Making Sure the Broadband Stimulus Money Isn't Wasted

How to find the areas not being served, and unlikely to get high-speed Internet services

It’s discouraging that after a daylong, standing-room-only meeting on the allocation of broadband stimulus funds the two federal agencies responsible for spending the cash couldn’t even define the meaning of an “unserved area.”  They couldn’t agree on which areas don’t have, and aren’t likely to get, Internet access in the foreseeable future.

Normally, this wouldn’t matter. The government shouldn’t be in the broadband business anyway. But, as part of the $787 billion stimulus bill, the American Recovery and Reinvestment Act, Congress set aside $7.2 billion for development of rural broadband. The National Telecommunications & Information Administration (NTIA) and the U.S. Department of Agriculture’s Rural Utilities Services (RUS) are charged with dispersing the funds.

While broadband service is available from a mix of phone, cable and wireless providers in even smaller cities, statistics show availability lags in some rural markets. The Pew Internet & American Life Project’s May 2008 survey found that 38 percent of rural residents polled said they have broadband at home, compared to the overall national rate 55 percent. Even so, Pew found rural broadband penetration had grown 23 percent from 2007.

With rural users steadily catching up, there’s a good case to be made that the private sector doesn’t need help in identifying or reaching these customers. But since Congress and the Obama administration are determined to send billions out the door, it’s time to make the best of it.

To be fair, one reason the government is struggling with the rural broadband issue is that each special interest group likes to frame the problem in ways that reflect best on their own solutions.

Incumbent phone and cable companies cite their experience with high-end platforms such as fiber optics, yet bemoan the large capital expenses. Wireless Internet entrepreneurs say they are more deserving of subsidies because their infrastructure is less expensive to build. Municipal broadband supporters insist that the private Internet companies have failed - and high-speed, high-quality rural broadband service can only be provided through local government ownership and operation.

Too often the Internet access debate devolves into techno-speak about the relative merits of fiber vs. wireless; whether market failure means there are no broadband providers, or simply one or two companies in a single town and thus not enough ‘competition’ for some in government’s liking; or if stimulus-funded networks should be “neutral.”  This debate distracts from what should be an easily measurable goal—how to wisely bring broadband connectivity to areas without it (and unlikely to get it).

Broadband is a lot like money—no one feels they have enough. The trick is to drill down into the data to find places where there is actually no terrestrial broadband (fiber or wireless) and reasonable likelihood that there will be no commercial construction in the next 12 to 18 months. Kentucky and North Carolina offer models on how to do this.

Agencies in both states used data from Geographic Information Systems (GIS) to correlate information about socioeconomic status, educational systems and health care facilities with geographic availability of high-speed Internet access. Using these numbers, these states have been able to apply funding to areas that truly need it and commensurately improve rural penetration.

Under the ConnectKentucky initiative, broadband availability went from 60 percent to 95 percent between 2004 and 2007, according to ConnectKentucky’s 2008 Progress Report. Further, broadband subscription increased 100 percent and there has been a 24 percent surge in home computer ownership.

Using the methods pioneered in Kentucky and North Carolina, there’s no reason Washington can’t find the areas that private companies are not likely to target for the foreseeable future. Once that is done, choosing the right technology gets a lot easier.

Fiber advocates often muddle the benefits broadband offers residential consumers with the benefits it offers businesses and institutions. There’s no question that fiber delivers high speeds for critical applications in health care, manufacturing, education and other commercial sectors. Connections of 100-megabit per second (Mb/s) are necessary for telemedicine, distance learning and data center operation, and thus can be extremely valuable to hospitals, schools or office parks. But does funding fiber to a rural hospital mean providing the same expensive line to every rural home?

For residential users, a 100 Mb/s remains high-end choice for high-volume users. Even most tasks required for home-based businesses or telecommuters--email, document transfers, basic uploading and downloading of work files, and Web-based teleconferencing can be accomplished by the basic 4 to 6--Mb/s connection delivered by most wired broadband systems today.

The stimulus money needs to be geared toward getting people who don’t have any Internet options connected now, using the technology best-suited to their needs.

Stimulus dollars can be applied to the expansion of wireless systems, because they stand to offer a far greater return than fiber. Wireless is not second-class broadband. Although not as fast as fiber, wireless broadband, which approaches 3 Mb/s today, offers the added benefit of mobility. The popularity of iPhones and BlackBerry smartphones among consumers attest to this. These pocket-sized devices integrate phone, email, texting, GPS and Web access. Meanwhile, employers are finding more and more applications that rely on mobile computing. Perhaps, then, the scope of wireless connectivity will be more critical than conventional wired Internet.

Stimulus policies that respect the private sector’s investment, diversity and expertise will go a long way toward achieving ubiquitous broadband. The government should be looking to partner with the private sector, not making attempts to create competing government broadband operations. To date, no government-run municipal broadband operation has made good on its triple promise to offer lower rates, universal connectivity and better quality service than commercial competitors. The stimulus is about delivering broadband to those in need, not to bailing out municipalities that have shown they can’t.

Combined, telephone, cable and wireless companies invested close to $115 billion in 2007 in infrastructure, much of it going to broadband upgrades. That investment came on the heels of the $350 billion invested in the four years prior, according to the Bureau of Economic Analysis.

ConnectKentucky, mentioned above, achieved most of its penetration goals by helping commercial companies understand the opportunities that existed in rural areas. The result was $860 million in private capital investment being spent in the state.

State and city governments can be excellent facilitators. In Ft. Wayne, Indiana, former Mayor Gavin Richard brought Verizon together with the area businesses that saw local broadband as a strategic investment. Verizon got first-hand information about market demand. Ft. Wayne businesses understood the immediate payoffs of fiber-based infrastructure. A commitment from area employer Raytheon sparked Verizon to build its first citywide fiber-to-the-home project in Ft. Wayne. Public-private partnerships can be used to bring users and providers together and can touch off a torrent of private sector capital, laying the groundwork for even more investment and technological advancements.

Congress and the federal government shouldn’t be in the broadband business. But now that they are, the feds owe it to taxpayers to wisely invest in projects in the neediest areas.

Steven Titch is a policy analyst at Reason Foundation.





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