Today I attended the August Minnesota Broadband Task Force meeting. One hot topic was the repealed telecommunications equipment sales tax exemption from the last Legislative session. The Task Force are working on a letter recommending that the Governor rethink the change during his Special Session in September, when he will be looking at sales tax exemption for farm equipment.
Following the meeting was an Open House at Red Wing Ignite, a program designed to promote and encourage Gigabit access. The speech from Governor Dayton comes from the Open House…
Get more notes from the Task Force meeting…
11:00 – Welcome, Introductions, Approval of Minutes
11:10 – Public Comments
11:20 – Welcome and Presentation by Red Wing Ignite
Ignite does not develop networks nor applications. You need to have a Gigabit network to join. Ignite is an incubator for great ideas.
Application is the value of any new technology!
There are challenges – such as training developers to think in Gigs!
What’s happening in Red Wing with Neela Moogaard
- Business accelerator
- Coworking space
- Testing area for small businesses
Long term goals
- Bring new concepts to reality
- 100 new members
- Recognized as a leading test bed community
- Be used as a forum for collaboration
- Sponsor innovative events
- Known as a technology epicenter
Can other Minnesota cities become US Ignite communities?
Yes – the baseline is a gigabit enabled network.
What can folks do in the co-working space?
It’s $50 a week for 1-2 times a week. They are working on more plans.
Dublin Ohio has had some success – can Red Wing help other communities become users?
Yes – we’d like to do that. We are the banner carrier for rural America – so the applications we are likely to develop and promote and likely to be different from other areas.
11:50 – Presentation by Thomas Cohen, Kelley Drye
FTTH Council’s Gigabit Communities Race to the Top Program
The biggest expense with fiber is the construction. Increasing speeds does not require a significant effort.
Gigabit Communities initiatives
- Community Toolkit
- Becoming Fiber-Friendly Community
- Gigabit Community Race to the Top Program
- Gimme Fiber Day (November 4)
More on Race to the Top – FTTH Council petitioned the FCC on July 23, 2013 to establish a Gigabit Communities Race-to-the-Top Program. The Opportunity is unlimited bandwidth to transform the mindset and capabilities of a community. The Challenge is that while communities want gigabit networks, there is a gap between the high up-front cost of the network and the leg in obtaining sufficient revenues.
- $150M in annual Catalyst Funding for 5 years
- Approximately $20M per project ($10M in Catelyst Funds with 100% match)
- Funding Source – Unused support from the FCC’s Connect American Fund Phase I/Phase II programs (after support is rejected by price cap carriers)
Is there any research on the multiplier effect?
We just got a proposal to do that.
We are looking at people in real estate promoting fiber access to new homes. The problem right now is that all of the info is anecdotal – we need some research.
The businesses are interested in take rates.
Google has shown us a new way of building the network. It’s still a construction project. Verizon changed the market – when they added connectors rather than splicers.
We pushed for a sales tax exemption but lost this in year in legislature. What are other places doing?
There are tax credits in Idaho and Mississippi. Got a tax cut through federal Senate but not through House. The tricky question is – am I giving you a tax credit for something you were going to do anyway. Probably not going through at federal level.
Tax Credit bond – the tax credit goes to the bond buyers, not to the company building the network.
Hawaii just passed a statue saying broadband permits must be addressed in 90 days – speeding permits. Also all new residential building must have fiber.
Define Tier 1 and Tier 2 community:
Micro communities = MSA 200,000 and smaller
Good things about Google:
- Created fiberhoods – demand aggregation
- Build out requirements is tough on a new builder
- Google made a real effort in poorer communities
Do you see any roll out with FirstNet network?
FirstNet is a problem because it’s not going to work smooth. The Public Safety community is splintered. The authority is not sufficient. E-Rare might be more helpful – or Connect America.
1:00 – Large group wrap–‐up/Upcoming meeting information
We need to make our needs know vis a vis tax exemptions. We had a policy to extend the telecommunications equipment sales tax credit
Could we look at ag apps? Yes good idea.
12:30 – Presentation by Minnesota State Senator Matt Schmitt
Hopefully the Office of Broadband Development will help put into practice some of the plans created in this room. Hoping to have a director in place early fall. It’s nice that it’s interagency – not just policy, not just economic development. It should be a clearinghouse – a place for information exchange.
Identifying gaps, opportunities and potential partners would be a vital role for the Office. Be nice to bring Transportation into the discussion more too – especially related to infrastructure.
Things we did this year: Data center tax credit
1:10 – Lunch
1:40 – Subgroup Breakout Session 1 Best Practices/Incentives
The Task Force will be writing a letter to the Governor to repeal the telecom sales tax in the special session.
If they’re estimating $66 million – giving some of it to Office of Broadband would be helpful. Even one percent would be a boon to the Office. It might be easier to ask them to give up that then to reinstate the sales exemption for telecom equipment.
The Office of Broadband might be able to push some of the Task Force recommendations with legislators. Tone is super important.
But really they just need to remove the telecommunications clause in the new capital equipment exemption.
The compelling reason to change it is to promote broadband expansion to reach the goals that the Legislators set up a few years ago.
The perception is that the tax credit money wasn’t being used in underserved areas anyways – partially because the average voter can’t make the connection between upgrades in Minneapolis that impact access in Northern MN.
Broadband tax bill may have been an unintended consequence. This was an effort to reform sales tax. Flattening sales tax rate was a goal to lead to lowering all taxes.
Why is it important and what it means to broadband deployment? Also where is the money? We need the budget to balance. The uncertainty is painful for things.
There’s enough money to repeal farm equipment exemption – but not manufacturing and telecommunications.
Legislators were thinking there might be funds this fall – but they aren’t appearing.
Legislators need to consider repealing the tax sales change – or offer another road for reaching the broadband goals.
What’s the cost of doing nothing? What’s the cost of uncertainty?
Can we get numbers of the impact of investment in broadband and ROI?
There are some national studies; we need Minnesota studies.
The $66M in tax revenue represents a private investment of over $1B. You spend a dollar it will come back fivefold. If lack of sales tax exemption means less investment – it means less tax as well.
The question is whether that money would be invested regardless. The money for the next two years has already been budgeted. BUT it will have an impact in the future. National providers may decide to invest in other states when the tax exemption is gone – it changes the numbers on the spreadsheet.
Everything is going to go IP. IP can reside anywhere – the cloud could be in MN or WI. There are political reasons that Comcast won’t move to WI – but no technological reasons. Is the Legislature creating political reasons to move?
It’s not corporate welfare – they have already extended a sales tax exemption for new capital spending.
This is an industry discussion.
What’s the economic impact? The bigger question is – How to help the politicians find the arguments that can get you closer to your goals?
So how does one do that without sounding self-serving?
Create a fully fleshed out study. That helps.
The time element makes it difficult. It would be difficult to get anything together by September 9.
We’re up against a big claim of the last session – a balanced budget.
From a policy perspective – it might be helpful to wait until next session. And it might be helpful to work with similar industries.
Might be helpful to start the conversation now and carry it out come spring. The dynamic will be different in spring. There will be more people looking for funds in spring.
Should we focus on user perspective rather than provider perspective? Think of secret job mission and Shuttery’s interest in MN.
We should stress the border to border internet claim too. The tax exemption will negatively impact that goal.
All of the other things rely on this. It is an infrastructure. It supports everything. You can’t skimp here and succeed in other programs – education, healthcare, economic development.
Talk about broadband like oxygen – nothing breathes without broadband.
QUESTION – how do you change a Shuttryfly for infrastructure? It’s based on cost. We have cost models. The Central Office will give the number to the business and will do a facilities check and will give you a timeframe for infrastructure. Often the costs also trickle down to the consumer.
What’s the role of grants?
The problem you run into is the sense of entitlement for free access. People want to buy cheap and get top shelf service. It’s a marketplace issue.
The customer views the internet as a utility. Yet broadband is not treated as a utility in terms of policy or planning. (Think Duluth outage a couple years ago.)
It’s not corporate welfare when broadband is a utility.
DO we need to put in something about fairness – every other industry seems to be covered.
So everyone will get a copy of the letter by Thursday.
2:20 – Subgroup Breakout Session 2 (Mobile/Wireless and Coordination Across Govt./Monitor FCC & PUC Decisions/Cost of Broadband subgroups)
3:00 – Adjourn
Red Wing Ignite Open House
Red Wing Ignite hosted an open house at the Ignite Building from 2:30 to 4:30 p.m. with a brief program at 3:30 with Governor Dayton. Task Force members and meeting attendees are invited to stay for the open house.
Speakers included Matt Schmit and Governor Dayton (above)