Why Is The Broadband Infrastructure Debate Dominated By Supply-Siders?

Rural America by IndyDodger

Thankfully the issue of rural broadband is getting more attention, as evidenced by an extensive article in the Wall Street Journal last week, and three hearings on the topic this week in Congress. Sadly, the WSJ piece doesn’t dive very deep into the thorny relationship between broadband provision and economic growth. I commend the authors for their work on this tough subject, but policy makers should be cautious to rush into expanding broadband availability into rural regions without also considering the demand side of the equation.

Let’s set the stage for the WSJ piece because it is a common narrative. The story begins in Caledonia, Missouri at a sheep farm owned and operated by Jeanne Wilson Johnson:

At her 420-acre farm, Ms. Johnson pays $170 a month for a satellite internet service too slow to upload photos, much less conduct business.
As in many rural communities, broadband here lags behind in both speed and available connections. Federal data shows only a fraction of Washington County’s 25,000 residents, including Ms. Johnson, have internet service fast enough to stream videos or access the cloud, activities that residents 80 miles away in St. Louis take for granted.

The problem in Caledonia reflects countless other regions:

In many rural communities, where available broadband speed and capacity barely surpass old-fashioned dial-up connections, residents sacrifice not only their online pastimes but also chances at a better living. In a generation, the travails of small-town America have overtaken the ills of the city, and this technology disconnect is both a cause and a symptom.
Counties without modern internet connections can’t attract new firms, and their isolation discourages the enterprises they have: ranchers who want to buy and sell cattle in online auctions or farmers who could use the internet to monitor crops.

Given these circumstances, it isn’t surprising that broadband deployment policy has come to be dominated by infrastructure supply-siders. Build it and they will come is the mantra, with the “they” here being jobs. Susan Crawford is a standard bearer of this view, which places blame on telcos and cable companies for stifling competition in the sector, limiting the speeds and raising prices. For infrastructure supply-siders, deployment needs to become more ubiquitous, while cost needs to be dramatically decreased. As Crawford and others argue, by increasing availability we will be able to “create whole new occupations (not just jobs), confront climate change, raise the level of everyone’s basic education, have the most advanced healthcare system in the world, reduce inequality, update our transportation options, care for our older relatives and friends — everything.”

Across a variety of studies, broadband adoption has shown to be correlated with better economic outcomes including higher employment rates and more businesses. Yet, the direction hasn’t been found to run both ways. Upping the amount of broadband in a region doesn’t seem to dramatically change its economic position. While it is true that broadband is an important input for growing companies, the difference between rural and urban broadband likely reflects the differing demands for the service. Supply-siders dominate the broadband infrastructure debate because theirs is an easy solution, pump more money into rural areas. But the easy solution won’t translate into a wholly different lot for rural communities.

The WSJ does hint at this complexity of this relationship when they note,

Rural counties with more households connected to broadband had higher incomes and lower unemployment than those with fewer, according to a 2015 study by university researchers in Oklahoma, Mississippi and Texas who compared rural counties before and after getting high-speed internet service.

Brian Whitacre, Roberto Gallardo, and Sharon Strover authored that 2015 study, and have written a series of important peer reviewed articles on the topic of rural broadband. Reading their work as a coherent whole one finds that adoption, not simple availability, is the key to income growth and lower unemployment. Indeed, their work points to some more puzzling relationships. In an earlier piece in 2014, these authors found that “non-metro counties with high levels of broadband availability (>85%) had growth rates of non-farm proprietors income that were over 5 percentage points lower than comparable counties with lower levels of availability.” On the bottom end, “non-metro counties with low levels of broadband availability (<50%) had growth rates of median household income that were marginally higher than otherwise similar counties.” A number of theories are offered to explain this counter-intuitive result, but the authors still conclude that future broadband policies should be more demand-oriented.

Research on Obama’s American Recovery and Reinvestment Act, colloquially known as the Stimulus, also points to lousy economic effects. In total, $7.2 billion of the act was allocated to extend broadband Internet access, including $2.5 billion for rural communities via the Broadband Infrastructure Program (BIP), which was administered by the Rural Utilities Service (RUS). Broadband adoption did increase in the targeted communities due to BIP after a couple of years, but the economic and quality of life measurements didn’t budge.

As the WSJ piece details, some see electric coops and municipal broadband networks as a work around. But again, there doesn’t seem to be much low hanging fruit. An econometric study of municipal broadband found very similar results to the other research. Comparing those regions with publicly supported networks to those without, business establishments grew by about 3 percent. However, worker income saw a drop of 1.3 percent, while private sector employment saw no growth. Not surprisingly, local government employment expanded by around 6 percent.

Because infrastructure supply-siders wield considerable influence in this debate, connectivity efforts have taken center stage, pushing inclusion efforts and research to the side. Yet, effective policy will require customized approaches that focus on specific places and communities, matching both demand and supply concerns. Researchers agree. Broadband policy needs to move towards a more nuanced view. Hopefully policy makers will adopt it.

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