According to a 10-year study, the municipally owned broadband utility of Chattanooga, Tenn., has brought about economic benefits in the billions. The research could play an important role in future political debates.
The economic impact of broadband has been debated by researchers, who haven’t always confirmed the conventional wisdom that high-speed Internet access leads to a significant return on investment. A key lesson from recent evidence is that broadband can have differential effects on the economy depending on the local or state context.
But for Chattanooga, Tenn., the relationship between its broadband utility and the economy is clearer than ever. According to a 10-year study conducted by economist Bento Lobo, Chattanooga’s fiber system has led to $2.69 billion in economic benefits and accounts for about 40 percent of all jobs created in Hamilton County over the last decade.
These results are impressive, but they don’t necessarily tell the whole story. Lobo told Government Technology that reliable fiber-based broadband can create benefits that can be hard to quantify. For example, while Lobo’s study mentions $19.8 million in server- and productivity-related savings that educational institutions have seen thanks to Chattanooga’s network, what is the dollar value of keeping kids connected so that they can do schoolwork?
“That’s the reason why I think that the estimates of value are understated rather than overstated, because a lot of these pockets of value remain to be revealed,” Lobo said.
Moreover, the positive economic effects associated with Chattanooga’s system aren’t just about broadband access. The fiber infrastructure has also enabled a smart grid, which accounts for about 28 percent of the benefits measured in Lobo’s study.
The grid has decreased operating and maintenance costs “through automation of meter reading, remote disconnects/reconnects, and planned switching events,” the study said. It has also helped prevent electricity theft and pollution.
And then there’s the most significant benefit related to the grid: reduced power outages.
“During major and minor storms or disruptions of any kind, the smart grid enables a quick diagnosis and often, a remote solution … as much as 281.1 million customer (residential and commercial) minutes of outage time were avoided, which when divided by 480 (minutes/workday) shows that roughly 585,643 work-days were saved due to the smart grid,” the study said.
While being able to point to numbers that show the economic value of municipal broadband is good, Lobo noted that producing a study of this kind takes a lot of work from the analytical side. Communities interested in their own studies should remember the importance of data collection.
“Try to capture as much data as you can,” Lobo said. “Data-driven analysis is always more effective in that we can minimize the assumptions we have to make about how people value something.”
Lobo added that one must acknowledge that variables other than broadband might explain a particular positive outcome. For instance, when Lobo interviewed real-estate developers about the idea of broadband being a major attractor of businesses, he was “always making them aware of other factors that could be affecting this influx of people, the growth of real estate downtown, and so on.”
Scientific principles aside, a study of this sort remains a “heavy lift” for local areas with municipal broadband, according to industry analyst Craig Settles. In particular, it’s asking a lot of municipalities that have smaller populations, such as 30,000 or less, to perform all of the necessary tracking and monitoring in order to produce an assessment.
Prioritizing such a study can even be a challenge for a place with a population exceeding 30,000. Longmont, Colo., a city of just less than 100,000 people, has its own fiber broadband service called NextLight. NextLight Executive Director Valerie Dodd said although she would be interested in research that best shows the difference NextLight is making, she considers this type of study a “nice to have” thing because of the money, time and staff that it would require.
Dodd also feels NextLight has already proven its worth. Longmont’s initial feasibility study for NextLight indicated that the municipal system would stay afloat as long as it had a 35 percent take rate in its fifth year. When its fifth year came around, NextLight had a take rate in the 50s. In 2021, the business case still looks strong.
“The city continues to grow and thrive — even during this difficult time,” Dodd wrote in an email. “In the last year the city added about 2,000 residents for a total of 99,570. We also hear from customers that NextLight is worth moving to Longmont for. And, on the commercial side, we only lost a handful of customers due to business closings … Our penetration for both business and residential customers is nearing 60% which is very high considering we are competing against two large carriers.”
Dodd added that eligibility for Sharing the NextLight, Longmont's no-cost broadband program, has expanded over the last year to include families with children in Head Start programs and college students who receive Pell grants.
One advantage of having a study like Chattanooga’s is that the research, depending on the results, can allow a municipality to further justify the existence of its community broadband system. Settles said if a local area believes it might have powerful enemies in the world of broadband, an economic assessment could be a savvy “political measure.”
“If you look at the track record of these networks, in a lot of places they have a certain amount of pushback from the incumbents,” Settles explained, “and there’s a tension to the fact that the incumbents are always going to be on your case, and so to have one more tracking mechanism is good politics, and you’re less likely to wake up one day and find out … the legislature is trying to clamp down on community broadband.”
Not every community broadband system is equal. Lobo flatly stated he is in no position to say “whether other utilities or other communities can do just as good of a job" as Chattanooga. At the same time, Lobo recognizes why municipalities feel led to try their own hand at broadband.
“Way back in 2005, 2006, when the utility was considering this, the pushback was from the private providers, as you might expect,” Lobo recounted. “But the fact of the matter is none of them had an incentive to bring fiber optics to a small community like Chattanooga … If we left it to them, we would not have fiber over here, because it doesn’t meet their metrics for a successful project.’’
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