Broadband's Economic Impact Remains Unclear, Contested

I have said from the very beginning of this "high speed internet quest" for Kewaunee Co. that the County is misdirected and is wasting a lot of time and effort on a problem, that for the most part, doesn't exist.

I have suggested from the very beginning of this complex discussion that the only way to really determine any shortfall of internet service is to complete a door to door survey so the "true picture" of any discrepancy/shortfall can be determined. 

The following well-written article helps to further explain the broadband issues.

NOT ONE PENNY OF TAX PAYER DOLLARS SHOULD BE SPENT TO SUBSIDIZE ANY COMPANY OR ANY INTERNET USER IN OUR COUNTY.

Broadband's Economic Impact Remains Unclear, Contested

by Jed Pressgrove | September 23, 2019 AT 3:01 AM

Internet access is a critical concern across the United States. Countless news reports chronicle a trend of states and local areas working to expand broadband Internet for unserved and underserved populations. One assumption driving these efforts is that improved broadband coverage will lead to better economic outcomes.

Here’s the complication: Research on broadband doesn’t necessarily confirm that assumption, even though certain pieces of research seem to suggest the case is closed. The literature on the relationship between broadband and the economy often focuses on two types of broadband: rural and municipal. Both types have distinct academic arguments associated with them, though observations about one type can sometimes be applied to the other.

RURAL BROADBAND

At the beginning of this month, the American Action Forum (AAF) released a podcast titled “The Economics of Rural Broadband.” The podcast frames the issue by referencing billion-dollar plans from Democratic presidential candidates to increase rural broadband access. During this conversation, Will Rinehart, AAF technology and innovation policy director, shares a cautionary perspective about these plans.

“When you look at the data itself, it’s not as simple as just not having Internet access,” Rinehart said on the podcast, adding that he doesn’t believe anybody has a “very, very good sense” of how to implement rural broadband correctly on a wide scale.

The primary reason for this lack of clarity relates to data. Many studies about rural broadband’s positive economic associations use Federal Communications Commission (FCC) Form 477 data. This data, however, has been criticized by Microsoft and the U.S. Government Accountability Office, among others, for overestimating the reach of broadband. In response to this criticism, the FCC established in August a more “granular” method of data collection that “will collect geospatial broadband coverage maps from fixed broadband Internet service providers of areas where they make fixed service available.”

The more detailed FCC data, when it’s made available, should help researchers paint a more accurate picture about broadband. But that data measures the concept of broadband coverage. As suggested by Rinehart, the concept of broadband adoption is more strongly associated with economic benefits.

“Everyone has a better time, and the deployment is cheaper, if you have a higher amount of people that are actually going on and using the technology,” Rinehart said on the podcast. “So to me, that’s really the big missing step in all of these plans.”

But wouldn’t people surely use broadband if it were available to them? That’s not the story told by Census results.

“When you look at Census data, the vast majority of the people that are not currently connected to the Internet aren’t connected because they don’t think that it’s relevant in their lives,” Rinehart said on the podcast.

As stated by telecommunications policy analyst Rafi Goldberg, “The proportion of offline households citing lack of need or interest has increased from 39 percent in 2009 to 58 percent in 2017.” Furthermore, a 2019 Pew Research Center survey indicates that 80 percent of “non-broadband users say they are not interested in getting high-speed connections at home.”

Such findings reveal limitations in research that implies rural broadband projects will bring a good return on investment. For example, a 2018 Purdue Center for Regional Development study estimates that, over a 20-year period, “Indiana would receive about $12 billion in net benefits if the broadband investment were made statewide.” This projected figure relies on a number of factors, including the idea that residents across Indiana would indeed adopt broadband.

Alison Grant, lead author of the Purdue publication, said the study’s ultimate message is its finding of a 4-to-1 benefit-cost ratio, meaning that for every dollar invested in rural broadband, Indiana would receive four dollars in return. In regard to broadband adoption, Grant pointed out that farmers in Indiana would be very likely to adopt, as their scanning drones operate more efficiently with faster Internet. For other residents in Indiana, she believes adoption would come down to a simple variable.

“It all depends on the price,” she said.

The holes in rural broadband research have less to do with the researchers themselves and more to do with the relatively small number of studies, Rinehart said in a phone interview with Government Technology. One of the challenges with rural broadband deployment is that it must be “very contextual,” meaning that more research is needed to account for a wide variety of factors, especially in cases involving massive programs.

“I would hope that there’s more work on it, but there isn’t,” Rinehart said. The potential economic benefits of rural broadband also depend on businesses and the workforce. If an area doesn’t have
workers qualified to take jobs that involve high-speed Internet, businesses may have to get the talent they need by outsourcing.

In other words, rural broadband is a necessary condition, not a sufficient condition. “[Broadband] doesn’t solve the fundamental problems of education and workforce training,” Rinehart said on the podcast.

MUNICIPAL BROADBAND
Municipal, or government-owned, broadband projects have received considerable attention from scholars because of their controversial nature, according to a 2016 State Government Leadership Foundation study written by George S. Ford. In the study, Ford said a municipal broadband project poses “an enormous financial risk,” but hundreds of cities have gone in that  direction “out of desperation for modern communications services (i.e., very high-speed broadband) and the benefits they are believed to provide.”

Research on the assumed benefits of municipal broadband showcases the risk of such projects. In a 2014 study, author Brian Deignan, using a sample of 80 cities with municipal broadband, concluded that “[i]nstead of increasing private employment, networks increase local government employment by around 6 percent.” Deignan did add that more research is needed to fully understand these cases.

Just two months ago, a Technology Policy Institute study by Sarah Oh indicated that it could not “prove that municipal broadband yields any effect on changes in household broadband subscriptions, unemployment rates, or labor forc participation rates.” However, Oh’s sample of places with municipal broadband was only 22. Moreover, the Technology Policy Institute is supported by a variety of private vendors, which, if nothing else, speaks to the tension involved in municipal
broadband projects.

Ford’s 2016 piece mentioned several studies that link broadband to economic growth. Ford nonetheless suggested caution. For instance, in regard to the successful broadband system in Chattanooga, Tenn., Ford said the city gained businesses after establishing faster Internet, but many of them relocated from other places. Such industry gains are good news for Chattanooga
but bad news for the cities that lost the businesses, which raises the question of whether a given municipal broadband project will lead to a better economic outlook for society as a whole.

HOW TO MOVE FORWARD?
Given the mixed results on the association between broadband and economic growth, what can leaders do as they plan to bring broadband to their communities? In Grant’s opinion, governments must consider the number of people who would receive broadband in a given scenario versus
the cost of the effort. Spending taxpayer dollars could be more difficult to justify when fewer people receive service.

“The cost per line per mile seems to be quite large when we move it up to rural areas,” she said.

Rinehart emphasized broadband adoption as a “key component” of any government initiative. He said it’s important to strategically use institutions to help increase broadband adoption numbers. Rinehart also believes governments should try to identify all of the potential paths to broadband and how feasible those paths are.

“A lot of times, local leaders don’t know what their options are,” Rinehart said.
Ford said he would caution governments not to believe most of the hype about the payoff of broadband to the economy. He also suggested that they work as closely as possible with existing providers to try to get expansion at the edge of existing networks. However, he said if a government does want to go into the broadband business, it should recognize that it’s going to be
subsidizing the business forever.

“Go in with your eyes open,” he said.

Update on Kewaunee Broadband Boondoggle

Thought it was time to have an update on how the County Administrator is working hard to blow a million or more of your tax dollars on a broadband boondoggle.

You know if something smells like horse dung, looks like horse dung, it probably is horse dung!

First, here is the Mission Statement of the Broadband Committee taken right from their minutes.

Read this mission statement carefully word by word.  Notice, there is no mention of spending tax dollar one in this statement?  What it does state is the committee will research, gather info, and educate the board and encourage third party investment.  That's all good, but it seems this is horse dung as well because, on the 21st of June, our County Legal Counsel Jeff Wisnicky who sits on that committee told me directly they want to spend the first million we've received from Dominion and maybe more on this broadband project.  I called the Administrator Feldt on this issue, he didn't answer, I left a message and he didn't return the call.

Last meeting of this Broadband Committee was on May 22.  Those minutes are now posted on the county website.  In those minutes, Administrator Feldt reported Door County Broadband had established a tower in Lincoln Township.  Could it possibly be that Administrator Feldt has a "special relationship" with Door County Broadband as he never talks about, or has talked to other broadband providers that are providing service in the county to include Bertrand and Mercury.

The committee is now reportedly investigating "Mesh WiFi"  opportunities and how to perhaps co-op with some company like Public Service in using their power poles to mount internet boosters on their poles or use other services they might have.  A mesh technology system works very much like a network of cell phone towers only with different technology.  One tower serves multiple customers and the towers are close enough that if one fails another tower picks up the load.  This is what broadband vendors are doing already.

Let's tear into this a bit. 
The whole idea sounds wonderful to residents.  They think if the County provides access points they will have free internet.  NOTHING IS FREE, there will be monthly fees of $60 to $100 or more for service which is available today through various vendors.

This whole idea was hatched by the County Administrator along with Board Member Lee Luft.  This is a bit complicated, so I would suggest you go back to review my earlier articles on this subject.  Go to www.ronheuer.com and review the Oct 26, 2018 article and the Jan 18, 2019 posts I have made on this subject. You can review the budgeting debacle by reading these two posts.

A Slight of Hand/Obfuscation?
According to Mr. Weidner, the County Board Chairman, he had no prior knowledge of the fact that the County Administrator Mr. Scott Feldt had added $1,000,000 to the budget to be spent on broadband in the County.  Thank God, Weidner worked with the board, and had that removed from the budget. That is when the Broadband Committee was established.

Mr. Feldt insisted the money from Dominion was to be used for "Economic Development."  Turns out that was a boldface lie, and by the way, it didn't take long before Administrator Feldt had other board members like Luft espousing the same lie.  (This is consistent with the idea, "Tell a lie over and over, and pretty soon people will believe it). The payment from Dominion was clearly and simply provided to the County to fill a budgetary gap left in the County budget with the closure of the Nuclear Plant.  There were no strings attached to that money.  The County can use that money for roadwork, tax rebate, you name it.

This whole dung stinking public broadband idea has come from a couple of people on the board and the KCEDC who say "We need high speed internet to attract businesses to Kewaunee Co."  They believe that "If you build it and they will come."  They believe that, if Kewaunee County has "extraordinary" high speed internet, there will be traffic jams on Highways 29, 42 and 54 with people wanting to relocate here.

But let's face facts.  The 1900 census showed 17,212 people in Kewaunee Co., and the 2010 census showed 20,574 people in Kewaunee Co.; a growth over 110 years of 3,362 people or an average of 30 people a year.  Four generations of growth or so, not impressive at all.

Reality, Growth has never been on the radar for the County
This County was an agricultural community 110 years ago and it still is.  In fact many townships have had, or do have restrictions as to how many acres of land you must own before you can build a house on your own land.  These restrictions were in place to preserve agricultural land.  BTW, if you haven't noticed, we don't have an Interstate Hwy touching our County, and if I am not mistaken, there is one rail spur left in the County that goes to the feed mill in Luxemburg. For years local residents of Kewaunee Co. have shunned growth, they wanted Kewaunee Co. to be kept pristine and did not seek growth.  Further, look no further than the City of Kewaunee.

Under the leadership of the previous Mayor, John Blaha the city received over $4.2M in State grants to redo the sea wall and develop the port area which was intended to draw construction of a hotel, restaurants and shops .  What happened after Blaha was not reelected?  Well, the State finished the sea wall and port development two years ago and it's been sitting there just as they left it.   With the current leadership in Kewaunee, my guess is that two years from now the answer will be the same on that project, Nothing done!

Why Should Our Taxpayers fund a portion of the broadband development?
They shouldn't!  High speed internet service by definition of the FCC already exists in the County, you just have to pay for it.  According to the FCC 10 MBPS per second download and 4 MBPS upload is considered to be the current "high speed" standard.

Internet users that demand high speed like Pagel Ponderosa and Kinnard Farms invested directly with providers to pull in fiber which gives them super access, probably up to 100 MBPS dedicated download.  Businesses can get fiber here if they want it or need it.  Heck, the County Administration building on Lincoln Street has fiber pulled to it.

There are a number of internet service providers like Mercury.net that will, at their expense, install high speed distribution systems if there is a demand (install meaning a mini-tower or nodes on a silo, or other high points).  By demand, I mean, a group of customers in a specific area that are willing to sign a one year contract for their high speed services.

I ran a consulting company from my home and had need to video conference and transfer large packets of data.  I made that work at my expense by paying about $210 per month with Verizon to have 4G access at my home with download speeds averaging about 20 MBPS and uploads of 7 MBPS.  It was adequate, but the data limits sometimes shot my monthly costs up quite high over the $210 figure.  I could stream Netflix HD movies, but the cost of doing so was prohibitive.  I didn't expect the County to fix my issue.  I fixed it myself as have hundreds of other people in the County have done themselves.

Even though I had a visual view of a Bertrand tower to my South and a Mercury.net tower to my North.  I couldn't access either tower because the trees were in the way.  So, I worked with Mercury.net.  I put in 600 feet of underground wire to get electric to a location where I had clear line of sight to the tower North of me.  It cost me, all in, about $600 to do this, but now I have consistent speeds of 20 MBPS download for 200 Gigs per month (that exceed the FCC standard) I pay $100 a month for this service.  And, my speeds are not slowed down after 60 or 80 Gigs.

So What Should the County's Role be?
Nothing.  It is a business that is driven by demand and best left to the private sector to own and manage.

Unfortunately, the whole high speed internet picture is really complicated and ever changing.  Most people cannot get their minds engaged to understand it fully.  The only role the County should/could play in this initiative would be to conduct comprehensive surveys to the inhabitants of the County.  Unfortunately developing a comprehensive survey that the rank and file person would understand is a challenge.

Go back and review my Oct blog where I have listed a number of companies that already provide service in the County.