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Broadband for Economic Growth; Energy Savings

Ohio gubernatorial candidate Ted Strickland is running for office on an ambitious program to leverage high-speed Internet "broadband" deployment for economic growth and bring its benefits to all Ohioans. Similarly, as part of his campaign for Governor, New York's Elliot Spitzer is promoting a statewide broadband initiative "to ensure universal access to affordable, high-speed broadband service for every New Yorker." Across the country, other state and legislative candidates are highlighting replacing slow dial-up Internet connections with high-speed broadband as a key policy issue.

Why broadband as a prominent state issue?

The easy answer is the lack of any serious plan by the federal government for broadband deployment. Where progressive US leaders in the past brought the world the Internet (and yes, Al Gore played a leading role in getting the Internet funded), both President Bush and the current Congress have allowed the US's global technology leadership to collapse. Just since 2000, the broadband ranking of the US has dropped from 4th in the world (measuring percentage of households with broadband) down to 16th in the world in 2006. Japan, South Korea and most of Europe have broader broadband deployment in their countries.

And those other countries have faster, cheaper broadband connections. Japanese citizens access the Internet at speeds 10 times faster than available to US homes -- and they pay just $22 a month. As Thomas Bleha wrote in a Foreign Affairs last year, US broadband currently is "the slowest, most expensive and least reliable in the developed world."

State leaders aren't waiting for the feds to act because, as this Dispatch will detail, universal broadband deployment is increasingly seen as a key component of promoting local economic growth, creating "smart" communities that are healthier and more energy efficient, and helping close the widening gap in economic opportunity.

Broadband as Jobs Creator

In a wired world, communities that are networked with broadband are more likely to attract the jobs and industries that can build a 21st century economy. From technology firms to cutting edge manufacturing to innovative health care companies, industry is growing jobs where communities are on high-speed Internet trunk lines and their employees have ready access to broadband in their homes.

A 2001 Brookings Institution study estimated the widespread adoption of basic broadband could add $500 billion to the U.S. economy and create 1.2 million new jobs per year. Not surprisingly, as a US Commerce Department study released this year details, that economic growth and those jobs are going disproportionately to communities with strong broadband deployment. Looking at growth in zip codes from 1998 to 2002, the availability of broadband kicked growth up a full percentage point and those communities ended up with a larger share of new technology-intensive firms.

Similarly, a more detailed case study in Florida found that Lake County, which created one of the most extensive municipally-owned fiber optic broadband networks in Florida, experienced double the rate of economic growth compared to similar counties without the same level of broadband deployment.

In today's world, broadband is like railroads and electricity in the past -- galvanizing new growth opportunities wherever it is built.

Smart Buildings, Energy Savings

One of the ways wiring our homes and offices promises large economic payoffs, along with immense environmental benefits, is by allowing interactive monitoring of and more efficient energy use. By creating "smart buildings" tied to the local power grid, as a 2002 Department of Energy report highlighted, utility companies won't have to keep as much wasted reserve power on hand, leading to "lower prices and less price volatility" which will "create a more resilient electric grid that is more robust and secure against brownouts, blackouts, and hostile attacks"-- the latter especially attractive in the wake of the 2003 blackout of much of the Northeast and Canada.

The Pacific Northwest National Laboratory announced earlier this year the launch of the Pacific Northwest GridWise Demonstration Projects, a regional initiative of new smart grid technologies. To outline the possibilities of the new technology, 200 homes will receive real-time price information through a broadband connection which will shift the time of operation for dryers, water heaters and other appliances when the transmission system is under stress.

In California, the state is funding an even more ambitious program, the High-Performance Commercial Buildings Project (HPCBS), targeting commercial building energy use, which currently costs about $10 billion per year -- one third of all electricity consumed in the state. The goal is to cut energy use by 70 percent in new buildings and save 50 percent in retrofits of older buildings using broadband connections combined with other technologies.

With billions of dollars in potential savings, venture capital is beginning to invest (see also here) in firms like Broadband Energy Networks and Comverge, which are deploying the broadband-related technology to monitor and use electricity, water, natural gas and other resources more efficiently. A number of companies are taking advantage of incentive programs in California and other states that encourage off-peak energy use by customers and give rebates to customers buying technology to facilitate this.

The Continuing Digital Divide

Yet states will fall far short of any of these potential savings if the United States continues to lag other countries so significantly in broadband deployment-- and some states lag others quite dramatically as well. Comparing the states, New Jersey recently edged out Hawaii to lead all states in broadband penetration with 48.6% of NJ households subscribing to a high speed connection, yet Mississippi trails all states with just 14.4% of households on broadband at the beginning of 2006.

Unsurprisingly, the gaps in broadband access also reflect existing racial and socio-economic gaps. As the Leadership Conference on Civil Rights detailed last year, Blacks and Latinos are much less likely to have access to home computers than are white, non-Latinos and are also less likely to have Internet access at home with far lower levels of broadband deployment. The overall numbers online are no doubt increasing across the board, but the digital divide between racial and ethnic groups continues.

Even where broadband is available in communities, because of high costs a Government Accounting Office report found a huge socio-economic disparity in use of the Interent, with high income households being 39 percentage points more likely to have broadband in the home than lower-income households.

And many neighborhoods have no real broadband options at all. While some business data reports near-universal deployment, the reality is that many households are bypassed. The GAO cited Kentucky where an extensive analysis found that 23% of households had no access to cable or DSL broadband even if they were willing to pay the price. The rural lag in broadband deployment, as Free Press documents is especially stark.

The flip side is that if states and communities do make broadband universal and affordable, it will make powerful new tools available to promote greater economic opportunity for all communities.

States and Communities Promoting Universal Access

So the question is what states can do to help promote affordable, universal access to broadband?

Protecting Municipal Broadband Efforts: The first answer is not to get in the way of communities that are building municipally-run broadband systems, especially the spreading wireless "wi-fi" proposals being implemented in a number of cities.

Unfortunately, under the influence of big money lobbying campaigns by large telecom companies, fifteen states have created legal barriers to communities establishing community-controlled broadband networks. The most high profile example was Pennsylvania, where Verizon helped push through a bill in November 2004 that prevents every city in the state, other than Philadelphia which was already moving forward with a community plan, from providing broadband services to their citizens. Groups like FreePress explain in detail why it makes sense to have Broadband as a Public Service and track state legislative battles over municipal broadband.

Funding Broadband Networks: States can assist communities in building local networks through both funding and coordination. Examples include:

Demanding Universal Access Commitments from Telcos: As the telephone companies increasingly want to offer video offerings to customers, they are lobbying to abolish local franchise agreements in favor of statewide regulation. 33% of Americans now live in states that have changed telecommunication laws to allow the Bells and others to directly provide television to consumers over high-speed lines.

Abandoning local franchise agreements, which protect public access television and other community benefits, has serious drawbacks, but if states are going to consider it, they should at least demand that companies applying for a statewide franchise agreement agree to deploy broadband for all households which they potentially serve. For example, Iowa enacted legislation requiring any telephone company seeking a rate increase to provide broadband services to all households within eighteen months. Without such provisions, as this testimony emphasizes, the danger is that companies will cherry-pick which communities get high-speed services while ignoring others, deepening the digital divide.

Conclusion: Taking Action

As discussed above, the economic payoff from broadband deployment, from jobs to energy savings, is so large that only bungled national leadership -- along with self-interested lobbying by cable and telecommunications companies -- can explain the slipping position of the US in global technology rankings.

Writing about the need to reverse this decline, John Podesta of the Center for American Progress and Robert McChesney of Free Press wrote earlier this year in the Washington Monthly:

[E]mpowering local governments and community groups, in coordination with private entrepreneurs, to provide universal affordable, broadband may be the single best thing we can do to make America the pre-eminent economy -- and democracy -- of the 21st century.

In the absence of federal leadership, states need to step into the breach to bring these benefits to their residents.