Estimation of the Net Benefits of Indiana Statewide Adoption of Rural Broadband

This paper projects the statewide net benefits that could be obtained from installation of rural broadband in all of the areas served by Rural Electric Member Cooperatives (REMC) in the state of Indiana. This analysis draws heavily upon an initial analysis that was done for the Tipmont Cooperative. Then six additional Indiana REMCs were added, although with somewhat less precision than the original Tipmont analysis. Then the benefit-cost results of these seven REMCs were extrapolated to the state of Indiana.  The benefit-cost ratios range from 2.97 to 4.09 for the seven REMCs. From a societal perspective, the rural broadband investment is clearly quite attractive. However, the anticipated revenue from customers would not be adequate to cover the total system costs, so some form of external assistance would be needed to incentivize the investments.

The sum of net present value of benefits for the seven cooperatives is $2,252,600,453. There are 92,726 members in these co-ops, so the net benefit per member is $24,293 (weighted average) for the seven cooperatives. Extrapolating the net benefits for these seven REMCs to the state, the total for the state of Indiana would be $11,976,222,899. In other words, the state of Indiana would receive about $12 billion in net benefits if the broadband investment were made statewide. That translates to $1 billion per year annuitized over 20 years at six percent interest rate.