How Government Can Speed Broadband Access

September 9th, 2016 by Leave a Comment

By Kelly McCutchen

KELLY McCUTCHEN
KELLY McCUTCHEN

Internet access is foundational in today’s economy. Lack of access can grind business to a halt and hobble critical services including health care, transportation and education. As a result, forward-thinking telecommunication policy is a priority in making Georgia a great place to live and economically competitive.

Georgia still has work to do to increase access to broadband but the news is good: Statewide, Federal Communications Commission (FCC) reports show, 87 percent of Georgians have access to wired broadband connections with speeds of 25 megabits per second (mbps) or higher and 93 percent have access to speeds of 10 mbps or higher.

A whopping 99 percent of Georgia’s population has access to wireless broadband of 10 mbps or higher. For perspective: Netflix recommends 3.0 mbps for high-definition video streaming.

In rural areas, 75 percent have access to wired speeds of 25 Mbps or higher. That is the 14th-highest rate in the nation, well above the US average of 61 percent and higher than all neighboring states except North Carolina’s 80 percent. (This does not include those who may have access to wireless broadband.)

To the best of our knowledge, every Georgia school, public health department and hospital is connected to wired broadband.

But too many Georgians still lack access to broadband. Plus, it is a constant challenge to keep up with the increasing need for greater data speeds, lower latency and new technologies. So what can government do to improve the situation?

One rule of economics is that if you tax something you get less of it. More specifically, economists largely agree that the sales tax should not apply to business inputs. That’s why Georgia wisely does not tax raw materials used in manufacturing and recently phased out the state sales tax on energy used in manufacturing. It may be part of the reason for the surge of new manufacturing jobs in Georgia.

By contrast, Georgia assesses a sales tax on telecommunications network equipment investment; 20 states do not. Georgia consumers also see additional sales taxes and 911 charges on their bill. This adds up to a tax rate of 8.81 percent. Federal taxes raise it to 14.64 percent – and that’s not counting additional franchise fees imposed on wired services.

Clearly, the first way for state and local governments to encourage broadband investment and competition is to reduce or eliminate sales taxes, other taxes and fees.

Second, Georgia governments could make investing in telecom infrastructure easier by streamlining regulation.

The film industry provides a good analogy. Having movies or television shows filmed in your community can be exciting but disrupting. The Georgia Department of Economic Development created the Camera Ready Communities program to help streamline the process for production companies and provide a single point of contact for citizens and businesses potentially inconvenienced.

Georgia should encourage “Broadband Ready Communities.” Indiana and Wisconsin already have a similar process, which includes granting equal access to public rights-of-way, infrastructure and poles.

Local governments should also promote “dig once” programs, encouraging the placement of conduit along roads and inside buildings that can be used by multiple service providers to encourage competition. (The surge in road construction in Georgia provides an opportune time to lay down conduit.)

In rural areas with less population density, reducing or repealing taxes and streamlining the regulatory process may be insufficient to attract private investment. Public-private partnerships can help.

Part of that process involves demand aggregation: surveying residents and businesses to gauge demand for certain broadband speeds and price points, and determining what local governments are willing to invest to connect anchor institutions.

A competitive reverse auction can identify the most efficient bidder or, in a worst-case scenario, identify the remaining financial gap. Public investment can then be assessed.

Local governments should not try to operate their own network. Consultants who paint a rosy picture of municipal networks are often the only ones to come out on top while cities are left with fewer than expected customers, higher than expected expenses and long-term debt.

Creating and operating a broadband network is not a core function of government. In the worst case, the local government could hire a private operator to build out and operate the network.

Georgia’s broadband network has thrived thanks to market-oriented policies implemented over the past two decades. Filling rural gaps may require public-private partnerships to attract similar private investment. Broadband infrastructure investment and innovation are far more likely to occur when government steps aside instead of standing in the way.  


Kelly McCutchen is President of the Georgia Public Policy Foundation, an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the view of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (September 16, 2016). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

 

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