The high cost of inaction on rural broadband

PHOTO: Gavin St. Ours, Flickr CC

Longtime readers know my position on rural broadband. In short, I view it as one important part of blended strategy to diversify the economy of Northern Minnesota.

To extend the fastest and highest capacity delivery system would mean more fiber optic lines buried underground. This is the most obvious and also the most expensive way to accomplish the goal of universal business and residential high speed internet.

But it’s true, cost makes this simple goal much more complicated. In the United States, we support projects that serve the public good, but usually only if someone acceptable (usually a big company that employs lots of people and lobbies public officials) is making money off them.

For instance, we can reroute major highways on the eastern Iron Range for a quarter billion dollars with minimal opposition. Why? Because it was part of an old deal with private enterprise. Because we are told a mine will stay open as a result. They money still comes out of the hides of taxpayers, but in this case they don’t seem to mind.

Thus, the United States has deferred to private companies to expand our broadband footprint. Those private companies have been loathe to invest in rural areas where they won’t see an immediate return on investment.

This has put the federal, state and even local governments in the business of waiting for those private companies to change their mind.

Usually, the general policy is to just ignore the broadband issue and tell rural residents that they’ll have internet in “5-10 years” when some combination of new technology and new private investment will enter the picture. They said this 5-10 years ago and 5-10 years before that.

Frustration over this endless delay has created demand for new rural broadband solutions. These have been implemented in all sorts of ways.

Here in Minnesota, state matching grants have helped several projects get off the ground, including one that brought fiber service to MinnesotaBrown World Headquarters. However, these grants have been limited to about $30-$35 million per biennium. This state money is then matched by some other source, usually private investment. In our case, it was a cooperative.

Some U.S. Cities have created municipal networks. That puts cities in the tech business, however, to the disdain of the private companies. In many places, telecom companies have lobbied to effectively ban municipal networks.

In certain areas, ragtag entrepreneurs have figured out ways to hook up microwave towers to deliver high speed internet. Here in Northern Minnesota, trees and topography make that difficult.

And then we have the news this week that the Fond du Lac Band of Lake Superior Chippewa was simply going to build a fiber network of its own. The $8 million plan, including matching funds from a federal program, will serve 900 unserved households on its reservation.

On one hand that’s a steep price — more than $6,000 per household. But on the other, it means improved quality of life, access to education and the potential for future job opportunities for those on the reservation. The impact could last decades. It depends on whether you perceive internet as a utility that is necessary for modern life or not.

Typically, opposition to this kind of broadband infrastructure comes down to the sheer cost of it. (“I know it’s good for people, but it’s too expensive”). Or it comes down to some kind of futuristic tech mythos. (They’ll be delivering the same thing through the air in 5-10 years, so don’t bother).

To that I would say that rural people are right to demand that they join the information age now, not later.

Rural people, even the rural poor are willing to pay for the utility. Nothing for free. But the service must be delivered. It must be delivered for students and their K-12 and higher education. For seniors and their access to medical information and communication technology. For professionals and entrepreneurs who could diversify and sustain the new economy of Northern Minnesota.

This is precisely the proper role of government in a modern capitalistic democracy. To correct a market designed to serve capital, not the needs or rights of human civilization.

At some point, just as the leaders in Fond du Lac concluded, you just have to do something because it’s important to do. Because if you don’t, there will be a tremendous cost.

Comments

  1. Ranger47 says:

    $6,000 is pretty darn cheap. Much less than paying for your own well and septic.

    Next thing you’ll know is folks living the country life demanding city water and sewer…and demanding someone else pay for it, ’cause it’s too expensive for an individual homeowner. Living the good life of dirt roads, loons calling & leaves turning color doesn’t come cheap..

    • Sewer and water utilities are already highly subsidized with taxpayer money through grants and legislative allocations in cities and municipalities throughout the state. If you think that the full costs of the construction work are paid for solely by the individual homeowner users, you are way off base. And for your information, I live in an areas in between rural and city where I fully expect city utilities to be forced on me.

      • Ranger47 says:

        Subsidies are evil. They metamorphosize into entitlements and feed a pervasive notion that they’re part of the natural order of things. And…nothing good comes from government forcing something on it’s people, nothing.

  2. Zach Raskovich says:

    Yikes, Aaron…Yikes.

    I have to give you credit though. Despite all these years you’ve never waivered in your opinion.

  3. Gerald S says:

    Meanwhile, elsewhere, the governor and legislature of Wisconsin have committed $3 billion in funding to induce Foxconn, the Taiwanese electronics manufacturer most famous for the mistreatment of their Chinese employees, to build a factory in Southeastern Wisconsin. The company has promised to provide 3000 jobs in exchange..

    Doing the math, those jobs will cost the state about $1 million each. Foxconn suggests that at some unspecified future date they might employ as many as a “potential” 13,000 people, depending, of course, on market conditions for their products, future developments in automation, and the alignment of the stars. If that topside estimate were eventually reached, the jobs would cost a bargain rate of $237,000 per job.

    I strongly suspect that broadband has the potential to cost a lot less than either $237,000 or $1 million per job generated.

    Here in Northeastern Minnesota we have had a lot of unfortunate experience with the promises of companies to create jobs in exchange for large government subsidies, and we are not alone. The CEO of United Technologies was caught on tape bragging at a shareholder meeting how he had scammed the state of Indiana and President Trump when he extracted large subsidies to preserve jobs at their Carrier plant, and, surprise, a large percentage of the jobs at the plant were exported to Mexico recently despite earlier promises, plus the company statements to shareholders show plans for further deep layoffs through automation in the next two to three years.

    The financial payoff from broadband investment depends much more on individuals figuring out ways to advance their own careers than on the commitments of companies headquartered in Taiwan, Texas, or Switzerland. Somehow, I have a lot more confidence in ambitious people trying to make a living for themselves in their hometowns by creating individual and small businesses taking advantage of broadband access than I do in international businesses with bad reputations keeping their promises to politicians. Investing smaller funding — which, as Ranger suggests, is about the same as the cost of a well and septic — in our own people strikes me as a better deal than mammoth payoffs to large companies eager to bounce from country to country to maximize profits. There are too many ghost factories out there whose only employees are a handful of security people stopping teenagers from breaking the windows.

  4. I love you, Aaron.

    “Thus, the United States has deferred to private companies to expand our broadband footprint. Those private companies have been loathe to invest in rural areas where they won’t see an immediate return on investment.”

    I would rewrite that:

    “Those private companies have been loathe to invest in rural areas — especially ones with a long history of patronage politics — where they stand a very high chance of having their investments undercut, thus losing their capital, by government initiatives backed by rural politicians and their cronies.”

    The louder the cry for broadband assistance the more stalled broadband delivery becomes. There is a lesson there.

    I also don’t get this, friend, except as a bit of populism:

    “Rural people, even the rural poor are willing to pay for the utility. Nothing for free. But the service must be delivered.”

    Sure, I’ll pay for gas and oil changes — nothing for free — but you have to buy me the car. What am I missing?

    • The love is mutual my friend. This is like a late night jam session.

      Perhaps I should have reiterated what I “want.” The way people get their internet should be as simple and about as expensive as getting phone or electricity. The reason that’s hard is because the phone and power lines are already in (having been subsidized by an earlier generation and aided by cooperative movements). Meanwhile, we were led to believe (at first) that phone lines would be enough to deliver internet service, only to find that the practical application of internet technology needs far more capacity. So we didn’t build up when we should have. And you’re right, the private companies have all kinds of reasons not to pay for all of it themselves. The risk of being undercut is certainly there, though far less of a factor than the fact that it will take decades to realize profit off lower density networks. There will be profit, just not now. Publicly traded companies have no incentive to act on that for a relatively small returns. But that’s a private interest, not a public one.

      I think the private companies could do us and themselves a favor by clearly identifying the specific criteria they use to determine investment in new lines. Because more than a decade of frustrating interaction with CenturyLink and I still have no idea what they’re up to. I think most in local or state government would rather not build public lines or spend any money on anything. But perhaps they could use the power of organization to line up customer demand estimates and make the necessary regulatory pathways for new lines. That’s not possible until we know if there is actual progress on the horizon. Time specific.

      If that’s not going to happen — and again, in deed, we just don’t know, even if we are fed sweet nothings every 5-10 years — then something must be done. We were aided by a cooperative here in Balsam. I think that model is particularly suited for expending access in rural areas (it certainly did wonders for Northern MN electricity 80-90 years ago). But if there are no cooperatives and there is no action by private companies, well — the populists will have their day — and they’ll work local, state and federal all at the same time. Seems to me it’d behoove everyone to figure this out before overzealous populism creates problems.

      But if we swap out the word “internet” for “electricity,” and 2017 for 1917, your car/oil change example would have been uttered by a man with a tall hat, a monocle, and a curly waxed mustache. That’s literally why the Farmer Labor Party rose in this state. And I’d have been right there with them.

  5. Gerald S says:

    The question is not so much something for nothing, as do we want areas like the Range to continue to exist as places where reasonable numbers of people live, or are we satisfied with letting them gradually die, like the ghost towns in the silver and gold mining regions in the West, with only a few scattered eccentrics living there.

    The state has already invested heavily in roads, in airports, in schools, power systems, sewer and water plants, and so on. They invested a ton in developing the taconite process. None of these investments have ever “paid off. To this day, the Metro area consistently pumps tax money into the Range, spending more state money per capita than the area pays in taxes, while the Metro pays more in taxes than it collects in state spending.

    In general, this is repeated on a larger scale in the country. The large metro areas in the Northeast and Upper Midwest pay more in federal taxes than they get back in federal spending, and the less populated areas in the South, the Plains, the Mountains, and the Southwest get more federal spending than they pay in taxes.

    This is based on the consensus that it is worth while to keep those parts of the country and the state viable, to attract people to live there or to stay there.

    Right now, part of living in the 21st century, both economically and culturally, is having access to the web and the net, to be able to participate passively or actively, and to be able to develop businesses that depend on the web.

    We can, of course, choose to let these areas die, slowly and surely, as they have been doing during most of our lifetimes. Or we can take the risk of investing in the possibility of preserving them.

    Republican Governor Elmer Anderson used to like to say “taxes are the way we work together to accomplish good things.” Making broadband available in less populated areas is one of those good things, as much as keeping the roads leading here, the airports serving here, the sanitation systems serving here running and in reasonable shape. As Aaron notes, we have just spent 100’s of millions rebuilding a Range highway that will never pay for itself either, but we did in anyhow.

  6. Chris Henjum says:

    Something the program will increasingly do as more get connected: upgrade terrible service (dial-up), rather than connecting remote, sparsely populated areas. Upgrades have a huge ROI and happen in areas w/ economic activity … which is why bad providers (except co-ops) fought hard against the program in the first place: once the remote places are connected, grants may encourage providers to actually *compete* and improve service in another’s service area.

    Rather than strictly an investment, state grants will increasingly be seen as a pro-competitive way to encourage co-ops to enter into another (bad) provider’s territory. Competition is the ultimate way to ensure upgrades in the future — but we’ll see if rural politicians have the stomache to stand up to those bad providers … so far, things have largely held together due to public pressure and co-op leadership.

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