The federal government’s latest investment in expanding rural broadband service has the potential to move the needle, but the best of intentions of policy makers could be undermined by overly restrictive bureaucratic rules.
Public and private Wisconsin entities have submitted applications for a piece of the $7.2 billion in grants and loans allocated for broadband expansion under the American Recovery and Reinvestment Act (ARRA). There is disagreement about whether the federal bureaucracy’s rules, which were written after the Act was signed into law, could undermine the extent to which Wisconsin’s rural areas obtain improved Internet service.
The broadband program is still in the first of three funding stages, with the merits of initial funding applications being considered this fall. Part of the funding is designed to help telecommunications providers with the high cost of deploying infrastructure in rural areas, but the program also includes $350 million for states to do broadband mapping.
The state’s Public Service Commission has applied for funds to complete a mapping project of broadband service gaps, while a group that includes Wisc.net and the UW Extension has applied for tens of millions of dollars to lay additional fiber and build Community Area Networks. In addition, private vendors like TDS Telecom have applied for federal dollars to help more of its residential and business customers in rural areas move beyond tediously slow, and terribly limiting, dial-up service.
While there are skeptics who doubt the value of extending broadband service to rural areas — the “cyber bridge to nowhere” is how rural broadband was described in one New York Times article — agricultural entities consider it vital for economic development.
In a report released last month, the U.S. Department of Agriculture put its stamp of approval on the economic value of rural broadband, saying rural counties that embraced broadband adoption in 2000 now have better access to jobs than those that did not, and their residents enjoy higher incomes than people in less-connected rural areas.
Still, only 41% of rural households had broadband access in 2008, according to the USDA report, compared to 55% nationally. The report cited the high cost of connecting sparsely populated, remote areas as the chief culprit.
Closer to home, this has economic ramifications. Zach Brandon, an executive assistant with the Wisconsin Department of Commerce, said a common refrain among entrepreneurs he recently spoke to in Green County was that one of the barriers to doing business in rural areas is the lack of access to infrastructure, and virtually everyone concedes that health care and education in remote areas will be lacking without improved Internet access.
The most tech-savvy farmers can use the Internet to keep up with weather information, commodity prices, and other market information, or they can apply seeds, pesticides, or fertilizers using GPS technology. In addition, many small-town entrepreneurs would welcome the ability to conduct more robust e-commerce.
“If you have a soap company and you want to market that to the world through an Internet site, having to use dial-up service to log in and see your orders is a great barrier to entry,” Brandon noted. “From our standpoint, we think it is an important economic development tool for rural communities, and I would add, frankly, inner city communities as well, but it’s also about making sure that the next generation of entrepreneurs and business owners are able to use technology so that they are proficient in its use.”
Since there is not a precise understanding of broadband penetration nationwide or statewide, step one is to develop a granular, street-level understanding of where broadband service exists, and where it is absent.
The common belief is that broadband service has pretty much been extended to areas where it was economical to “build out,” and what remains are the areas where it is cost prohibitive for telecommunications companies to provide it.
Gary Evenson, administrator of the Public Service Commission’s telecommunications division, noted that broadband at the speeds the federal government has identified is available to the vast majority of customers in the state. “It’s in some of the rural parts of existing exchanges where broadband service just doesn’t go four, six, or eight miles out in to the country, and some folks don’t have that capability,” Evenson said. “How long it would take companies to do those investments, I’m not sure.
“And also it’s going to be a little dependent, I think, on how some of the wireless networks get rolled out, and how eager customers are to maybe use a wireless option for Internet access, as opposed to a DSL (digital subscriber line) option or a cable modem option.”
Enter the ARRA and a change of mindset in presidential administrations. The Bush administration’s approach was that full broadband penetration was more of a private-sector concern, whereas the Obama administration views it as a worthy investment in rural economic development.
Broadband Anchor
Andy Lewis, a professor for the UW Extension and a community development specialist in the Center for Community Economic Development, worked on an application for ARRA funds that seeks to build on previous efforts to extend the state’s broadband infrastructure.
Those efforts were coordinated by WiscNet, a 428-member research and education network that was established to get broadband to Wisconsin “anchor institutions” like public schools, libraries, institutions of higher education, technical colleges, hospitals, and municipalities.
“This [application] is really an extension of the Go Gig program by WiscNet, and it’s really about developing a big Internet for Wisconsin, a better broadband connection for anchor institutions in Wisconsin,” Lewis said. “So at this point, we’re talking about what we would call dark fiber, middle-mile projects, and creating those connections.”
A subsequent and related goal, to be pursued in second and third phases of the current funding program, is to create pilot Community Area Networks that would provide fiber connections between anchor institutions within communities.
“As I was adding up the miles, what we’re talking about in this first phase of the proposal is laying about 1,600 miles of fiber in the ground [in highway right-of-ways], with the potential for expanding broadband in the state of Wisconsin, and this is just the first phase of federal funding,” Lewis said. “Most of us view this as a once-in-a-lifetime opportunity to do this infrastructure development.”
A former Middleton alderman who serves on the board of the Wisconsin Economic Development Association and the Middleton Area Development Corporation, Lewis said the grant proposal could cost close to $60 million, but the ultimate amount would be influenced by the requirement for a 20% match that is subject to a waiver request on a showing of financial need. In-kind contributions may count toward that match.
The applicants will need to partner with private-sector providers on “last-mile” connections, delivering connectivity to both businesses and individuals. Thus far, the state’s broadband network, or loop, extends from Eau Claire, east to Green Bay, down to metropolitan Milwaukee, west to Madison, and from Madison to Eau Claire. Lewis estimates that with the stimulus grant proposal, the state “would more than triple” its existing broadband network.
Restrictive Rules
Application requirements were established by the U.S Department of Commerce’s National Telecommunications and Information Administration (NTIA), which will spend $4.7 billion overall, and by the Rural Utilities Service (RUS), which will spend $2.5 billion overall. Over the next few years, the agencies will distribute funding in three phases.
In the initial phase, which is underway, NTIA will issue $1.6 million in grants, including $1.2 billion for broadband infrastructure. RUS will apply $2.4 billion in grants and loans, including $2 million to “last mile” and “middle mile” projects as defined by the agency.
In the ARRA, Congress required these agencies to develop funding rules for broadband initiatives. By October 15, the most highly qualified applications will advance to the next validation step, and the governor of each state will have an opportunity to weigh in on the most worthwhile projects. NTIA and RUS will begin to announce funding awards in early November.
In the first phase of funding disbursements, only remote areas will be eligible to receive outright grants, but the federal government’s application requirements define remote as areas that are 50 miles or more from a population center of more than 20,000; other rural areas could be served with a combination of grants and loans. The problem with this definition is that Wisconsin has 34 cities with at least 20,000 people, and they are located in almost every corner of the state. About the only areas that could be upgraded with pure grant money are in the far north and a sliver in the southwest.
The dilemma doesn’t exist solely in Wisconsin. TDS Telecom has 91% broadband availability in its 30-state coverage region, where it operates about 120 telecommunications companies in 600 communities, but only 16 of those meet the government’s definition of remote.
Drew Petersen, director of external affairs and corporate communications with TDS, believes the two federal agencies will have to revise their rules in Phases II and III. “The definition of remote is important because that is what triggers your ability to get 100% grant funding for the deployment of broadband services,” Petersen noted. “So with a restrictive definition of remote, it really limits your access to broadband funding at least in this first phase of disbursements.
“Both agencies are talking about three rounds of funding, and I think there is a high likelihood they will change definitions in a second round of funding based on those who apply or those who don’t apply for funding.”
The other areas are rural but they are not deemed remote, so the best TDS can do in those instances is “a 50% grant and a 50% loan,” he said, “and it’s somewhat counterintuitive, but even if someone was to provide us support to build a network at half the capital cost, it still does not make economic sense in a whole bunch of places. That’s what we’re struggling with.”
The 50-50 match is less beneficial to TDS, Petersen explained, because it already has invested hundreds of millions of dollars in capital to bring broadband services to customers. Now, with only 8% or 9% left to go, those remaining unserved customers are truly high-cost builds.
According to Petersen, it can cost anywhere from $2,000 to $7,000 per household passed to put fiber optics in the ground capable of delivering robust broadband speeds. Even if it becomes a 50-50 grant-loan proposition, it could still cost the company more than what it finds economical, and Petersen said TDS traditionally finds anything above $500 “to be rather uneconomic.”
In the TDS coverage area, one casualty of the Phase I rules is the northern Wisconsin city of Medford, which is a market in which TDS hopes to expand broadband. Medford, a community of 6,000, is the former home of Tombstone Pizza and is still home to Hurd Windows and Doors. TDS services 5,000 of those customers today, but Petersen said there are a bunch of customers who live out on the fringes that need broadband upgrades to be connected with their more urban counterparts. The trouble is that Medford is 21 miles from Wausau (population 38,400), so it’s not considered a remote area.
“When you do 50% grant, 50% loan calculations, it still doesn’t make economic sense to build out to those more rural customers,” Petersen said. “That is really unfortunate. There are a number of good jobs in Medford, where interestingly the size of Medford doubles during the day with people coming from the outskirts of town into town to work.”
Closer to home, communities like Albany and Black Earth have broadband availability in some, but not all areas. Neither community meets the federal definition of a “remote” area because each is too close to Madison. On the back side of Black Earth, Petersen said there are farms and isolated houses where the cabling needs to get close enough to a central office or a hosted remote to allow for DSL service.
“That’s exactly what we’re doing in the areas we’ll be applying for stimulus dollars, those areas that meet the definition of remote,” he said. “We’ll be installing fiber and adding high-speed Internet electronics and shortening loop lengths, which is a term of art for the telecom business, but it’s your connection from a remote serving point or a central office to your house.
“Those need to be shortened so that you can get robust speeds to run over them, and that requires rehabilitation or downright overbuilding of your existing network.”
Petersen does not believe the restrictive definitions were the intent of the Obama administration or Congressman David Obey, D-Wisconsin, who basically wrote the stimulus bill and was instrumental in putting $2.5 billion into the Rural Utility Service for broadband deployment.
“I think when you look at the federal stimulus program for broadband services, the goal of Congress and in my view the Obama administration was to get broadband deployed to the remaining 10% to 15% of this country that doesn’t have it today, in hopes that it would be somewhat of a professional and personal society equalizer,” Petersen said.
“The practical affect — since the law was passed, the rules have been written, the notice of available funds have been issued, and the application process has started — is the availability of funds for telecommunications carriers have been somewhat restricted by some of the definitions that have been created by the two agencies administering the disbursement of these funds.”
According to Petersen, a better definition of remote would be an area that is 25 miles from a population center of 20,000 people. If the federal government cut it from 50 to 25 miles, he said it would increase TDS Telecom’s ability to apply for funds in 60%, rather than the current 20%, of its service area. “That will certainly expand broadband availability and choice to a whole host of customers that wouldn’t have it today,” he said.
Not everyone believes the federal rules are too limiting. Lewis said it depends on which grants an applicant is going after. He said there are some grants administered by the Department of Agriculture that are focused almost entirely on rural areas, and there are Commerce funds with a number of sub categories under that.
“It’s not true that only remote areas could apply for these federal funds,” he stated. “It depends on what they are actually trying to do, and if they are part of a bigger network like the one we’re talking about. There is fiber coming out of Madison, for example, that then goes west to Prairie du Chein and through Richland Center and La Crosse.
“So when you’re talking about middle-mile projects, we are going through some very urban areas like Madison and Milwaukee, but connecting them to some very rural areas of Wisconsin.
“So it’s not correct that Dane County wouldn’t be able to take advantage of this.”
Speedy Service
The term broadband means different things to different people. Under the state law, the only mandate for a broadband connection is that it is capable of data transmission, and “anything that is being talked about in this NTIA project is a faster speed than any requirement that we’ve got out there right now,” Evenson said.
Under federal guidelines, broadband service is defined as a two-way transmission speed of at least 768 kilobits or kbps (a unit of data transfer rate equal to 1,000 bits per second) downstream, and at least 2,000 kbps upstream to end-users.
In contrast, TDS defines broadband as the ability to be “always on” with robust speeds between 3 and 10 megabits (mbps), which would allow full-motion video. (A Megabit is a unit of data transfer rate equal to one million bits per second.)
Lewis believes the federal government’s formal definition of broadband is an extremely low, even faded definition. “We think a better definition would be connectivity that does not limit applications,” he said. “You can’t do Voice over IP and Web-based video streaming at 200 kpbs. Video over Internet, for example, requires about 700 kbps.
“So you could have a broadband proposal under this grant that would be as slow as 200 kilobits, but most of those anchor institutions served by WiscNet are getting about 10 megabits per second. We’re talking about somewhere in the neighborhood of 30 megabits per second, so broadband that really doesn’t limit the application.”
Evenson notes that a lot of providers say they can deliver 3, 5, or 10 mbps, while some of the institutional applicants say they need 20 mbps or 100 mbps systems. “It all is going to depend on how definitions change over time,” Evenson stated. “It’s going to be a long time, in my opinion, before you get a 100 mbps system around the state. I don’t know that you need a 100 mbps system to every user in the state, but it’s not going to be 100% broadband at the conclusion of sending out these grants. There is not enough money to get ubiquitous coverage.”
Why should Madisonians care about broadband in the boonies? Petersen noted that Madison, being a midsized Midwestern city, has legitimate traffic congestion, and broadband allows a highly skilled workforce to “telecommute,” or work from home, an environmentally friendly practice. Broadband also allows private and public-sector employees a larger applicant pool of potential employees, he noted.
Lewis said that even in Madison, the Community Area Networks can improve service. “When I was on the Middleton City Council, we certainly made some investments in using broadband,” he noted. “Our police cars are wired, for example, via cell connections, but there could be better connectivity between police departments and 911.”
In addition, when fiber goes down, there has to be a way to reconnect those networks, so creating redundancy and alternatives for connectivity benefits everyone. “If we think about making those connections, there are still areas within Dane County that could be served by Community Area Networks, and the Madisons of the world aren’t focused on even having that fiber in place,” Lewis said. “We have some fiber in place in Madison, but what it should really be about is creating those connections between the institutions, which might create some efficiencies.”
Map Quest
According to Brandon, the next step is to get the mapping done — the target date is Nov. 1 — and determine which areas are underserved, see how much of the $7.2 billion will be directed toward Wisconsin communities, and then “see if there are [additional] federal programs that will be of assistance or whether we need another state program.”
Noting that future business owners can come from anywhere, Brandon emphasized state government’s interest in, and its reasons for expanding modern communications to everyone in the state. “A child in suburban Milwaukee or in Madison will have access to top-of-the-line Internet speeds, which allow them to use the most up-to-date and best program, visit the most technologically advanced sites, and use the full features of different Internet programs,” he stated. “We want to make sure that all of Wisconsin’s children have the ability to learn how to use that technology and benefit from its use.
“So it’s not just the current generation of business owners, it’s about being focused on the next generation of business owners.”
Lewis equates the expansion of broadband to rural areas with the decision the nation made decades ago to use federal funds to extend electricity and phone service to all Americans, including those in the most remote and least-populated places. He said the UW Extension played a very active role in the electrification of Wisconsin, helping communities organize electric co-ops.
“This [broadband initiative] feels very much like that,” he said. “We’re talking about building out a public infrastructure to build an economy in Wisconsin. Just like electrifying rural Wisconsin was important in the 1940s, expanding broadband access in Wisconsin is important today.”
At the end of this program, Petersen said the government will be successful if it has moves the needle in making sure that more people that didn’t have broadband yesterday, have it tomorrow. The government will fail if more government and university-owned networks are created that simply serve as a redundant connection and leave customers on the information wayside.
“Broadband is the most legally addictive product that a company can sell,” Petersen said. “When you deliver a broadband connection to a customer that has been hungry for it and had a perceived value for it, once they experience speeds and availability of information, they view it as something they can never live without and they will never go back to dial up.”
The current program is not the last we’ll hear of broadband. At the same time the stimulus program is unfolding, the Federal Communications Commission is under Congressional mandate to craft a national broadband plan and present it to Congress.
“That $7.2 billion is just stimulus money,” Evenson said. “It’s not the be-all and end-all of expanding broadband in the country. It was intended to get money out quickly, improve broadband, and help on the job front. It’s not the final action nationally that is going to be taken on a broadband program.”
