I’m a little surprised at how much attention the current Minnesota broadband legislation is getting. I posted an update yesterday – but more happened over night – so I’m offering an update 2.0. (Quick recap on the topics for new readers: There are a couple of conversations that are happening in the Minnesota Legislature these days that relate broadband: $100 million for broadband development and reinstating telecom equipment sales tax exemptions for providers.)
Sales tax is not the primary barrier to border-to-border broadband – says that sales tax isn’t the greatest barrier to broadband in rural areas…
Katz touts telecommunications industry capital investment – $865 per capita over six years. Over those same six years, many families might pay over $20,000 for telecommunications services, with bills averaging $300 per month for television, Internet, landline and cell phone services. I know that I do.
Katz states that over 50% of provider capital investment went to “suburban, rural and isolated communities.” Lumping suburban communities with rural and isolated communities makes no sense for this type of analysis. In any event, this means that almost 50% of telecom capital spending went into Minneapolis and St. Paul alone. …
Again, few would dispute that sales taxes on capital equipment provide a disincentive to broadband investment. After all, the Department of Revenue estimated that this tax generates $70 million dollars per biennium. We do need great broadband throughout the state, including the affordable Gigabit services that are becoming available in some of the Twin Cities’ greatest economic competitors.
What I do argue is that removal of the sales tax will do little to stimulate broadband investment in greater Minnesota. In fact, the sales tax might add only $150 in cost on a $5,000 per home network investment, as approximately 50% of the deployment cost is devoted to labor.
This sales tax is not the primary barrier to rural broadband deployment. In fact, when the FCC offered its Connect America Fund subsidy of $750 per line to incumbent providers to extend broadband services (five times the incentive offered by the sales tax exemption), many of those funds went unused. The true barrier is investor-owned telecom provider requirements to finance long-term network assets with short-term capital and to obtain adequate ROI for every network extension. Almost every underserved community has heard the phrase “We can’t make a business case.”
(This article was written by my colleague Bill Coleman.)
Counterpoint: ‘Broadband’ and ‘boondoggle’ don’t belong together – a rebuttal to an earlier letter to the editor that said the government should not get involved with broadband. This article thinks that government should get involved – just as they get involved with transportation…
There are many parallels between investment in transportation infrastructure and that in broadband infrastructure. While it is true that a more-advanced broadband infrastructure will allow people on the outskirts of Minnesota to “surf Facebook at 10 megabits per second (or greater),” it also is true that a system of public roads allows people to drive to a movie theater. As we all know, a road system has many more substantial uses than driving to a theater; so, too, with broadband infrastructure.
The fact of the matter is that broadband is critical, even for those who have no desire to follow anyone on Twitter. There are numerous sensors, systems and signals we all rely on and interact with daily that utilize broadband connectivity. From ATMs and credit-card transactions to stoplights, road sensors and equipment for weather forecasting, nearly everything is now network-enabled. The reason for this, in one word, is efficiency — something I’m certain Schmidt can appreciate.
Those with experience in logistics understand the tremendous value of locating a business in an area with excellent transportation infrastructure. Placing your business along a major transportation route can offer substantial cost savings and a competitive edge that can be the lifeblood of your company — and not doing so can be its undoing. Thus, companies take the placement of their businesses very seriously.
I also see that many local papers are picking up editorials written by Senator Matt Schmit and industry leaders Brent Christensen and Mike Martin. I’m glad to see so many people interested in broadband!