$7.2 Billion for Broadband Stimulus: Opportunities & Challenges

1. $7.2 Billion forBroadband Stimulus:Opportunities & Challenges Robert C. Atkinson Director of Policy Research Columbia Institute for Tele-Information (CITI) Columbia Business School, New York April 15, 2009

2. Disclaimer Although I have assisted NTIA and RUS in moderating a series of recent public meetings on the broadband stimulus programs, I have no non-public knowledge about the programs and my comments do NOT reflect the views of either agency: they are strictly my own.

3. AGENDA • Summary of $7.2 Billion “Broadband Stimulus” • RUS an NTIA “BTOP” Programs • Broadband Deployment and Availability in West Virginia • Barriers to Broadband Adoption and Use • Creating (or Losing) Jobs With Broadband

4. NTIA “BTOP” Program • $4.7 Billion • No more than $350M for BB mapping • Leaving at least $4,350M, including- • At least $200M to expand community computer centers • At least $250M for innovative programs to encourage sustainable BB adoption • About $150M for administration, inc. $10M to Inspector General for audits and monitoring • Remainder---max $3,750M-- for project grants • Grants for up to 80% of a project’s cost • All grants to be awarded by Sept. 30, 2010 • Three phases being considered • Projects must be completed 2 years after award

5. Who Is Eligible for BTOP Grants? • States and political subdivisions • Includes DC, territories, Indian tribes, native Hawaiian organizations • Non-profit organizations • Any other entity, including a broadband service or infrastructure provider, found “by rule to be in the public interest.” • No rule yet, so “partnering” with government or non-profit results in assured eligibility

6. NTIA BTOP Grants For: • Equipment, network capability, hardware and software, technology for BB services • Build/deploy BB infrastructure • BB access for “community anchor institutions” • Facilitate BB access for “low-income, unemployed, aged and otherwise vulnerable populations” for education and employment • BB for public safety communications • Other projects that are consistent with BTOP purposes

7. BTOP Purposes • More consumer access to BB in “unserved areas” • More consumer access to BB in “underserved areas” • BB education, awareness, training, access, equipment and support for - • schools, libraries, medical, colleges and “other community support organizations” • Organizations that encourage BB use by low-income, unemployed, aged and otherwise vulnerable people • Job-creating strategic facilities in eco development zones • BB for public safety agencies • Stimulate demand for BB, economic growth and job creation

8. NTIA Grant Award Criteria • At least one grant per State • Infrastructure deployment projects should- • Increase BB affordability and subscribership • Provide greatest BB speed • Enhance service for healthcare, education and children • Not result in unjust enrichment • Consider socially and economically disadvantaged small business … and presumably other criteria developed by NTIA

9. NTIA BTOP Critical Issues • What is “broadband”? • What is an “unserved” area? • What is an “underserved” area? • Is it in the “public interest” to allow for-profit entities to receive grants? • How does applicant show: • Capability to do the project? • That project wouldn’t have been implemented without grant? • State role?

10. BTOP Opportunities “We view these grants as a test-bed or proof of concept for sustainable, viable, and scalable projects. For example, we encourage partnerships between small businesses, municipalities, and others that may demonstrate nontraditional but effective ways of getting broadband into communities. These grants will not be just for large companies.” Mark Seifert, Senior Advisor, NTIA, testifying before the House Subcommittee on Communications, Technology, and the Internet, April 2, 2009

11. Suggestions for BTOP Projects • BB Infrastructure Deployment, such as: • First/last mile (connections to users) • Mid-mile (connecting first/last mile to internet backbone) • Stimulating BB Adoption and Usage, such as: • Training and education • New ways to use BB in education, healthcare, economic development, etc.

12. RUS Program • $2.5 Billion • For loans, loan guarantees and grants • 75 percent of project’s area must be in “a rural area without sufficient access to high speed broadband to facilitate rural economic development” • Priority to projects that deliver choice of more than one service provider to end users • Priority to projects that provide service to highest proportion of unserved rural residents • Priority to current and former RUS borrowers

13. RUS Community Connect Grants in West Virginia Source: USDA, http://www.usda.gov/rus/telecom/commconnect/pdfs/2008West%20Virginia.pdf

14. RUS Community Connect Grants in West Virginia Source: USDA, http://www.usda.gov/rus/telecom/commconnect/pdfs/2008West%20Virginia.pdf

15. RUS Broadband Loans Source: USDA http://broadbandsearch.sc.egov.usda.gov/

16. Broadband DeploymentandAvailability

17. Is the US “Behind” in BB? Broadband Subscribers per 100 Population by Technology

18. Broadband Penetration Comparisons- US States and European Countries (2007 Data Based on Consumer Surveys, Not Service-Provider Reports) West Va. SOURCE: Verizon analysis: EU Member States – European Commission, DG-Information Society, “E-communications Household Survey” (June 2008), at 54. U.S. States – U.S. Census Data, as reported in U.S. Dept. of Commerce, NTIA, “Networked Nation: Broadband in America” (January 2008), at Table B-3. Other countries – OECD Broadband Statistics, Households with Broadband Access (Nov. 2008)

19. Wired Broadband Availabilityfor Residences Source: FCC, “High-Speed Services for Internet Access: Status as of December 31, 2007,” Table 14,January 2009

20. Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00-0028-T-GI, 2007 Update, April 2007

21. Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00-0028-T-GI, 2007 Update, April 2007

22. Source: West Virginia Public Service Commission, General Investigation Into The Deployment Of Advanced Telecommunications In West Virginia, Case No. 00-0028-T-GI, 2007 Update, April 2007

24. Broadband Availability Source: Connect West Virginia http://connectwestvirginia.org/mapping_and_research/county_maps.php

25. Source: WISP Directory, http://www.wispdirectory.com/index.php?option=com_mtree&task=viewlink&link_id=5504&Itemid=53

26. Commercial WISPs in West Virginia Source: WISP Directory, http://www.wirelessmapping.com/Google%20Maps3.htm

27. Observation • There are plenty of opportunities to use RUS and BTOP funding to build additional broadband infrastructure (last mile, mid-mile) in “unserved” and “underserved” West Virginia • There is a track-record of success from relatively small grants that pay the capital costs for deployment of “last mile” • Modest operating costs can be covered by monthly subscriber charges • “Mid-mile” is essential to “last mile” and may be favored BUT…”infrastructure” isn’t the whole story…

28. Barriers to Broadband Adoption and Use

29. Availabilty vs. Adoption(2007 Data, excluding satellite)

30. BB Adoption Challenge:Moving Dial-Up Users to BB What would it take dial-up users (9% of adults) to switch to broadband? • 35% say price would have to fall • 19% say nothing would get them to change • 16% don’t know • 14% say it would have to become available where they live • 11% cite some other reason Source: John Horrigan, Pew Internet & American Life Project

31. BB Adoption Challenge:Non-Users of Internet What is the MAIN reason 25% of US adults don’t use the internet? • 33% of non-users say they aren’t interested in getting online. • 13% say they can’t get access • 9% find it difficult and frustrating • 9% cite unspecified “other” reason • 7% say it is too expensive • 7% say the internet is a waste of time • 4% don’t have a computer • 3% say they are too old to learn • 3% are physically unable Source: John Horrigan, Pew Internet & American Life Project

32. Barriers to Broadband Adoption Among Rural Residents Rural (National) (44%) (32%) (23%) (14%) (8%) Source: “Consumer Insights to America’s Broadband Challenge,” ConnectedNation, Oct. 2008 at http://www.connectednation.org/_documents/ConsumerInsightsBroadbandChallenge_20081013.pdf

33. Barriers to Computer Ownership Among Rural Residents Rural (National) (62%) (24%) (10%) (10%) Source: “Consumer Insights to America’s Broadband Challenge,” ConnectedNation, Oct. 2008 at http://www.connectednation.org/_documents/ConsumerInsightsBroadbandChallenge_20081013.pdf

34. BB Adoption Challenge:Matching Policy to Problem Source: John Horrigan, Pew Internet & American Life Project

35. Observation • Encouraging greater use of existing broadband may be at least as important as building new broadband infrastructure • Creates different kinds of jobs • New demand justifies more private investment in infrastructure

36. Creating (or Losing) Jobs With Broadband

37. Creating Jobs with BB Stimulus • Capital investment of $6.4B in the form of BB stimulus grants will generate 128,000 jobs over four years (32,000 per year), nationwide • 37,300 directly (mostly construction) • 31,000 indirectly (jobs in other sectors) • 59,500 induced from spending direct and indirect incomes Source: “Estimating the Economic Impact of the Broadband Stimulus Plan,” Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009; available at http://www.elinoam.com/raulkatz/Dr_Raul_Katz_-_BB_Stimulus_Working_Paper.pdf

38. Increasing and Retaining JobsWith Improved Broadband • Distributed call centers: work at home • Data centers • Telecommuting and satellite work centers • “Back office” services • New home-based businesses • Warehousing and distribution operations • Agricultural productivity improvements BUT…

39. Jobs Challenge • While BB stimulus spending will create construction and network operations jobs, • “How many jobs can be lost as a result of productivity induced by broadband? • How many jobs can be lost as a result of outsourcing facilitated by broadband? • Finally, a broadband investment program could create new jobs in the targeted region but result in job losses in another one, with limited incremental national impact…” Source: “Estimating the Economic Impact of the Broadband Stimulus Plan,” Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009

40. Jobs Challenge Network externalities could result in another 136,000 jobs,although there is a high level of uncertainty of ultimate impact Source: Raul Katz, Director of Business Strategy, CITI , Feb. 19, 2009 40

41. No Easy or Quick Fixes “…targeted efforts to address infrastructure gaps and cost barriers could, within a few years, boost broadband adoption by as much as 10 percentage points... However,one-in-five Americans currently don’t have broadband for reasons that won’t be addressed by price cuts or a fiber node in the neighborhood. It will take time to get them up and running on broadband -- probably longer than the impacts of the stimulus package are intended to last.” Source: John Horrrigan, Pew Internet & American Life Project

42. Thank You Contact Info: rca53@columbia.edu 212-854-4222