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4/29/2009
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$$7.2 Billion forBroadband Stimulus:Broadband Stimulus:
Opportunities & ChallengesWest Virginia High Technology Consortium
Roundtable Discussion of"Broadband's Impact on Your West Virginia Business"
Fairmont, West Virginia
Robert C. AtkinsonDirector of Policy Research
April 15, 2009
Director of Policy ResearchColumbia Institute for Tele‐Information (CITI)
Columbia Business School, New York
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Disclaimer
Although I have assisted NTIA and RUS in d ti i f t blimoderating a series of recent public
meetings on the broadband stimulus programs I have no non-public knowledgeprograms, I have no non public knowledge about the programs and my comments do NOT reflect the views of either agency: they are strictly my own.
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AGENDA
• Summary of $7.2 Billion “Broadband Sti l ”Stimulus”– RUS an NTIA “BTOP” Programs
Broadband Deployment and Availability in• Broadband Deployment and Availability in West Virginia
• Barriers to Broadband Adoption and Use• Barriers to Broadband Adoption and Use• Creating (or Losing) Jobs With Broadband
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NTIA “BTOP” Program• $4.7 Billion
– No more than $350M for BB mappingLeaving at least $4 350M including– Leaving at least $4,350M, including-
• At least $200M to expand community computer centers• At least $250M for innovative programs to encourage
sustainable BB adoptionsustainable BB adoption• About $150M for administration, inc. $10M to Inspector
General for audits and monitoring– Remainder---max $3,750M-- for project grants$ , p j g– Grants for up to 80% of a project’s cost– All grants to be awarded by Sept. 30, 2010
• Three phases being considered• Three phases being considered– Projects must be completed 2 years after award
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Who Is Eligible for BTOP Grants?
1. States and political subdivisionsIncl des DC territories Indian tribes nati e– Includes DC, territories, Indian tribes, native Hawaiian organizations
2. Non-profit organizationsp g3. Any other entity, including a broadband
service or infrastructure provider, found “b l t b i th bli i t t ”“by rule to be in the public interest.”
– No rule yet, so “partnering” with government or non-profit results in assured eligibilityp g y
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NTIA BTOP Grants For:
1. Equipment, network capability, hardware and software, technology for BB servicesgy
2. Build/deploy BB infrastructure3. BB access for “community anchor institutions”4. Facilitate BB access for “low-income,
unemployed, aged and otherwise vulnerable populations” for education and employmentp p p y
5. BB for public safety communications6. Other projects that are consistent with BTOP
purposes
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BTOP Purposes1. More consumer access to BB in “unserved areas”2. More consumer access to BB in “underserved
areas”3. BB education, awareness, training, access,
equipment and support for -(a) schools, libraries, medical, colleges and “other
comm nit s pport organi ations”community support organizations”(b) Organizations that encourage BB use by low-income,
unemployed, aged and otherwise vulnerable people(c) Job-creating strategic facilities in eco development(c) Job creating strategic facilities in eco development
zones4. BB for public safety agencies5. Stimulate demand for BB, economic growth and job5. Stimulate demand for BB, economic growth and job
creation
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NTIA Grant Award Criteria1. At least one grant per State2. Infrastructure deployment projects should-
(A) Increase BB affordability and subscribership(A) Increase BB affordability and subscribership(B) Provide greatest BB speed(C) Enhance service for healthcare, education and
childrenchildren(D) Not result in unjust enrichment
3. Consider socially and economically disadvantaged small businessdisadvantaged small business
… and presumably other criteria developed by NTIANTIA
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NTIA BTOP Critical Issues• What is “broadband”?
What is an “unserved” area?• What is an “unserved” area?• What is an “underserved” area?• Is it in the “public interest” to allow for-profitIs it in the public interest to allow for profit
entities to receive grants?• How does applicant show:
– Capability to do the project?– That project wouldn’t have been implemented
without grant?• State role?
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BTOP Opportunitiespp“We view these grants as a test-bed or proof of concept for sustainable viableproof of concept for sustainable, viable, and scalable projects. For example, we encourage partnerships between small businesses, municipalities, and others that may demonstrate nontraditional but effecti e a s of getting broadband intoeffective ways of getting broadband into communities. These grants will not be just for large companies ”for large companies.
Mark Seifert, Senior Advisor, NTIA, testifying before the House Subcommittee on Communications, Technology, and the Internet, April 2, 2009
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Suggestions for BTOP Projectsgg j
• BB Infrastructure Deployment, such as:– First/last mile (connections to users)– Mid-mile (connecting first/last mile to internet
backbone)backbone)• Stimulating BB Adoption and Usage, such as:
– Training and educationTraining and education– New ways to use BB in education, healthcare,
economic development, etc.
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RUS Programg• $2.5 Billion
For loans loan guarantees and grants– For loans, loan guarantees and grants– 75 percent of project’s area must be in “a rural
area without sufficient access to high speed broadband to facilitate rural economicbroadband to facilitate rural economic development”
– Priority to projects that deliver choice of more than one service provider to end usersthan one service provider to end users
– Priority to projects that provide service to highest proportion of unserved rural residentsP i it t t d f RUS b– Priority to current and former RUS borrowers
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RUS Community Connect Grants in West VirginiaWest Virginia
Grantee and Location
Year Amount Project DescriptionLocation
Philippi Municipal Building Comm., Philippi
2002 $2,391,115 Upgrade muni cable system to HFC for internet access
Gateway Telecom (aka StratusWave),Pine Grove
2003 $181,000 WISP: connect school, FD, PD, community center, etc; provide computer and internet training
Gateway Telecom,Middleborne
2003 $192,000 WISP: same
Gateway Telecom 2003 $182 000 WISP: sameGateway Telecom, Bethany
2003 $182,000 WISP: same
Source: USDA, http://www.usda.gov/rus/telecom/commconnect/pdfs/2008West%20Virginia.pdf
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RUS Community Connect Grants in yWest Virginia
Grantee and Location
Year Amount Project Description
Mountain Champion 2003 $275,000 WISP: connect school, FD,pCommunity First, Richwood
$ , , ,PD, community center, etc; provide computer and internet training
T f D 2005 $280 360 WISPTown of Davy,Davy
2005 $280,360 WISP: same
WV Wisp,Reedy
2008 $628,200 WISP: sameReedy
Source: USDA, http://www.usda.gov/rus/telecom/commconnect/pdfs/2008West%20Virginia.pdf
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RUS Broadband Loans
Source: USDA http://broadbandsearch.sc.egov.usda.gov/
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B db d D l tBroadband Deploymentand
Availability
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Is the US “Behind” in BB?
Broadband Subscribers per 100 Populationb T h l
30
35
40
Fibre/LAN Cable
USA‐#16
by Technology
15
20
25 DSL OECDAverage
OECD average
0
5
10
Source: OECD
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Broadband Penetration Comparisons-US States and European CountriesUS States and European Countries
(2007 Data Based on Consumer Surveys, Not Service-Provider Reports)
West Va.
SOURCE: Verizon analysis: EU Member States – European Commission, DG‐Information Society, “E‐communications Household Survey” (June 2008), at 54. U.S. States – U.S. Census Data, as reported in U.S. Dept. of Commerce, NTIA, “Networked Nation: Broadband inAmerica” (January 2008), at Table B‐3. Other countries – OECD Broadband Statistics, Households with Broadband Access (Nov. 2008)
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Wired Broadband Availabilityed oadba d a ab tyfor Residences
xDSL AvailabilityWhere ILECs Can Provide Telephone Service
Cable ModemAvailability Where Cable TV Systems Can Provide Cable TV Service
West Virginia 74% 84%
Nationwide 82% 96%
Source: FCC, “High‐Speed Services for Internet Access: Status as of December 31, 2007,” Table 14, January 2009
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Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00‐0028‐T‐GI, 2007 Update, April 2007
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Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00‐0028‐T‐GI, 2007 Update, April 2007
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Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00‐0028‐T‐GI, 2007 Update, April 2007
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Broadband Availability
Source: Connect West Virginiahttp://connectwestvirginia.org/mapping_and_research/county_maps.php
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Source: WISP Directory, http://www.wispdirectory.com/index.php?option=com_mtree&task=viewlink&link_id=5504&Itemid=53
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Commercial WISPs in
WestWestVirginia
Source: WISP Directory, http://www.wirelessmapping.com/Google%20Maps3.htm
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Observation• There are plenty of opportunities to use RUS and
BTOP funding to build additional broadband infrastructure (last mile mid-mile) in “unserved” andinfrastructure (last mile, mid-mile) in unserved and “underserved” West Virginia
• There is a track-record of success from relatively small grants that pay the capital costs forsmall grants that pay the capital costs for deployment of “last mile”– Modest operating costs can be covered by monthly
subscriber charges– “Mid-mile” is essential to “last mile” and may be favored
BUT…”infrastructure” isn’t the whole story…
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Barriers to Broadband Adoption and Usep
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Availabilty vs. Adoption(2007 Data excluding satellite)(2007 Data, excluding satellite)
U.S. West VirginiaAvailability 92% 77%Availability 92% 77%
Adoption 51% 34%
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BB Adoption Challenge:Moving Dial Up Users to BBMoving Dial-Up Users to BB
What would it take dial-up users (9% of adults) to switch to broadband?to switch to broadband?
• 35% say price would have to fall• 19% say nothing would get them to change• 19% say nothing would get them to change• 16% don’t know• 14% say it would have to become available• 14% say it would have to become available
where they live• 11% cite some other reason
Source: John Horrigan, Pew Internet & American Life Project
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BB Adoption Challenge:Non‐Users of InternetNon Users of Internet
What is the MAIN reason 25% of US adults don’t use the internet?33% of non users say they aren’t interested in• 33% of non-users say they aren’t interested in getting online.
• 13% say they can’t get access9% find it diffic lt and fr strating• 9% find it difficult and frustrating
• 9% cite unspecified “other” reason• 7% say it is too expensive• 7% say the internet is a waste of time• 4% don’t have a computer• 3% say they are too old to learny y• 3% are physically unableSource: John Horrigan, Pew Internet & American Life Project
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Barriers to Broadband Adoption Among Rural ResidentsAmong Rural Residents
(44%)
(National)Rural
( )
(32%)
(23%)
(14%)
(8%)
Source: “Consumer Insights to America’s Broadband Challenge,” ConnectedNation, Oct. 2008 at http://www.connectednation.org/_documents/ConsumerInsightsBroadbandChallenge_20081013.pdf
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Barriers to Computer Ownership Among Rural Residents
(62%)
Rural (National)
(62%)
(24%)(24%)
(10%)
(10%)
Source: “Consumer Insights to America’s Broadband Challenge,” ConnectedNation, Oct. 2008 at http://www.connectednation.org/_documents/ConsumerInsightsBroadbandChallenge_20081013.pdf
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BB Adoption Challenge:M t hi P li t P blMatching Policy to Problem
Policy Response
On line literacy
Vouchers, USF
Computer literacy
Infrastructure
Source: John Horrigan, Pew Internet & American Life Project
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Observation• Encouraging greater use of existing
broadband may be at least as important asbroadband may be at least as important as building new broadband infrastructure – Creates different kinds of jobsj– New demand justifies more private investment
in infrastructure
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Creating (or Losing) Jobs With Broadband
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Creating Jobs with BB Stimulus
• Capital investment of $6.4B in the form of BB stimulus grants will generate 128,000 j b f (32 000 )jobs over four years (32,000 per year), nationwide
37 300 directly (mostly construction)– 37,300 directly (mostly construction)– 31,000 indirectly (jobs in other sectors)– 59,500 induced from spending direct and59,500 induced from spending direct and
indirect incomes
Source: “Estimating the Economic Impact of the Broadband Stimulus Plan,” Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009; available at http://www.elinoam.com/raulkatz/Dr_Raul_Katz_‐_BB_Stimulus_Working_Paper.pdf
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Increasing and Retaining JobsWith Improved BroadbandWith Improved Broadband
• Distributed call centers: work at home• Data centers• Telecommuting and satellite work centers• “Back office” services• New home-based businesses• Warehousing and distribution operations• Agricultural productivity improvementsAgricultural productivity improvements
BUTBUT…
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Jobs Challengeg
• While BB stimulus spending will create construction and network operations jobsconstruction and network operations jobs,– “How many jobs can be lost as a result of
productivity induced by broadband? – How many jobs can be lost as a result of
outsourcing facilitated by broadband?– Finally a broadband investment programFinally, a broadband investment program
could create new jobs in the targeted region but result in job losses in another one, with limited incremental national impact ”limited incremental national impact…
Source: “Estimating the Economic Impact of the Broadband Stimulus Plan,” Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009
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Network externalities could result in another 136,000 jobs,
Jobs Challengealthough there is a high level of uncertainty of ultimate impact
2009 2010 2011 2012 TotalProductivity Effect
Jobs Lost in professional and i f ti i
(19,000) (17,000) (15,000) (13,000) (64,000)
information services
Jobs lost in other sectors
(61,000) (54,000) (47,000) (40,000) (202,000)
Subtotal (80,000) (71,000) (62,000) (53,000) (266,000)
I ti N b i 55 000 47 000 40 000 33 000 175 000InnovationEffect
New business services
55,000 47,000 40,000 33,000 175,000
New economic activity
64,000 55,000 46,000 38,000 203,000
Subtotal 118,000 101,000 86,000 70,000 375,000, , , , ,
Outsourcing Effect
Pessimistic scenario (33,000) (29,000) (26,000) (22,000) (110,000)
Mid-course scenario 8,000 7,500 6,000 5,500 27,000
Optimistic scenario 49,000 44,000 38,000 33,000 164,000
Total Pessimistic scenario 5 000 1 000 (2 000) (5 000) (1 000)Total Pessimistic scenario 5,000 1,000 (2,000) (5,000) (1,000)
Mid-course scenario 46,000 37,500 30,000 22,500 136,000Optimistic scenario 87,000 74,000 62,000 50,000 273,000
40Source: Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009
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No Easy or Quick Fixes“…targeted efforts to address infrastructure gaps and cost barriers could, within a few years boost broadband adoption by as muchyears, boost broadband adoption by as much as 10 percentage points... However, one-in-five Americans currently don’t have broadband for reasons that won’t be addressed by price cuts or a fiber node in the neighborhood. It will take time to get them upneighborhood. It will take time to get them up and running on broadband -- probably longer than the impacts of the stimulus package are intended to last ”intended to last.”
Source: John Horrrigan, Pew Internet & American Life Project
