Making Sense Of Broadband Stimulus

Vice President Joe Biden is in Pennsylvania today to kick off the Administration's $7.2 billion broadband stimulus program, announcing the release of the federal agency regulations, also known as the Notice of Funds Availability (NOFA), that set eligibility rules.So far, most people have focused on who should be entitled to receive the grants -- large telcos or small ISPs, private companies versus municipal governments -- and incumbent carriers have worked hard to prohibit local governments from operating broadband networks.

The NOFA will settle all those questions, or most of them, and now we get to the part of the process where federal agencies sort through thousands of proposals and start making actual funding decisions. But the real benefits of the broadband stimulus won't come from the actual technology spending. As Peter Pratt writes (and his blog has plenty of useful details for anyone who wants to understand the details of the grant-making process):

Less than $10 billion in broadband stimulus is not going to trigger another tech or telecom boom. That figure is a fraction of the annual capital expenditure (capex) of American cable, wireline and wireless carriers, even in the current recession. The $7.2 billion in broadband stimulus funds is not chump change, but it will not set-off much more than a boomlet in spending.

If that's the case, then why do it at all? Is it to enrich a couple of small entrepreneurs here and there?

No, the point is to actually extend broadband into rural areas; just like the aims of President Roosevelt's Rural Electrification Administration, the point wasn't to enrich the utilities, but to bring under-served rural areas into the modern economy.

Broadband isn't just about allowing people in Podunk to stream Netflix to their PCs -- although that's not a bad thing either. It's about allowing them to do things like run a home-based business, and helping communities attract modern industry, or save money on health care by creating an infrastructure for remote care.

According to broadband business consultant Craig Settles, the impact of rural broadband might not even be felt for four or five years. "You have to look at the long-term impact of education and job training, of taking an adult workforce or an under-performing K through 12 student population and giving them the skills for the digital and data-driven workplace. You're creating better odds of the kids going to college, and retraining a next-generation workforce. You can't even get a job at Mcdonald's without having some basic technical expertise," he told me.

Settles ticked off a number of rural communities that have created broadband networks in public-private partnerships:

Lafayette, La., was able to attract a new call center operation because of a new fiber network, with a net creation of 600 jobs;

Bristol, Va., several hundred jobs were created after a fiber network was put in place, also helping the company attract a subsidiary of HP to open a plant with jobs paying "on average twice the average job in that area;"

Prestonberg, Ky., started with limited-reach networks that increased foot-traffic and consumer spending in business areas that were struggling to stay even, and gradually expanded the network as it proved itself.

These effects also create a virtuous cycle allowing municipalities to improve their tax base, in turn allowing them to improve other services like schools and health clinics that further enhance the area's economic prospects. "Where it also pays for itself is in lowering the cost of running government services... which justifies the expense of putting these networks in place," Settles told me.