Putting Skin in the Game for Broadband

Recently, Anne Hazlett, the Assistant to the Secretary for Rural Development at the USDA was quoted in an interview with Telecompetitor saying, “We believe the federal government has a role (in rural broadband), but we also need to see skin in the game from states and local communities because this is an issue that really touches the quality of life in rural America”.

This is a message that I have been telling rural communities for at least five years. Some communities are lucky enough to be served by an independent telco or an electric cooperative that is interested in expanding into fiber broadband. However, for most of rural America there is nobody that will bring the broadband they need to survive as a community.

Five years ago this message was generally not received well because local communities didn’t feel enough pressure from citizens to push hard for a broadband solution. But the world has changed and now I often hear that lack of broadband is the number one concern of rural counties and towns with poor broadband. We now live in a society where broadband has grown to become a basic necessity for households similar to water and electricity. Homes without broadband are being left behind.

When I’m approached today by a rural county, one of the first questions I ask them is if they have considered putting money into broadband. More and more rural areas are willing to have that conversation. In Minnesota I can think of a dozen counties that have decided they will pledge $1 million to $6 million to get broadband to the unserved parts of their county – these are pledges to make outright grants to help pay for the cost of a fiber network.

States are also starting to step up. Just a few year ago there were only a few states with grant programs to help jump start rural broadband projects. I need to start a list to get a better count, but there are now at least a dozen states that either have or are in the process of creating a state broadband grant program.

I don’t want to belittle any of the state broadband grant programs, because any state funding for broadband will helps to bring broadband to places that would otherwise not get it. But all of the state broadband grant programs are far too small. Most of the existing state grant programs allocate between $10 – $40 million annually towards solving a broadband problem that I’ve seen estimated at $40 – $60 billion nationwide. The grants are nice and massively appreciated by the handful of customers who benefit with each grant – but this doesn’t really fit into the category of putting skin in the game at the state level.

The federal programs are the same way. The current e-Connectivity program at $600 million sounds like a lot of assistance for broadband. But this money is not all grants and a significant amount of it will be loans that have to be repaid. Even if this was 100% grant money, if the national cost to bring rural fiber is $60 billion, then this year’s program would help to fund 1% of the national broadband shortfall – all we need to do is to duplicate the program for a century to solve the broadband deficit. If this program was to be spread evenly across the country, it’s only $12 million per state.

For many years we’ve been debating if government ought to help in funding rural broadband. In some ways it’s hard to understand why we are having this debate since in the past the country quickly got behind the idea of the government helping to fund rural electricity, rural telephony and rural roads. It seemed obvious that the whole country benefits when these essential services are brought to everybody. I’ve never seen any criticism that those past programs weren’t successful – because the results of these efforts were instantly obvious.

There is nobody anywhere asking governments to outright pay for broadband networks – although some local governments are desperate enough to consider this when there is no other solution. Building rural fiber – which is what everybody wants – is expensive and putting skin in the game means helping to offset enough of the cost in order to enable a commercial provider to make a viable business plan for fiber.

I wrote a blog in December that references a study done by economists at Purdue who estimate that the benefit of rural fiber is around $25,000 per household. I look at the results of the study and think it’s conservative – but even if the results are a little high this ought to be all of the evidence we need to justify governments at all levels putting more skin in the same.

When I see a rural county with a small population talking about pledging millions of dollars towards getting broadband I see a community that is really putting skin in the game, because that is a major financial commitment. For many counties this will be the largest amount of money they have ever spent for anything other than roads. By contrast, a state grant program of $20 million per year when the state budget might be $20 billion is barely acknowledging that broadband is a problem in their state.

I’m sure I’m going to hear back from those who say I’m being harsh on the state and federal grant program, and that any amount of funding is helpful. I agree, but if we are going to solve the broadband problem it means putting skin into the game – and by definition that means finding enough money to put a meaningful dent in the problem. To me that’s what skin in the game means.

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