The Opportunity Zone Program Can Close the Digital Divide
The case for investing in broadband infrastructure within communities.
The Opportunity Zone program was designed to encourage investment, through Opportunity Funds, into communities with potential for growth. Most funds have focused on real-estate as the ideal vehicle for increased community vitality. At Neighborly, we believe broadband networks are the most important foundation for every future-ready community: the key to better educational outcomes, greater economic opportunity and output, and all next-generation infrastructure. As a result, the Neighborly Infrastructure Opportunity Fund is a first-of-its-kind fund to accelerate the deployment of this critical infrastructure in communities, and generate competitive, tax-advantaged returns for investors who care about closing the digital divide.
How does the program work?
Introduced by the Tax Cut and Jobs Act of 2017, Opportunity Zones are designated low-income census tracts — from rural regions to burgeoning urban communities. Qualifying investments into these communities of opportunity, made through an Opportunity Fund, are eligible for preferential tax treatment. In short, when investors reinvest outstanding capital gains into an Opportunity Fund, they will benefit from tax deferral on their original gains, and tax relief on gains in the fund after a qualifying period.
In this way, the Opportunity Zones program incentivizes long-term investment, making it an effective vehicle for infrastructure investments like open access fiber broadband networks — the critical underpinning for every vibrant community.
Why Fiber Broadband Networks
According to (conservative) FCC data, 19 million people in the U.S. still lack access to fixed broadband service at threshold speeds. Other counts, where the data is not self-reported by incumbent providers, have the number of people without access significantly higher. In every single state, some portion of the population does not have access to broadband, and some residents have no Internet access at all. Moreover, of those with access, 61% have only one choice of internet service provider, and that figure rises to 90% in low income, rural & tribal areas.
Deep fiber networks have the potential to transform struggling communities and will form the foundation for all next-generation infrastructure and reinvestment. Open access fiber networks provide equal and open access to the internet and internet enabled services like telehealth; enhance educational opportunities; create jobs; generate revenue for the community; and lower prices for subscribers.
According to a 2017 Deloitte study, “extending fiber deeper into communities is a critical economic driver, promoting competition, increasing connectivity for the rural and underserved, and supporting densification for wireless.”
That same study put the estimated necessary investment to close the access divide, and upgrade our current copper line infrastructure to fiber capable of unlocking wireless technologies like 5G, at $130 billion.
How Networks Generate Returns
1. Networks are built based on quantified demand
Engagement campaigns drive network adoption and profitability before deploying capital.
2. Efficiency-enhancing software
Network operations are conducted through software to improve efficiency and reduce operational expenditure.
3. A unique model to boost choice and open the marketplace
The open access model encourages a thriving private sector marketplace atop the shared infrastructure, strengthening network economics.
4. Community buy-back is a win-win
Option for community ownership provides liquidity, generates equitable outcomes, and adds increased earning potential to the investment horizon cash flow.
Broadband networks, as equitable infrastructure, have holistic community benefits. The Neighborly Infrastructure Opportunity Fund delivers enhanced opportunity for communities and enhanced returns for investors.