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January 31, 2010

Should Vermont Pay for Broadband Deployment?

"Does extending broadband access to the last unserved 5% of Vermonters really stimulate economic development?" one Vermont senator asked.

"Why should the State provide money to make that happen?" asked another senator.

Two good questions at a time when Vermont is struggling to close a $153 million budget gap and will have to stop doing some of the things it has traditionally done. Should we really be doing something new?

It was my job to answer these questions since I was testifying before a senate committee in support of Governor Douglas' proposal to use $3.17 million of federal stimulus money for a program called Backroads Broadband designed to make sure that the hardest to reach last 5% of Vermonters do get broadband access in the near future. (More about Backroads Broadband is at http://cto.vermont.gov/blog/backroadsbroadband. Currently about 85% of Vermonters have access to broadband; we think programs under way including some luck with competitive stimulus grants'll get us to 95%; that's why we're planning for the last 5%).

So does serving the last 5% really make a difference to economic development?

In my opinion, yes.

First of all, the unserved people are not spread evenly around the state; they're in clusters. In some areas there is no broadband availability at all. Who's going to open a new business in a place where they can't go online? How can potential workers in these areas work from home or learn from home if they can't go online? Given broadband, though, these are often places where housing is cheap and space is available at a reasonable price for new businesses. These are places where economic development is needed. These are places where economic development can occur – but not without broadband.

Second, economic development depends on an educated workforce and schools to which potential new employers want to send their children. If even a small percentage of the kids in class can't get online at home to do their homework, then teachers won't be able to give online homework. If teachers don't give online homework, kids won't be prepared for the world they're about to enter. Potential immigrants to the State, who might start home businesses or larger ones and want to live in this beautiful place, aren't going to come if the schools aren't good enough for their kids.

Third, the State needs lower taxes and a higher tax base to succeed economically AND socially. Like a business which must cut prices to stay competitive, Vermont must find ways to cut costs to support a lower price for government services. E-government, delivering state services online, makes it possible to deliver better services at a lower cost. But, if any significant part of our population can't get online, we'll have the cost of developing new web-based service delivery systems PLUS the cost of maintaining traditional office-visit-based systems. We've got to be able to assume in the near future that the same percentage of people who can make a phone call from home (by cell or landline) can also go online.

But should Vermont spend money –even if it came from the feds it's still our money – in order to accelerate broadband penetration?

Again in my opinion, yes.

Government needs economic development to generate tax revenue to support government – and, of course, the people of the state need jobs. Government does all sorts of things to encourage job creation including tax breaks, low interest loans, and direct grants to individual businesses. Many economic development policies depend on government being able to pick the "right" businesses to invest in – a dicey proposition at best. But we do all these things because we need economic development.

What government does best is build or incent the building of the infrastructure needed to attract economic development. This was and is true for railroads, canals, ports, electrification, telephone, and roads and much, much more. Often government doesn't have to invest as much in infrastructure in urban areas where the economics are good as in more rural areas; but a whole nation, state, or region benefits from good infrastructure and a good economy throughout. Government investment in infrastructure DOESN'T require being right about which business'll succeed; infrastructure creates opportunity and private capital comes in to take advantage of the opportunity. The good businesses succeed, the bad ones fail – but our investment in infrastructure is a winner.

You know the old saying about how it's better to teach a man to fish than to buy him fish sticks. Well, especially when times are tough, we need to make sure Vermonters can fish for opportunity online – all of us.

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