MTA Commentary–Broadband economic stimulus, Part II

I thought you might be interested in this month’s MTA Commentary, which discusses broadband economic stimulus policy. As one official puts it, investment incentives should be “timely, targeted and temporary.” Otherwise, long term risks may outweigh short term benefits.

Feel free to share this commentary.

Please call/reply if you have any comments or questions.

Best,

Geoff Feiss
Montana Telecommunications Association
406.442.4316 (office)
406.594.0424 (mobile)

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MTA Commentary—Economic Stimulus, Part II

January 21, 2009

In his inaugural address to the nation yesterday, President Obama listed
some of the formidable challenges that lie ahead of our nation, and some of the
policies he plans to pursue. Near the top of the list, of course, is the economy.

The President and Congress already are developing plans for a package of
proposals to help stimulate our economy. The details of the stimulus package
continue to emerge. In general, the package appears to include some
combination of tax reductions and infrastructure investment.

In fact, last week, House Democrats released a discussion draft the
“American Recovery and Reinvestment Act.” The package contains $825 Billion
of infrastructure investment and tax reductions. Included among the proposals
are $6 billion of broadband investment incentives.
In the past, I have talked about the value of broadband communications,
as well as various reports that question America’s standing in the world in terms
of broadband deployment. On the matter of the value of high speed
communications networks to the nation’s economy, there is no doubt that
broadband deployment truly qualifies as infrastructure investment. High speed
communications networks form the foundation that enables more efficient, more
effective economic activity, whether such activity involves personal
communications, education, health care or business sales and marketing, to
name just a few uses of broadband infrastructure. Investing in broadband really
does help the economy.

But we need to be careful with how we invest in our broadband
infrastructure. And we need to be sure we have our facts right before we make
additional expenditures. For example, as I discussed last month, one widely cited
study ranks the United States 15th among developed countries in terms of
per capita broadband usage. However, we rank above Japan, considered one of
the most “wired” nations in the world. And practically each one of the countries
that rank above us could fit inside the borders of Montana. Moreover, the same
widely used study puts the U.S. in first place by a factor of more than two times
above the second place country—Japan—in terms of total population using
broadband communications. And these statistics don’t even include as many as
70 million broadband connections in the U.S. that weren’t counted in the study.

Further, there have been studies that explore why broadband is not
subscribed to even when it’s available. That is, it’s worth noting that even where
investment in broadband is made, there’s no guarantee that broadband is used.
According to several studies, broadband usage—or non-usage—is more related
consumers’ education and income. Deployment of additional broadband
capability won’t change that situation, at least not immediately.

To some extent, we see this in Montana. Montana’s independent telecom
providers are deploying broadband capabilities to the edges of their networks,
reaching as many as 100 percent of their customers. And yet, the average
uptake by customers is in the range of 60 to 75 percent. We can’t determine
precisely why there is a differential between availability and usage, but we
suspect part of the reason is cost, and another part is that some people don’t—
yet—see a benefit.

This is not to say that we’re sitting pretty when it comes to ubiquitous
deployment of high speed communications networks. We’re not. There are
customers and areas that remain unserved, or at least underserved with
broadband capabilities. And the economic stimulus packages that are being
contemplated can help—if they’re crafted and implemented correctly.

One Obama Administration official has said that economic stimulus needs
to be “timely, targeted, and temporary.” In other words, investment incentives
need to be turned into actual investment quickly to have their desired effect on
the economy. Further investment needs to be targeted to where it actually is
needed. And it should be focused on one-time investments, so that we don’t
create a long-term dependency on public support.
An investment in broadband infrastructure, for example, in an area that
already has broadband not only would be a waste of money, but it would threaten
to create an entity that would be dependent on continued public support to
survive. Meanwhile, the existing broadband provider in such a situation would
face an “uneconomic” competitor. In this situation, the existing provider would be
weakened. And when public support goes away, there would be the risk of
leaving two broadband corpses behind where one viable operation existed
before.

Fortunately, both Congress and the Montana Legislature are watching. As
Congress reviews economic stimulus proposals, Montana Senate President Bob
Story has proposed an Interim Committee to oversee and evaluate stimulus
package funding. And Senate Minority Leader, Carol Williams, has requested a
bill to establish a procedure for recommendations on expenditure of federal
stimulus funds.
It’s good to see the Legislature exert its prerogative.

Checks and
balances work, because in addition to “timely, targeted, and temporary” stimulus
policies, legislative participation in the process can stimulate accountability and
transparency.

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Contact: Geoff Feiss, General Manager

Montana Telecommunications Association

406.442.4316 (office)

406.594.0424 (mobile)

[email protected]