Public Investment in Broadband

When should you consider public investment in broadband?

When broadband quality and/or coverage fail to meet community needs
When the commercial business case is not sufficient to drive private-sector investment
When the existing broadband status quo will negatively impact future community well-being.

When an area has enough market demand and a business case that supports private-sector competition, that area can offer competitive services from multiple providers, making quality broadband available to all users—an optimal situation.

Many communities do not enjoy such a situation. The primary reason? They cannot make a sufficient business case for commercial broadband providers to invest, either in building new networks or extending and upgrading existing networks. Such providers do not see sufficient return on investment (ROI) and will choose to invest in areas that offer higher ROI.

When communities know they have unserved and underserved areas and recognize that this makes community well-being unsustainable, some level of public intervention and investment is needed to ensure a quality of service comparable to what competitive markets provide, such as competitive prices, reliability, access, choice of providers, and service packages.

The challenge of building networks in unserved and underserved areas is that the cost of capital for private-sector investments is often higher than for public investments because of:

Required private-sector returns on investments—investment will flow to higher-ROI opportunities
Shorter payback periods on investments, such as 5–8 years for private-sector investments versus 15–25 years for public investments
Different broadband service cost structures depending on what assets are local vs. off-site —these need to be assessed on a case-by-case basis.

There are various options for bridging broadband gaps in unserved or underserved areas, but the first step for any community or region should be to assess the benefits and costs of better broadband as an infrastructure investment. A benefits assessment needs to include infrastructure investment time frames and the derived community benefits, such as municipal or county cost reductions, subscriber savings, economic impacts, and quality-of-life benefits that are off balance sheets of private-sector providers.

SNG hosted a webinar, Is a Locally Owned Broadband Network Right for You?, on assessing the benefits of broadband. You may listen to it by clicking here >>

The Economic Feasibility Assessment looks at benefits versus costs up front, a process that a community should undertake as a first decision point on whether to contemplate a network build. Before going through asset inventories and financial feasibility assessments, a community should get a clear picture of the potential long-term benefits that a community network could provide businesses, citizens, and the municipality or county in terms of cost savings and economic growth.

The Economic Feasibility Assessment helps communities understand the benefits and whether the heavy lifting of establishing feasibility should begin. It also helps identify who benefits and by how much and what helps get the right stakeholders (private and public) around the table and to focus on common goals when they discuss who makes the investments and who constructs/manages the infrastructure.

Strategic Network Group’s Small Business Growth Program, which is dedicated to driving local economic growth from broadband. Examples of Digital Economy index scorecards, which provide businesses and individuals ROI assessments from adopting new online business practices, are included.