That community networks act as a positive force in the broadband market is something we’ve covered for the better part of a decade, but a new study out in the journal Telecommunications Policy adds additional weight (along with lots of graphs and tables) which shows that states which enact barriers to entry for municipalities and cooperatives do their residents a serious disservice. 

“State Broadband Policy: Impacts on Availability” by Brian Whitacre (Oklahoma State University) and Robert Gallardo (Purdue University), out in the most recent issue of the journal, demonstrates that enacting effective state policies have a significant and undeniable impact on the pace of basic broadband expansion in both rural and urban areas, as well as speed investment in fiber across the United States. 

Digging into the Data

The research relies on the State Broadband Policy Explorer, released in July of 2019 by Pew Charitable Trusts, and focuses on broadband availability across the country from 2012-2018. Whitacre and Gallardo control for the other common factors which can affect whether an area has broadband or not (like household income, education, and the age of the development), and combine the FCC’s Form 477 census block-level data along with county-level data to explore expansion activities over the seven-year period. By making use of an analytical model called the Generalized Method of Moments, Whitacre and Gallardo are able to track all of these variables over a period of time to show that there is a statistically robust connection between specific state policies and their influence on the expansion of broadband Internet access all over the United States. 

The authors zero in on three particular policies that they say have among the most significant impact on whether a community has broadband or not: whether or not the state has passed laws restricting municipalities and cooperatives from building and operating broadband networks; whether or not the state has a broadband office devoted to expansion and staffed by full-time employees; and whether or not the state has a funding program...

Most of us are familiar either with Metcalfe's law or the general principle of it: networks are more valuable the more people are on it. The common example used to illustrate is a telephone. One person on a telephone network is useless. Two people is an improvement. With millions, you are far more likely to be able to call the person you want to.

Recognizing this principle flips common arguments about connecting rural areas on their head. Ensuring that people in rural areas are connected benefits everyone -- it is not charity. Connecting people in rural areas increases the value of the connections in urban areas, creating more value for everyone.

But the flip side may be too rarely considered. As these networks have grown in size (and therefore value), the cost of those who are excluded from them also increases significantly. This means that while the costs of not connecting rural areas are high today, those costs will be even greater in coming years. The argument is rather intuitive, but for those who want to learn more, Rahul Tongia and Ernest J Wilson III published an academic paper this year in the International Journal of Communications.

The abstract for "The Flip Side of Metcalfe's Law: Multiple and Growing Costs of Network Exclusion" is here:

The study of networks has grown recently, but most existing models fail to capture the costs or loss of value of exclusion from the network. Intuitively, as a network grows in size and value, those outside the network face growing disparities. We present a new framework for modeling network exclusion, showing that costs of exclusion can be absolute, and might, at the extreme, eventually grow exponentially, regardless of underlying network structure. We find that costs of exclusion can also be spread to the “included” through several mechanisms such as parallel networks, and we also highlight how future research needs to capture the interaction of alternate or parallel networks to the network at hand. Backed by empirical evidence, this will have wide-reaching policy and design implications, particularly for the role of subsidies or direct intervention for...

In this paper, we explore whether broadband investment by municipalities has an effect on economic growth. To do so, we employ an econometric model to compare economic growth in Lake County, Florida, with other similar Florida counties. In 2001, Lake County – a small county in central Florida – began generally offering private businesses and municipal institutions access to one of Florida’s most extensive, municipally-owned broadband networks, with fiber optic connections to hospitals, doctor offices, private businesses, and 44 schools.1 Our econometric model shows that Lake County has experienced approximately 100% greater growth in economic activity – a doubling – relative to comparable Florida counties since making its municipal broadband network generally available to businesses and municipal institutions in the county. Our findings are consistent with other analyses that postulate that broadband infrastructure can be a significant contributor to economic growth. Our results suggest that efforts to restrict municipal broadband investment could deny communities an important tool in promoting economic development.