Today’s blog wonders why local governments don’t view an ISP that is going to build a fiber network in the same way that they view other economic development opportunities. What do I mean by that? Local governments roll out the red carpet for a business that is considering building a factory that will bring jobs. Communities routinely offer incentives to attract a new business, such as offering free land in an industrial park. It’s routine to offer relief on property taxes and other fees for a company that is bringing new jobs to the community. Local governments sometimes offer a cash incentive to coax a new employer to build in the community.
These kinds of incentives come from the traditional economic development playbook. Local governments understand the math involved for a business that will bring a hundred jobs to the community. They can quantify how those jobs will result in property taxes from employees, and how the new salaries will be spent to support the other businesses in the community. The economic development playbook has always been pretty simple – new jobs bring prosperity.
To be fair, local governments sometime make concessions to an ISP that is going to build fiber – but not with the same zeal and fervor associated with bringing a new factory. A city might give a break to a new fiber builder by relaxing right-of-way rules or by providing expedited permitting. They will sometimes donate spare land or a building. But generally, the concessions to bring a fiber network are not of the same magnitude as the concessions given to other potential new businesses. It’s not unusual to see the opposite of concessions where a local government instead asks for concessions from an ISP, such as providing free fiber connections for government buildings.
This mystifies me. A new fiber network brings huge benefits to a community with inadequate broadband or that is suffering from a lack of competition due to a cable company controlling the market. The investment a fiber overbuilder makes in building a fiber network can easily equal or surpass the dollar investment that another company might make in bringing a new factory or a call center.
- An ISP always brings at least a few jobs in the form of fiber technicians. More local jobs are created if the ISP is going to open a local business office. But the real jobs benefit of building a fiber network comes from making it easier for folks to work from home. A fast broadband network allows existing residents to find better paying jobs online than are available locally. If the community is a desirable place to live, a fiber network can attract people who want to work from home and get away from big cities or bad weather.
- A new fiber network helps everybody in a community by bringing competition. The industry rule of thumb has always been that competition will lower the cost of broadband across the board by at least 15%. That’s a huge saving and affects every household that buys broadband – including those who stay with the incumbent providers. These are the kinds of savings that economists love because when residents save money on a monthly commodity, they spend that money elsewhere to the benefit of grocery stores, restaurants, and every other local merchant.
- Competition might bring the biggest benefit to the local business community. When there is only one incumbent ISP selling to businesses, the rates are often extraordinarily high – sometimes many times the rates charged to a resident buying the same broadband. Lowering costs across the whole business community is a tangible and measurable benefit.
Part of the reason that bringing fiber isn’t considered as economic development is that ISPs are not telling a good story about the economic benefits of bringing fiber. In their defense, ISPs concentrate of building and operating networks and are not used to talking, jobs, local revenue multipliers, and the other economic development arguments that the folks who bring new factories are adept at talking about.
But I think ISPs are missing the boat. Bringing a fiber competitor to a community is at the top of the list for bringing economic development for most communities.