Cities and States Push for Rural Broadband

Digital Divide is a reality in America. Broadband or high-speed Internet is spotty or not available at all in rural areas, unlike urban areas.

America’s Digital Divide

  • Some 39 percent of rural Americans — roughly 23 million people — don’t have access to broadband services, according to a 2016 report by the Federal Communications Commission.
  • By comparison, just 4 percent of Americans in urban areas lack access to high-speed Internet.
  • Some states have more pronounced digital divide such as Virginia where only 55 percent of homes in rural areas have access to broadband.

In fact, residents of these communities have few choices of internet service providers and pay higher prices for lower quality service – despite earning less than urban residents.

Both Congress and the White House have set it as a priority to bridge the divide by improving access to high-speed Internet across the nation, including far flung communities. President Trump has indicated that rural broadband expansion will be part of his $1.1 trillion infrastructure bill.

Even as the bill makes its way to Congress, many states are taking matters on their own hands to tackle this issue. These state and local officials see broadband access as essential for economic development, and for giving residents of remote areas access to improved health and educational opportunities with online services.

digging broadband
Laying cables for high-speed Internet

For example:

• Colorado Gov. John Hickenlooper recently signed two bills aimed at increasing rural broadband services and the speed by which the infrastructure is built. Senate Bill 2 was among the first bills filed in this year’s session and its passage signaled a consensus among both the Democratic and Republican parties. The accompanying Senate Bill 104 will allow more leeway for the state to get funding for the infrastructure deployment from federal sources.

• Virginia is looking to expand high-speed Internet throughout the state, with Governor Terry McAuliffe’s 2019-2020 biennial budget including an increase in rural broadband funding. Moreover, advocates of rural broadband announced the formation of the Virginia Rural Broadband Coalition earlier this year comprising government, electric cooperative and education leaders to develop policies that encourage expansion of rural broadband.

• Louisiana’s Broadband Alliance – a collaboration among six state agencies – plans to deploy more than 900 miles of fiber-optic network to expand broadband Internet service in some of the most economically distressed regions of Louisiana. The new network intends to provide direct connections for more than 80 community anchor institutions including universities, K-12
schools, libraries, and healthcare facilities.

• Wisconsin’s Public Service Commission this month awarded nearly $8 million in broadband expansion grants, focusing on rural communities – the most in state history.

“Minnesota was among the first states to realize that high-speed Internet is essential to the new economy, enacting a law in 2010 that set specific goals to be achieved such as ‘all state residents and businesses should have broadband’ by 2015. That goal has now been revised to 2022.”

Bridging the digital divide is imperative, given that some 39 percent of rural Americans — roughly 23 million people — don’t have access to broadband services, according to a 2016 report by the Federal Communications Commission. By comparison, just 4 percent of Americans in urban areas lack access to high-speed Internet.

In Virginia, the divide is even more pronounced where only 55 percent of homes in rural areas have access to broadband, according to a 2016 Virginia Chamber of Commerce study.

Fort Collins downtown
Aerial view of Fort Collins, Colo., downtown with the Cache la Poudre River
Funding Broadband Expansion

Broadband allows users to access the Internet and online-based services at significantly higher speeds than those available through “dial-up” phone services.

State and local officials argue that access to broadband would significantly improve the quality of life – say, by opening doors to advanced education via online courses or improved health service via online consultation with experts.

In fact, many municipalities are funding broadband on their own.

One example is Fort Collins, Colo.

The city, at the direction of City Council and voters, is building and implementing high-speed next-generation broadband for the whole community. Estimated to take 3 to 4 years to cover the entire growth area, the initiative will provide high-speed connectivity for $70 per month or less, as well as a less expensive internet tier of service.

Comcast and CenturyLink currently provide service in the city.

While the issue is being debated, it’s evident that the municipal bond market has been a source of financing for local broadband since 2000, says Joseph Krist of Court Street Group Research, who writes for Neighborly Issuer Briefs.

At least 8 municipalities and the U.S. Virgin Islands have issued bonds for this purpose.

“Typically, bonds have been issued to provide funding for the equipping of local broadband networks within the existing infrastructure maintained by local electric systems. The issuers tend to be owners of their own existing electric distribution systems,” Krist writes. “The bonds are generally payable from the net revenues of the local cable system and are sometimes supported by an ad valorem tax pledge in the event that cable/internet revenues are insufficient.”

Another method of financing mirrors the experience of financing rural electric distributions — the establishment of cooperatives for that purpose, he says. Much like rural electric coops, rural communities have banded together to create a critical mass sufficient to support a debt financing.

For example, Krist points to the RS Fiber coop is an entity made up of 17 rural Minnesota communities which issued bonds through one of the member communities in 2015. That structure obtained a stand-alone investment grade bond rating so the concept is viable from that standpoint and we could see more of these financings in the future.

A local group in Vermont called Central Vermont Internet also plans to bring fiber optic capability to rural communities to keep their economies up to 21st Century standards.

“Collective action such as this could easily be the digital equivalent to the joint action agency undertakings that maintained electric service in the last quarter of the 20th Century,” Krist says.

Equitable Broadband

“Fundamentally, it is a question of values,” writes Sharon Strover, Director, Telecommunications and Information Policy Institute, and Professor of Communication at University of Texas at Austin.

“In the 1930s and ’40s, the public sentiment was that the nation would be better off if everyone had reasonably comparable electricity and telephone service,” she writes in The Conversation.

“As a result, the federal government established a system of loans and grants to ensure universal access to those key utilities. To help, the FCC set up a system to charge businesses and urban customers slightly higher fees to subsidize the higher costs associated with bringing phone lines to rural areas.

“The question facing the FCC and Congress – and really, the U.S. as a whole – is whether we are willing to invest in providing broadband service equitably to both urban and rural Americans,” she writes. “Then we need to make sure it is affordable.”

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