Broadband and Unemployment

Economists at the University of Tennessee at Chattanooga and Oklahoma State University conducted a study that correlates broadband speeds to unemployment. They concluded that unemployment rates are 0.26% lower in counties with faster broadband. They further concluded that broadband has a bigger impact on jobs in rural areas than in metropolitan ones.

The lead economist on the project, Bento J. Lobo, lives in Chattanooga and began the investigation because of the high-speed municipal fiber network in the City. He was curious if that network had contributed in a measurable way to jobs. The study also looked at FCC data from the National Broadband Map dataset and looked at 95 other counties in Tennessee.

The study looked at broadband availability and unemployment over the period from 2011 to 2016. The study measured broadband availability by considering places that have more than one landline broadband provider defined as served, with the rest either unserved or underserved. They concluded that Tennessee looks a lot like the rest of the country in that urban areas have decent broadband while broadband options in rural parts of the state are limited.

I have to wonder about the extent to which poor FCC broadband mapping data suppressed the findings of the study. I wrote a blog earlier this week that highlighted a Penn State study that showed the inadequacies of the FCC data in Pennsylvania, where the number of people that have broadband availability was overstated in every county in the state. For example, the Penn State study showed that there are counties in the state that the FCC considers as fully covered by broadband, but in which the average actual download speed in the county is at half of the FCC’s 25/3 Mbps definition of broadband. That kind of mapping error has to be affecting the results found in this unemployment study by overstating the rural areas that have good broadband.

The fact that the authors found a correlation is impressive after understanding the nature of the FCC dataset. The authors of this report say that the topic is worthy of more granular studies looking at specific counties that get broadband for the first time. At CCG we work with such counties and we’ve gathered a lot of anecdotal evidence over the years that broadband brings jobs to rural America.

Everywhere we go we see evidence that rural people are hungry for good-paying jobs. In one rural county we studied in Minnesota we saw that every single farm in the county had an incorporated home-based business that was separate from farming. Somebody at every farm was trying to supplement farming income. The rural folks in that county hoped that they could find better-paying jobs after getting broadband. In this particular county, the farms didn’t even have rudimentary DSL, and their broadband options were limited to satellite broadband or cellular data.

Parts of this county have gotten wireless broadband that is advertised at speeds between 25 Mbps – 50 Mbps. I agree with the researchers that more granular study ought to be done and it would be illuminating to have studied the rural households in this county before and after the introduction of broadband. My guess is that broadband has a bigger impact than calculated by this study.

Good broadband enables rural residents to find home-based online jobs – an exploding part of the new economy. In this particular county the unemployment rate might not change due to broadband – but household incomes are likely to increase as farm family members find better-paying jobs online to replace the ones they are tackling today without broadband. That kind of job upgrade would not be measured by looking at the unemployment rate, but would be discovered in more granular analysis.

The impacts in bigger cities like Chattanooga must be a lot harder to quantify. Again, we know anecdotally that programmers and other high-tech folks moved to Chattanooga due to the ubiquitous gigabit fiber network. It has to be very hard to somehow pinpoint those fiber-related new jobs out of a diverse big-city economy. This has to be particularly hard to pinpoint the impact of broadband in an economy where unemployment rates fell nationwide during the whole study period.

Can You Trust Your Small ISP?

FCC Commissioner Michael O’Rielly recently made a speech at the Media Institute “Free Speech America” Gala in which he made some serious allegations against municipal broadband. From that speech:

In addition to creating competitive distortions and misdirecting scarce resources that should go to bringing broadband to the truly unserved areas, municipal broadband networks have engaged in significant First Amendment mischief. As Professor Enrique Armijo of the Elon University School of Law has shown in his research, municipalities such as Chattanooga, Tennessee, and Wilson, North Carolina, have been notorious for their use of speech codes in the terms of service of state-owned networks, prohibiting users from transmitting content that falls into amorphous categories like “hateful” or “threatening.” These content-based restrictions, implicating protected categories of speech, would never pass muster under strict scrutiny. In addition to conditioning network use upon waiver of the user’s First Amendment rights, these terms are practically impossible to interpret objectively, and are inherently up to the whim of a bureaucrat’s discretion. How frightening.

Let me address the three allegations he’s made against municipal broadband:

Municipalities create competitive distortion. The fact is that most US markets have almost no real competition – they instead have weak competition between a cable company and telco. O’Rielly is repeating a familiar talking point of the big ISPs who don’t want any competition. Customers love real competition whether it comes from a municipal provider or from a fiber overbuilder.  Consumer Reports recently listed the Chattanooga municipal ISP cited by O’Rielly as the ISP with the highest customer satisfaction in the country. I think what O’Rielly and the big ISPs call market distortion, consumers would call real competition.

Municipalities misdirect needed investments from unserved areas.. This is a particularly ironic statement. Wilson, Greenlight used those ‘scarce resources’ to build fiber to the nearby tiny unserved town of Pinetops, NC. Anti-municipal legislation in in North Carolina first required that Wilson not bill outside of their city boundaries. That same legislation then forced Wilson to sell or abandon the network when Suddenlink decided by build in the town.

Anybody who knows the industry knows that the big ISPs are not investing a single nickel of their own money in rural broadband. The big ISPs have been willing to spend the FCC’s tax money to implement 10/1 Mbps broadband from the CAF II program, but otherwise they don’t care a whit about the unserved areas of the country. I’m really not sure who Commissioner O’Rielly thinks will invest in rural America if the FCC precludes rural towns, counties and townships from solving their local lack of broadband.

Municipalities restrict First Amendment rights of customers. This allegation is almost too ridiculous to respond to. Take the example of Wilson, North Carolina, who the Commissioner singled out. The wording of the Wilson terms of service are nearly identical to the terms of service from Charter, the largest ISP in the region. I’ve not done the same comparison for Chattanooga, but I’ve done so for around twenty other municipal ISPs and they all typically mimic the terms of service of their commercial competitors.

A have a lot of clients that are municipal fiber providers, fiber overbuilders and small telcos. I can’t think of one example over the last decade when one of my clients unilaterally shut down a customer for things they’ve said on the web. They mimic the terms of service from the big ISPs, because all ISPs are occasionally asked by law enforcement to shut down a user who is harassing somebody or otherwise engaging in nefarious, illegal or other bad practices on the web. The terms of service give the ISPs the cover to disconnect customers under such circumstances.

Commissioner O’Rielly has it backwards and it’s the big ISPs that daily violate the trust of their customers. Small ISPs don’t use deep packet inspection to read emails or messaging. Small ISPs don’t record and then sell or use customer web search history. Small ISPs don’t track what their customers do on the web. Smalll ISPs don’t monetize their customer’s data.

Commissioner O’Rielly ought to talk with some customers of the two ISPs he’s singled out. Those customers will tell them that they trust their local municipal ISP far more than they trust Comcast or Charter or AT&T. The Commissioner’s talking points come straight from the big ISP lobbyists and he further supports his position by citing a discredited whitepaper paid for by the big ISPs. If the Commissioner spent more time outside the Beltway he’d find out that people love and trust their small ISPs – be that a municipality, a fiber overbuilder or a small telco.