Editor’s note: This story has been corrected regarding legislation about broadband in the N.C. General Assembly.
RESEARCH TRIANGLE PARK – A new study questions whether fiber broadband networks built by municipal governments really deliver the promised benefits of economic development and jobs. However, the study also acknowledges that there are several caveats to their findings.
Rick Smith, WRAL TechWire’s editor and a cofounder
North Carolina has been a battleground over the issue of so-called GONs, or government owned networks. The best known examples are Greenlight in Wilson and Fision in Salisbury. The GON debate has included the FCC in the past, which at one time aggressively defended the rights of cities such as Wilson and Chattanooga, Tenn. to build them. In North Carolina two bills introduced in March called for expansion of broadband opportunity through partnerships. [The bill does not concern GONs as I wrote earlier.]
“The N.C. Association of County Commissioners and N.C. League of Municipalities applaud the sponsors of legislation unveiled on Thursday designed to help close the digital divide in North Carolina and connect more of the state’s residents to critical 21st century communications infrastructure,” the groups said in March. “HB 431 FIBER NC Act (Foster Infrastructure for Broadband Expansion and Resources in North Carolina) encourages the creation of public-private partnerships to bring better broadband access to more areas of the state. The legislation would broaden the authority of local governments to enter arrangements in which they lease fiber and other broadband assets to internet service providers, who would then provide retail service to customers.”
The state and Gov. Roy Cooper administration also are making nearly $10 million in grants available to drive more government-private partnerships.
Meanwhile municipalities across the state continue to demand broadband and note that it is essential today as electricity. Private service providers such as AT&T, Google Fiber, Frontier, CenturyLink, Spectrum, Ting Internet and others say they are expanding their networks and service areas. But coverage area mapping remains suspect and broadband advocates say much work remains to be done.
Thus the GON arguments are likely to continue. And the timing of this 40-page study from a Washington, D.C.-based think tank means it’s likely to get a lot of attention.
“Worried about being left behind in the Digital Age, a few hundred municipalities have chosen to construct and operate high-speed Internet networks. Above all else, it is the impacts on the labor market— i.e., the promise of ‘more jobs’—that form the policy justification for these municipal investments, though evidence of such effects is informal and anecdotal,” say the authors of “The Rewards of Municipal Broadband: An Econometric Analysis of the Labor Market,” which was published by the Phoenix Center for Advanced Legal & Economic Public Policy Studies.
The paper focuses on Chattanooga’s network.
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In a statement, Phoenix Center Chief Economist Dr. George S. Ford and co-author of the study, pointed out:
“Since spending $400 million to construct its city-owned and operated fiber broadband network, Chattanooga’s labor market has not improved in any discernible way relative to its peers. When contemplating municipal investments in broadband, at least in cities where broadband is already available, the returns on such investments are not to be found in the labor market.”
The study stresses that point.
“Across a variety of empirical models, we find no payoffs in the labor market from the city’s broadband investments,” the authors conclude. “An
automotive plant built in the area is, however, found to substantially increase automobile manufacturing employment.”
They note that the findings are “(to our knowledge) the first statistical evidence on the effects on labor market outcomes of municipal broadband systems.”
Greenlight challenged the findings of a study several years back that questioned the value of a GON. They noted that Greenlight was generating substantial revenue while boosting development. Further, they said, some of the data in that report was flawed.
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In this report, the authors concede there are caveats that affect conclusions to be drawn about other GONs.
“Since Chattanooga’s system is an overbuild of multiple private providers, we stress that our findings may not be generalized to areas where broadband services are not available absent the municipal system,” the wrote.
“Also, our results cannot speak to the benefits of high-speed Internet services generally, since broadband Internet service was and remains available in Chattanooga absent the municipal system.”
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They later spelled out in greater detail possible exceptions to the findings:
“Our analysis is subject to three important caveats.
“First, our analysis looks for effects only in the labor market; there may be other effects of GONs not realized in the labor market.
“Second, since Chattanooga’s system overbuilt private providers, our findings may not be generalized to areas where broadband services
are not available absent the municipal system.
“Third, our results cannot speak to the benefits of high-speed Internet services generally, since broadband Internet service was—and remains available—in these cities absent the municipal system.
“Thus, our results indicate only that building a GON in markets where privately provisioned broadband is generally available has no favorable effect on labor market outcomes.”
Yet they conclude: “Any improvements or declines in Chattanooga’s labor market, or changes in the mix of employment toward information technology, are no different than those observed in comparable cities without a municipal broadband network.”
The full study can be read online.
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