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October 19, 2010

Economic Development Execs Think Broadband Promotes Development

By Gary Kim
Contributing Editor

It would come as no surprise that people working in the economic development business for local government think broadband promotes or even causes some amount of local economic development. Most of us likely would agree that lack of broadband can discourage economic development, at least in the form of business relocations to an area, or housing growth that brings in new residents from outside the region. 

You might not be surprised to learn that such officials have views wildly out of sync with what federal policymakers or service providers believe is possible. 

Over 55 percent of the respondents surveyed on behalf of the International Economic Development Council believe speeds of 100 Mbps (the FCC’s (News - Alert) goal for 100 million mostly urban and suburban households) or more are needed, but within three years, not 10 years.

Over 90 percent of those surveyed found government-recommended goals of four Mbps for rural areas inadequate for spurring economic development outcomes. 

Support of the private sector also is mixed. About 37 percent of rural respondents say they do not have sufficient broadband to reach the economic outcomes presented, with over half of this group believing they may never have the broadband they need. Some 58 percent of respondents from all areas believe Universal Service Fund reform should enable communities to determine where such funds are spent.  

Fully 50 percent believe the community should own the network in whole or in partnership with private sector companies. 

Wireless has a role to play in economic development, the respondents believe, but only 37 percent of survey respondents believe it directly impacts new business attraction to a community. More respondents believe fixed-line broadband in the form of fiber access networks do have a direct effect in economic development.

Some 52 percent of respondents believe the technology can help harness home-based businesses into a strong economic development force, and 43 percent believe broadband can be used to influence underserved individuals to become entrepreneurs. 

The survey commissioned by the International Economic Development Council found that 36 percent of economic development executives believe wireless broadband has a direct impact, while 23 percent have experienced or expect it to have an indirect impact. 

About nine percent expect wireless broadband to have no impact on business attraction and another 14 percent say it is tough to assess the value, one way or the other.

On the question of convincing businesses to stay in an area, 24 percent expect wireless broadband to have a direct impact on retention, while 33 percent believe there’s only an indirect impact. 

There is not so much optimism where it comes to wireless improving conditions within depressed business districts and residential communities.  Only 11 percent to 13 percent believe there will be a direct impact. About 20 percent believe there will be an indirect impact. 

Some 55 percent of respondents believe broadband has had (or will have) a direct impact on attracting businesses to a community as opposed to 37 percent who believe wireless will do the same. Only five percent believe fiber networks will have no impact and seven percent believe this outcome will be difficult to measure.

About 40 percent of respondents expect fiber to have a direct impact on improving the competitiveness of local companies, and 30 percent expect an indirect benefit. In rural areas, about 35 percent believe new fiber access networks will enhance local competitiveness while 32 percent think there will an indirect impact.

Policymakers should take note that less than nine percent of respondents believe two Mbps to four Mbps services, available by 2013, will be adequate for any of their five top economic development goals.

Approximately 55 percent of respondents expect that 100 Mbps or more is needed by 2013. Furthermore, if a community’s goal is to use broadband as a main incentive to attract new businesses, 34 percent of respondents believe this requires a minimum of one gigabit speed. 

Those beliefs notwithstanding, few in the service provider community would likely agree that a market for speeds that high actually exists, or will exist, by 2013. Others might argue that broadband is an important infrastructure amenity, but that the evidence for a causal link to development is weak. "Necessary but not sufficient" is probably how some would see it. 

Still, there is little doubt that economic development planners believe broadband helps development, though there might be some disagreement about whether it can cause such development, and if so, how much incremental development is possible. 

The survey does show a huge gulf between local government and service provider expectations about how much broadband capacity is needed. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Jaclyn Allard
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