A Case for Rural Broadband: $47–$65 billion annually in additional gross benefit

The Benton Foundation does a nice summary of a recent report from the U.S. Department of Agriculture (A Case for Rural Broadband: Insights on Rural Broadband Infrastructure and Next Generation Precision Agriculture Technologies).

The give a high level Return on Investment…

This latest chapter in the Trump Administration’s American Broadband Initiative finds that the deployment of broadband networks and adoption of new agricultural technologies could result in approximately $47–$65 billion annually in additional gross benefit for the U.S. economy.

They also noted…

If broadband infrastructure and digital technologies at scale were available at a level that meets estimated producer demand, the U.S. economy could realize benefits equivalent to nearly 18 percent of total agriculture production. Of that 18 percent, more than one-third is dependent on broadband, equivalent to at least $18 billion in annual economic benefits that only high-speed, reliable Internet can provide.

They talk about farms without…

The report details how unreliable broadband service undermines scaling adoption of precision agriculture:

  • Some farmers dedicate significant time and effort to find workarounds to insufficient Internet service, which takes time away from managing their businesses and serving their customers.
  • Some precision agriculture technologies function with basic Internet connections, so even slow speeds are better than no connections at all. But many require a more reliable and high-speed Internet connection as a minimum requirement.
  • Without access to online learning and peer sharing platforms, farmers are less likely to succeed with technology implementation, having wasted money, time, and effort without realizing complete benefits.

And note next steps for the USDA…

This “coordinated action” must focus on six key priorities:

  1. Tailor deployment of Internet infrastructure to communities.
  2. Incentivize development of innovative technologies and solutions, both for scaling connectivity and improving agricultural production.
  3. Create the conditions that allow, encourage, and reward innovation, including identifying the statutory or regulatory obstacles that hinder new, innovative providers.
  4. Coordinate across public programs to effectively use taxpayer funds and develop new partnerships.
  5. Build capability to scale adoption and realize value.
  6. Clarify and emphasize the importance of rural connectivity to all consumers of agriculture commodities.

5G – the good, the bad, and the things we hear again and again

Last Friday I happened to catch NPR’s Science Friday’s segment on The Future of 5G. If 5G is still a mystery to you – it’s absolutely worth listening to the program. It starts with a 101 and then delves into potential security risks and what 5G means for rural areas. They also talk about 5G as a marketing term. Some providers talk about 5G Evolution, which isn’t yet 5G but is more like 4G+.

Minneapolis is a 5G shining star – I’d go on a limb to say that hosting the Superbowl last year put us on that map. 5G is great for high speed connectivity in small spaces. So if you want everyone in a packed stadium to be able to stream a football game from their awesome seats to friends back home – 5G is your friend. The MN Broadband Task Force heard all about the upgrades last February; policy changes like small cell equipment regulation helped.

Rural areas will have a tougher time getting on the 5G stage – in part because distance is not your friend with 5G. It takes a lot more equipment to support 5G than it does 4G. I think I heard 9 times the equipment. Someone can please correct me if I’m wrong. That kind of infrastructure is expensive and in rural areas it’s hard to make it up in volume. Mainstreet publications, such as Fortune, have pointed out that to be ready, rural areas need more fiber.

Last week, FCC Chair Pai and President Trump announced federal programs intended to help the US “win the race to 5G.” Specifically they mentioned the following:

President Trump’s historic tax cuts and deregulatory actions have created incentives for the wireless industry to invest in 5G technology.

To ensure rural America is not left behind, the FCC aims to create a new $20.4 billion Rural Digital Opportunity Fund that will extend high-speed broadband to 4 million homes and small businesses.

The Benton Foundation has taken on the claims of the latest announcement…

An FCC fact sheet claims the $20.4 billion will be distributed in rural America over the next ten years. “It will provide funding through a reverse auction to service providers that will deploy infrastructure that will provide up to gigabit-speed broadband in parts of the country most in need of connectivity.” Chairman Pai claims, “The Rural Digital Opportunity Fund represents the FCC’s single biggest step yet to close the digital divide.”

Details of the plan began to emerge in the days after the White House event. We learned that the funding would come from essentially extending and rebranding the FCC’s Connect America Fund (CAF) program. …

CAF is the program aimed at connecting rural and remote areas that are expensive to reach. The Obama-era FCC created CAF to support broadband instead of just traditional voice phone service. CAF II currently makes around $2 billion in insubsidies available for telecommunications providers each year. CAF II is scheduled to end in 2020.

The crux of Chairman Pai’s announcement is that he is proposing to extend CAF’s current $2 billion per year for another ten years.

One of the issues that I can see for folks on the frontlines is that while they are extending the speed minimum, it still won’t keep pace with urban counterparts…

FCC spokesman Mark Wigfield said the Rural Digital Opportunity Fund would establish a minimum speed threshold of 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads (25/3), as opposed to the current 10/1 Mbps. Wigfield also said the new program would be “technology neutral” and “open to all qualified providers,” but specifics about eligibility will depend on an FCC rulemaking not yet launched.

By comparison, the MN speed goals for 2022 are 25/3 and for 2026 are 100/20. So yes, the new speeds are faster – they are still not at pace of growth in other areas.

Reaction has been…

Deb Socia, executive director of Next Century Cities, characterized the proposal as “more of a rebranding than a new project,” although she was careful to note that details about it are still unclear. “I don’t think it’s significantly different,” she said. But the proposal was still welcomed. “We’re always happy when more money can go into rural communities,” Socia added. “And we’re really pleased to see them upping the speed.”

Harold Feld, senior vice president at Public Knowledge, said, “This is really just like slapping ‘new and improved!’ on the same package.”

Feld also said repurposing USF funds as proposed could prove legally problematic because the FCC decided in the 2017 net neutrality repeal to re-reclassify broadband as a Title I information service rather than a Title II telecommunications service. “It is hard to see how you can do this given that broadband is a Title I information service and USF is restricted to Title II telecommunications.”

A Broadband Agenda that creates a rural broadband ghetto?

Brookings recently posted Blair Levin’s A broadband agenda for the (eventual) infrastructure bill. He highlights a number of key strategies:

  • Provide more dedicated funding to broadband.
  • Clarify the definition of what constitutes acceptable broadband for rural areas.
  • Clarify geographic eligibility.
  • Prioritize funds for capital expenditures.
  • Eliminate barriers to co-ops.
  • Require new technologies to meet market metrics before eligibility.
  • Preempt laws that prohibit local communities from addressing local digital divides.

Many of those strategies seem like a clear cut way to support expanding broadband but I take umbrage with one – Clarify the definition of what constitutes acceptable broadband for rural areas.

Here is more of what he says on that topic…

The current law requires the FCC to ensure that rural, high cost areas have service “reasonably comparable” to urban areas, words that lead to varying interpretations. Congress should clarify the definition with a market test. For example, it could state that “reasonably comparable” means a service level equal to what 75 percent of consumers in urban areas use.

This metric will evolve over time, but a standard would ground the target around market activity, not political preferences. It reduces the ability of institutions, like the FCC and Department of Agriculture, to favor funding for projects that protect their prior investment decisions rather than deploy capital more effectively. My experience in government suggests that an institutional “confirmation bias” is a material risk.

It seems that we are creating a technology second class status when we decide that rural areas and rural residents don’t require or deserve the same broadband as their urban and suburban counterparts. I don’t know why rural residents should be urged to be satisfied with less. It seems to me that rural residents have greater need to access educational opportunities, remote healthcare and economic opportunities. In St Paul I have several hospitals within 5 miles of my house – that’s not true in most rural areas. In St Paul, my kids could walk to school even on a snow day. Schools aren’t always walking distance in rural areas.

The population density inherent in rural areas creates opportunities. Broadband can level that playing field in rural areas by bringing customers from all over the world to your front door and conversely bring the world of products, training and services to your front door.

I understand that the goal of the strategy is to encourage providers/communities to move away from legacy infrastructure but I think we can do that by recognizing that we need one definition for broadband for rural, urban and suburban areas.

Survey shows that digital technology can help rural businesses

The U.S. Chamber Technology Engagement Center (commissioned by Amazon) recently did a survey of 5,300 small business owners in rural America about the economic impact of online tools and technology on their businesses. Below are the highlights of the report…

Digital technology boosts sales and reduces costs for rural small businesses: Online tools and technology help rural small businesses expand their customer base in their own community, neighboring states, and, in some cases, outside of the country as well. Online tools boost sales for nearly 55% of rural small businesses across America. In addition, online tools reduce purchasing costs of products and materials for nearly 29% of rural small businesses.

Small businesses in rural areas are slowly adopting digital tools and technology: Nearly 20% of rural small businesses in America generate the vast majority of their revenue (at least 80%) by selling their products and services online. A slightly larger share of rural small businesses, 22%, purchased at least 80% of their goods and services online.

Rural small businesses utilize digital tools and technology for sales, marketing, and operations: About one-third of rural small businesses sell their products and services through their own websites and nearly 13% sell their products and services through third-party websites. Over 58% of rural small businesses have social media accounts and nearly 36% use online advertising services. Rural small businesses also use online tools for operational tasks such as business banking, accounting, virtual meetings and conference calls, and cloud computing.
Greater use of digital tools and technology could unlock potential in rural small businesses across the country.

Digital technology created opportunities for rural small businesses in the past three years: Digital tools and technology boosted gross sales of rural small businesses by 17.2% during the past three years, the equivalent of $69.8 billion per year. The additional gross sales contributed $38.7 billion to U.S. GDP per year and created 296,288 jobs (full-time equivalent) with $12.1 billion in wages per year. The magnitude of the economic benefits is equivalent to the size of the economy of Vermont or Wyoming.

The economic benefits of digital technologies have not been fully realized in rural areas: If rural small businesses had better adopted online tools and technology, their gross sales would have increased by an additional 18.3% in the past three years, the equivalent of $74.4 billion per year. Consequently, rural small businesses would have added another $41.3 billion to U.S. GDP per year and created an additional 316,605 jobs with $13.0 billion wages per year. These unrealized economic benefits are equivalent to 0.2% of GDP and over 5% of the number of unemployed people in the U.S. labor force.

With greater adoption of digital tools and technology, the potential economic benefits in rural areas are far reaching: If rural small businesses better adopt online tools and technology, their gross sales could increase by an additional 20.8% during the next three years, the equivalent of $84.5 billion per year. This increase in sales could contribute an additional $46.9 billion value added to U.S. GDP per year and create 360,054 jobs with $14.8 billion wages per year. By unlocking the digital potential of rural small businesses, the U.S. GDP would gain an additional 0.2% per year and reduce the number of unemployed people by nearly 6%.

MN Farm Bureau and Farmers Union priorities include broadband

AgriNews reports on agricultural issues at the Legislature…

The state’s Farm Bureau and Farmers Union priorities provide a blueprint that would benefit rural communities. Creating an environment that encourages more readily available and affordable health care is hugely important. It involves motivating more institutions, doctors and other health care professionals to set up shop in underserved rural areas.

Programs to better protect Minnesota’s invaluable natural resources is another area where a consensus for action seems apparent. Protecting water resources and conserving top soil are keys to maintaining a sustainable future.

Improving broadband access to rural communities is another. Increasing broadband access would help motivate businesses and families to live and work in rural communities and improve educational opportunities.

There is broad agreement on the need to reform property taxes to produce greater fairness for farmers.

How Technology Can Balance Urban/Rural Development

There was a panel at SXSW (South by Southwest) on – How Technology Can Balance Urban/Rural Development. The panelists spoke from an international perspective but there were some lessons that we could learn in Minnesota. And I think there’s something they could learn from us.

The talked about two ways to fix the rural broadband issue…

The most obvious lines of thinking are that there are perhaps two main ways to solve this: influencing market forces in a way that incentivizes private companies to build more rural broadband infrastructure; or creating a government-owned high-speed Internet network.

That is where I think the “Minnesota model” of encouraging public-private partnership with state grants could be a big boost to many areas.

They noted some other tactics, such as digital inclusion. I think most of Minnesota is beyond needing to learn why to use technology but the how can still be a barrier. Whether that’s how to use email or how to run an online business.

They talked about extending smart city ideas to the village…

This work must now be translated to what the panelists called “smart village” technologies. So whereas the parks department in San Francisco can — and is — use sensors to tell when garbage cans in their parks are too full, farmers in Modesto, Calif., can similarly use sensors to tell if their pigs are getting sick.

And one very practical idea is to ask new developers about their plans for broadband…

Schweiger described one particularly effective means of supporting broadband in her city, which has been offering a questionnaire to property developers asking how they will incorporate broadband infrastructure into their new construction. Schweiger described it as “a behavior nudging mechanism.”

Need better broadband for precision ag – the Minnesota model could help

IN FORM reports on the need for better broadband in rural areas…

Midwestern states, however, rank high in their access to internet service. A U.S. News and World Report ranking in January said Iowa and North Dakota were the top two states for internet access, and South Dakota and Minnesota also made the top 10.

The article talks about some of the technology solutions in play to help reach far corners and details some of the ways government can help extend broadband. Minnestoa came up by names as did the Office of Rural Broadband Act, introduced by Senators Klobuchar and Cramer…

The report suggests some gains can be made in streamlining processes for permitting, using federal property for expansion of commercial services and making federal funds go farther through better collaboration.

In addition to the recommendations made in the report, other federal efforts are underway. U.S. Sens. Kevin Cramer, R-N.D., and Amy Klobuchar, D-Minn., recently introduced the Office of Rural Broadband Act, which would create an office to coordinate with other federal agencies to maintain information on current rural broadband initiatives and programs and to remove barriers to broadband deployment. Sens. John Hoeven, R-N.D., and Ron Wyden, D-Ore., have signed on as original co-sponsors.

Hoeven, who chairs the Senate Agriculture Appropriations Committee, announced the Fiscal Year 2019 Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriation Bill, which Congress approved Feb. 15. It provided $550 million for a rural broadband loan and grant pilot program targeted to areas that lack access to broadband service.

Efforts also are underway in states. Minnesota Gov. Tim Walz’s spending plan includes money to bring broadband access to rural Minnesota in two years. South Dakota Gov. Kristi Noem announced plans to close the “broadband gap” during her first State of the State Address. In Montana, Senate Bill 239 would exempt property taxes on fiber optics installed by utilities for five years. After that, the tax value would be phased in at 20 percent a year over five years.