The Federal Reserve is responsible for setting interest rates and executing monetary policy in the United States, but many people don’t realize that the agency also has a hand in community development. This summer, the Federal Reserve Bank of Dallas released a report, Closing the Digital Divide: A Framework for Meeting CRA Obligations, which includes information for banks about funding digital inclusion programs and community networks.

The report, published in July, states:

“Access to broadband has become essential to make progress in all areas of community development—education and workforce development, health, housing, small-business development and access to financial services.”

Closing the Digital Divide is important not only because it provides substantial information for banks, but also because it indicates federal support exists for community-based infrastructure improvements. The report discusses improving Internet access for low and moderate-income individuals and neighborhoods.

Using The Community Reinvestment Act To Improve Infrastructure

From the 1930 until the late 1970s, many banks denied lending to individuals and organizations based on their location. The practice is called “redlining” after the red ink that outlined low-income neighborhoods on a map, and was made illegal when Congress passed the Community Reinvestment Act (CRA) in 1977. Under the CRA, banks must to use the same evaluation criteria for all loan applicants regardless of the neighborhood they live in, which expands lending to include low and moderate-income (LMI) individuals. The Federal Reserve assesses banks’ performance under CRA guidelines, which bring about $100 million in capital to low and moderate income areas per year through various projects. Improving Internet access is an increasingly large portion of these initiatives.

In The Weeds

As part of the act, banks must “identify and invest in low and moderate-income communities.” Eligible activities include affordable housing, services geared toward LMI individuals, financing for certain small businesses and farms, and other revitalization efforts. Bringing broadband infrastructure to underserved communities qualifies as...

The second-largest city in Wisconsin and the home of the University of Wisconsin, Madison, is pursuing a path-breaking municipal Fiber-to-the-Home (FTTH) strategy. They have already started by deploying fiber to several low-income neighborhoods and working with local ISP ResTech to offer services.

Madison CIO Paul Kronberger joins us for Community Broadband Bits episode 227 to discuss their plan. We start by discussing how they decided to deploy FTTH as a digital divide strategy. Like more and more of the communities considering this approach, Madison does not have a municipal electric utility.

We also discuss how Madison plans to deal with the state law that limits municipal fiber network investments and why Madison has decided to work with a private provider even though the city will retain ownership of the network. Read more of Madison coverage here.

Read the transcript of the show here.

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In June, North Carolina released a report pronouncing that 93 percent of the state has access to broadband speeds. At the Institute for Local Self-Reliance, our Research Associate H.R. Trostle, who has been examining reporting data in North Carolina for the past year, came to some very different conclusions. In episode 224, she and Christopher talk about the report they co-authored, which gives a different perspective on the connectivity situation in the Tar Heel State.

In their report, North Carolina Connectivity: The Good, The Bad, and The Ugly, Trostle discovered that, while urban areas have been well served by the big private providers, those same national companies have shunned rural areas. Instead, rural cooperatives and municipal networks are attempting to serve their residents and businesses with high-quality Internet access. It isn’t easy, however, when state laws discourage investment and access to federal funding.

Trostle gets into her analysis of the data, its limitations, and what we can learn from both. She and Chris go through some of the recommendations they provide to the state of North Carolina as it moves forward. The obvious first step is to repeal the state’s barrier on municipal network expansion, which has caused real harm in Pinetops, North Carolina. They also offer advice on how to facilitate telephone and electric cooperative investment and what that could mean for rural North Carolina.

For more, take a few minutes to download the report, which offers useful maps of where to find various connection speeds in the state.

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North Carolina's digital divide between urban and rural communities is increasing dangerously in a time when high quality Internet access is more important than ever. Rural and urban areas of North Carolina are essentially living in different realities, based on the tides of private network investment where rural communities are severely disadvantaged. The state has relied too much on the telecom giants like AT&T and CenturyLink that have little interest in rural regions.

Download the Report

The state perversely discourages investment from local governments and cooperatives. For instance, electric co-ops face barriers in seeking federal financing for fiber optic projects. State law is literally requiring the city of Wilson to disconnect its customers in the town of Pinetops, leaving them without basic broadband access. This decision in particular literally took the high-speed, affordable Internet access out of the hands of North Carolina's rural citizens.

The lengths to which North Carolina has gone to limit Internet access to their citizens is truly staggering. Both a 1999 law limiting electric cooperatives' access to capital for telecommunications and a 2011 law limiting local governments' ability to build Internet networks greatly undermine the ability of North Carolinians to increase competition to the powerful cable and DSL incumbent providers. 

In the face of this reality, the Governor McCrory's Broadband Infrastructure Office recommended a "solution" that boils down to relying on cable and telephone monopolies' benevolence. What this entire situation comes down to is a fundamental disadvantage for North Carolina's rural residents because their state will not allow them to solve their own problems locally even when the private sector abandons them.

"It's not as if these communities have a choice as to what they're able to do to improve their Internet service," says report co-author Christopher Mitchell, director of the Community Broadband Networks initiative at the Institute for Local Self-Reliance. "There's a demonstrated need for high-quality Internet service in rural North Carolina, but the state literally refuses to let people help themselves."

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