Another approach is funding projects using private service providers to deploy to unserved areas, typically with matching funding. Preference is given to those projects that offer the greatest matching funding to State dollars. This may be straightforward and may ‘check the box’ for broadband service, but choosing one provider to build-out to an area is essentially using public funds to subsidize one provider among many. While it may be compelling for practical reasons, this approach assumes that private providers can and will execute quickly with deployments, as well as provide competitive levels of service to address local broadband demand – current and future. However, subsidizing one service provider in a market tilts the playing field and inhibits healthy competition. Furthermore, problems can arise when profit-driven service providers interests do not align with a locality’s interests and needs – such as deploying smart community services.
Without other options, localities will continue to see under-investment in digital infrastructure even when community benefits outweigh private sector returns on investment.
Investing in Digital Infrastructure Planning
A more recent strategy is investing in digital infrastructure planning which enables funding agencies to leverage ten times what they are currently receiving from their broadband investments. The ten-fold (10x) 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 developing 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 broadband 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 and demand aggregation 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.