Fiber Networks as Community Development

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.

5 thoughts on “Fiber Networks as Community Development

  1. Hi Doug – Still here and grabbing the latest goodie from your blog. Fiber IS great and deserving of more attention but, after reading one or two articles (and there are more), I see that fiber network is now stuck with some bad press. SEE:
    It’s too bad because communities suffer from the lack of solutions that possibly could grow so many possibilities. During these times of high inflation, trying to compete gets even tougher. I’m wondering who can tough it out and rise as stars and I see you are too! Thanks! WEBGURL

  2. The vast majority of communities, other than the largest cities, have moved away from “business recruitment” via tax incentives. Rather, more and more are approaching economic development (growth) via the “$th Wave”. Here the focus is on people rather than businesses and jobs: what can we do to make out community more attractive to people. Here, most communities have come to realize that broadband is a vital piece of the puzzle: necessary but not sufficient. In other words, most communities realize that they must have broadband but its not a magic bullet. So, with all due respect, I think your premise for most communities (other than the largest cities) is incorrect.

  3. If there’s already a service provider in the area, then offering a potential competitor a sweet deal would be the community playing favorites. If the existing service is not sufficient (such as DSL, or old DOCSIS technology), they should first offer the incumbent the same incentives to help defray the cost of some mutually agreed upon upgrades to the service. That won’t bring in competition, but it would be fair to the current provider who already has investment and infrastructure in the area. If the incumbent doesn’t want to take the deal, they could then offer it to another provider. In either case, depending on how much the community is willing to put up on their end, and whether there are ongoing incentives, they could also have a requirement that pricing be set at some reasonable amount. For example, no higher then some factor of the average broadband price around the country for the same service.

  4. In my county of Piscatiquis the commissioners have come out saying expanding in fiber is expanding in “antiquated technology”. They wrongly believe the future is starlink and other satellite modes and refuse to put money towards fiber technology using money granted to expand communications for ecomm towers rather then suppling internet to those that require them t.

    • It’s likely that one or more ISP is going to take BEAD funding and bring faster technology to the County. Your commissioners couldn’t be more wrong about satellite. But by not participating they can’t complain if they end up with an ISP or technology they don’t like, or if parts of the County get no broadband solution.

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