Government Funding for Broadband Network Providers Serving Community Anchor Institutions

The SHLB Coalition developed Connecting Anchor Institutions: A Broadband Action Plan to provide ideas and actionable policy recommendations for government leaders at the federal, state, and local levels to address the broadband needs of anchor institutions. The ten policy papers highlight connectivity gaps and explain why broadband access is vital to communities nationwide. In the coming weeks, the Benton Foundation will be highlighting each of the Action Plan policy papers. The following is an excerpt of the eighth paper. In December, we'll be looking at Subsidies and Rural Broadband Needs. To read the complete Broadband Action Plan, visit www.shlb.org/action-plan

Introduction

Governments can play an important role in funding broadband infrastructure deployment to ensure robust, affordable access for anchor institutions beyond what the market is able to do. Failing to take action to spur broadband deployment creates risks for the community – losing businesses, jobs, services, and population. A U.S. Government Accountability Office report found that in communities with government-funded broadband projects, small businesses experience higher speeds and lower prices as compared to communities without such projects.

There are several ways that governments can finance broadband deployment, including subsidies for investment, equity in public-private partnerships (PPPs), preferential tax treatment, long-term loans, on-lending loans, and guarantees to offset regulatory or political risk. One strategy that can minimize risk to the government and the provider is to fund broadband builds first to community anchor institutions (CAIs) in a region: CAIs can then serve as the “anchor tenants” to support the network’s economic viability. This strategy can ensure that schools, libraries, health providers, and other anchor institutions receive the high-capacity broadband services they need, while also providing capacity that can be shared with surrounding residential and business consumers.

Despite Significant Broadband Network Investment, CAIs Face Connectivity Gaps

While the market sometimes provides sufficient financial incentives for broadband companies to deploy high-capacity broadband, the market does not always work. There are several factors that contribute to this market failure, including:

• The expense and complexity of building out and maintaining high-capacity broadband infrastructure;
• The limitations of legacy infrastructure, such as aging DSL lines;
• The absence of competition and open access policies that could allow multiple ISPs to operate using the
• same infrastructure; and
• Little return on investment when it comes to serving certain communities and regions.

Public Funding for Broadband Networks Benefit CAIs

Federal, state, and local governments are playing an increasingly important role in funding ubiquitous, high-capacity broadband infrastructure to CAIs and the general public. Reversing the privatization trend of the 1980s and 1990s, more governments are financing at least a portion of broadband network build-out, particularly where there is a market failure to reach unserved or underserved areas.

The federal Broadband Technology Opportunities Program (BTOP) was a catalyst for broadband infrastructure deployment benefiting anchor institutions across the country.(1) BTOP grantees were awarded matching Federal grants to deploy “middle mile” broadband infrastructure in every state in the U.S. Grantees were required to connect anchor institutions and to abide by non-discrimination and open interconnection policies that allowed other “last mile” broadband providers to build off the BTOP-funded infrastructure to serve surrounding residential and business consumers. BTOP funding resulted in approximately 116,000 miles of new and upgraded broadband networking and improved connections to 25,766 anchor institutions. CAIs served by BTOP infrastructure experienced a 95 percent decline in broadband prices, among other benefits.

Several states are also engaged in funding broadband deployment by private sector companies.

Even when a broadband program is focused on residential customers, the program can include an obligation to serve the anchor institutions in residential communities. The Federal Communications Commission employs this approach in implementing the Connect America Fund (CAF), which provides financial support for telecommunications networks serving rural and high-cost areas of the country. The program requires recipients of CAF funding to engage with CAIs in the network planning stages and establishes an expectation that broadband companies will provide CAIs with high-capacity connections at rates that are reasonably comparable to the rates offered to CAIs in urban areas. Public funding to spur broadband network development can have additional benefits, such as a deepening collaboration between local entities working on infrastructure deployment and those working on digital inclusion. New funding opportunities, even if small, can have a tremendous positive impact on local planning and partnering. Even coalitions that did not receive BTOP funding often developed “shovel-ready” projects that were able to attract additional funding post-BTOP.

High-Quality, CAI Broadband Delivers Many Broader Community Benefits

• Supporting anchor institution connectivity is an effective means to help achieve public interest goals for education, health, and economic development. Broadband networks around the country built with public funds offer many examples of these benefits:
• With access to a new, higher capacity (1 Gbps) network made possible by BTOP funding, students at Arlington High School in South Dakota are now able to take previously-unavailable online foreign language classes during school hours.
• Investing in broadband networks can provide significant cost savings in tele-health. In New York, a study found that 40 percent of nursing home hospitalizations were avoidable. With hospitalizations costing approximately $12,000 per occurrence, eVisits, with a fee of as little as $40, have the potential to lead to millions of dollars in annual savings.
• In northwest Pennsylvania, there are only two board-certified pediatric dermatologists practicing within a 125-mile radius, leading to excessive travel and wait times for children in the region. The Children’s Hospital of Pittsburgh leveraged the region’s connectivity to create a telemedicine program in pediatric dermatology. During the first two years, 500 time-sensitive e-consultations were conducted – which were typically followed up by an in-person visit. The consultations allowed for “more time-efficient, precise care, decreasing patient travel and expense, and even in many cases decreasing prolonged hospital stays.”
• High-quality, affordable broadband infrastructure can help stimulate economic development and job growth. The BTOP investments are estimated to generate increased annual economic activity of between $5.17 billion and $21 billion. The additional broadband infrastructure could also be expected to create more than 22,000 long-term jobs and generate more than $1 billion in additional household income each year.

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Notes:

1. In 2009 and 2010, the National Telecommunications and Information Administration invested about $4 billion – provided by the American Recovery and Reinvestment Act – in 233 BTOP projects benefiting every state, as well as five territories and the District of Columbia. The most significant portion of funding was allocated for Comprehensive Community Infrastructure projects to deploy new or improved broadband to connect households, businesses, and community anchor institutions.

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About the author
Trained in cultural anthropology and new media, Amelia Bryne is co-Director of DeepTech.org, a research consultancy that focuses on the social and environmental impacts of information and communications technologies. She has worked with the American Library Association Office for Information Technology Policy, the University of Helsinki, the Social Science Research Council, the Community Wireless Infrastructure Research Project, byDesign eLab, and other public interest research projects and institutions. Her research has been published in journals such as Telematics & Informatics, Policy & Internet, and the Journal of Community Informatics.