Beware Beto's Siren Song of Rural Broadband

Beware Beto's Siren Song of Rural Broadband

After announcing his candidacy for president, Beto O’Rourke quickly highlighted one of his primary policy interests: expanding broadband Internet into rural regions. This policy idea featured prominently in his Senate campaign, and it promises to be part of his national platform. But policymakers shouldn’t expect any economic miracles from expanding broadband. To really make an impact, rural regions will need much more than just fast Internet access; they will need access to talent and financing.

The argument for rural broadband expansion is straightforward. Rural areas’ low density and lack of a large broadband market limits broadband providers from expanding into these regions. Federal loans and grants can overcome these economic forces, giving rural areas access to the prerequisite for participation in the modern economy. With broadband access, rural regions will see an entrepreneurial renaissance, the argument goes.

Official statistics indeed tell of a worrying divide in broadband access between rural and urban areas. While the gap has been narrowing over time, broadband is available to only 65 percent of rural regions, compared to 98 percent in urban areas. But these aggregate numbers hide high variability: American Action Forum analysis of official Federal Communications Commission data found that rural population cores (i.e. small cities in rural areas) have access to high-speed broadband at about the same rates as densely populated metropolitan regions. Yet these rural cores are the easiest target for broadband funding; President Trump’s last rural broadband proposal focused primarily on these small cities.

Further, past efforts at broadband expansion haven’t shown such prompt impacts on the economies of the benefitting areas. Studies have found that the American Recovery and Reinvestment Act’s $7 billion investment in broadband development had only mixed success. While some communities saw a marginal increase in broadband adoption as part of the Community Connect program, researchers found no change in the economic and quality-of-life measurements touted by the Obama Administration. Paradoxically, broadband adoption also increased in one community where a federal grant was ultimately terminated.

Research on the Department of Agriculture’s Broadband Loan Program also found “no evidence that loans received…have had a measurable positive impact on recipient communities.” And the most comprehensive and up-to-date metastudy on the topic of rural broadband summarizes the economic literature as being simply inconclusive on broadband’s entrepreneurial impact. In fact, one study found digital connectivity in remote rural areas actually hurt the local entrepreneurs because it opened these regions to e-retail.

Google Fiber’s experience in Kansas City provides an anecdotal version of the complexity of the problem, albeit in an urban setting. One local leader told Bloomberg, “We’re scratching our heads a little bit. Why is Kansas City really not taking off, especially with this asset like Google Fiber?”

The example of rural electrification in the 1930s provides a useful contrast. Rural areas saw a near-immediate economic benefit from electrification, but this benefit came because electricity provided a raw material and the technology to leverage what already existed. In other words, rural businesses only needed to buy new machines to take advantage of the new electricity.

But broadband functions very differently in an economy. Startups might have broadband, but that access must be matched with talent and financing for the broadband to provide any economic boost.

While there are pockets of innovation, rural America faces similar challenges to Kansas City. Kids who grow up in rural areas tend to be more upwardly mobile than their peers in larger urban areas, but the young and educated are leaving for better opportunities in bigger cities, limiting the growth potential of new companies in non-metro regions. Further, financing for new ventures is tough to come by.

Indeed, when rural Americans are polled, access to advanced job training and skills development, as well as improving the quality of schools, rank far higher than better access to high-speed Internet. High-speed Internet is at the bottom of pressing concerns, far below jobs and the opioid crisis, and even below access to good doctors and hospitals, access to public transportation, and access to grocery stores.

Rural broadband buildout seems like an easy win, and thus an obvious policy to include in a presidential campaign. But aspirations need to meet reality. Rural broadband likely will not be the savior of rural regions without the talent and financing to match.

Will Rinehart is the Director of Technology and Innovation Policy at the American Action Forum.

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