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Bringing Broadband to Rural America [1]

['Alexander Marre']

Date: 2024-02

Introduction

High-speed broadband internet service has transitioned from a luxury good to an increasingly necessary utility.1 Rural regions are particularly susceptible to poor broadband infrastructure coverage, however, because they pose a costly business case for providers. The economic case for rural broadband infrastructure, though, is compelling despite its cost: Broadband access and adoption in rural areas is linked to increased job and population growth, higher rates of new business formation and home values, and lower unemployment rates. Unlike with many other types of infrastructure, the long-run benefits of broadband access could grow exponentially, given the potential for innovation and productivity gains it provides.2,3

In the near term, the COVID-19 pandemic has thrust the problem to the forefront of policy discussions. Employers are using remote work as a tool to protect the health and safety of their employees. Similarly, schools are offering online learning or hybrid approaches. Remote work and distance learning are difficult to achieve without a broadband internet connection at home that is fast enough to handle their audio and video requirements. At the same time, increased demand for online services during the COVID-19 pandemic has slowed speeds for those who have access.4

The Pew Research Center conducted a national survey at the beginning of the pandemic that drives home the importance of reliable internet service.5 The internet was a source of information about the coronavirus and a tool for connecting with doctors and other medical professionals for both urban and rural respondents: 62 percent of rural respondents searched online for coronavirus information, and 13 percent used the internet for communicating with health professionals. One quarter of all respondents and 14 percent of rural respondents used the internet to work remotely.

Lack of access to broadband internet in rural areas is not a new problem. Low population density and long distances to existing infrastructure make the upfront cost of infrastructure expansion high for providers. Once built, rural areas have lower adoption rates due to lower average incomes, a higher share of the population that is elderly or disabled, and lower average levels of educational attainment. A costly build out combined with low probability of paying for it with customers make some rural places an unattractive business case for broadband service.6

How big of a problem is lack of access to broadband service? Over 18 million Americans lack access to high-speed broadband service, according to the Federal Communication Commission’s (FCC) 2019 broadband deployment report.7 This figure, however, is widely seen as an underestimate of the true problem. Census blocks are considered served by broadband internet if just one household or business can “reasonably” be serviced. In urban areas, census blocks are reasonably small. In rural areas, though, census blocks can be hundreds of square miles. Alternative measures of access to broadband service put the number of unserved Americans as high as 42 million.8

To finish broadband expansion in the United States, large subsidies will likely be needed. Alternative technologies may be required in high-cost areas where rapid expansion is needed. Alternative providers may also be needed, and -- where no potential private-sector provider exists – public-private partnerships may be needed to propel infrastructure projects forward.

Local economic impacts of broadband access and adoption

Access to broadband internet service holds the potential for boosting overall economic growth. Communication infrastructure helps to improve coordination and reduce transaction costs in the marketplace. According to an article by Czernich et al., it also “may further facilitate macroeconomic growth by accelerating the distribution of ideas and information, fostering competition for and development of new products and processes, and facilitating the introduction of new work practices, entrepreneurial activities and improved job matching.”9 One study of the economic impacts of broadband infrastructure expansion among 25 developed countries found that a 10 percentage point increase in broadband access resulted in a 0.9 to 1.5 percentage point increase in annual per capita growth.10

Can large-scale economic gains translate down to the local level in rural areas? Overall, despite the limitations of data on broadband access and methodological challenges, the research suggests potentially positive impacts of broadband on local economies.11,12 Effects tend to be stronger in rural areas that are closer to metropolitan areas than in more remote regions, and the use of broadband (adoption) rather than access alone is more powerful.

Studies of the economic impacts of broadband expansion into rural areas can be broadly categorized into local labor market effects, benefits accruing to consumers, benefits accruing to businesses and homeowners, and benefits accruing to participants in telemedicine and distance learning. Highlights of these findings follow:

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[1] Url: https://www.richmondfed.org/publications/community_development/community_scope/2020/comm_scope_vol8_no1

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