Broadband Communities

SEP 2018

BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.

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A U G U S T / S E P T E M B E R 2 0 1 8 | w w w. b r o a d b a n d c o m m u n i t i e s . c o m | B R O A D B A N D C O M M U N I T I E S | 2 9 are not building bridges to nowhere; second, helping state funding agencies prioritize broadband projects. Elin Swanson Katz, agency head of the Connecticut State Broadband Office, who initiated the project in 2015, says, "Working with the state economic development agency, we were delighted to have the opportunity to support the efforts of Sudip Bhattacharjee and his students in developing this unique statistical analysis tool for a question that has hampered the efforts of towns and investors alike: Does the introduction of a fiber network in a town actually provide benefits in excess of the costs of creating it? e model is a giant first step toward creating an objective tool for predicting an accurate answer to that essential question." BUILDING THE MODEL Researchers began by defining and measuring broadband quality, economic outcomes, and other relevant characteristics. Like all economic models, this one is limited by data availability, so researchers didn't have access to every measure they might have wanted – such as broadband prices or even the precise number of broadband providers in a town. Briefly, they defined broadband quality by average upload and download speeds (as measured by Ookla), the (approximate) number and type of broadband providers, and the percentage of households connected. Economic outcomes used were median household income, number of annual housing permits, average wage, employment, and property tax revenue. All five outcomes were provisionally given equal weight. State and local governments that use this model can choose to predict a subset of these outcomes and/or assign different weights to the outcomes, depending on their preferences and values. When they examined a sample of 62 Connecticut towns over the 2008–2013 time period, the researchers found that broadband quality was indeed related to economic outcomes. But did broadband quality affect the local economies, or vice versa? A fortuitous sudden bump in broadband speeds when Comcast and Cox converted to DOCSIS 3.0 showed definitively that the direction of causality ran from broadband to economic outcomes. (is part of the study is described in a second paper, which is yet to be published.) In addition to broadband quality, the researchers considered many other variables to find out what might affect the cities' responses to improved broadband. Ultimately, because many of these variables were closely correlated, the researchers reduced the number to a minimum. e three that appeared most significant were size category (small, medium, large), distance from the nearest big city and median age. Using these variables, the researchers used data from any 52 towns to calculate the effect of raising broadband speeds to 50 Mbps/15 Mbps or 100 Mbps/25 Mbps on each of the five economic variables and on a combined economic index. ey then applied the model to the remaining 10 towns in the sample to see how well it predicted their experiences. is process was repeated multiple times, using different towns in the 10-town validation set. e average predictive value over the six-year period was 86 percent. e economic indicator most accurately predicted was tax revenue. MEDIUM-SIZED TOWNS BENEFIT MOST e researchers found that the same broadband speeds affect different towns in different ways. • Most towns benefit economically from internet speed increases. • Medium-sized towns benefit most, followed by small towns and then by big cities. • A few small towns actually suffer economically from increased broadband speed. ese towns have relatively fewer broadband providers, have higher median ages and are located farther from big cities. e difference in the number of broadband providers (both fixed and mobile) is most striking. e researchers speculate that big cities benefit less from broadband speed increases because they already have relatively good infrastructure and internet speeds, so the marginal economic benefit of introducing more high-speed internet is low. Medium-sized and small towns, on the other hand, have low average broadband speeds, so raising their speeds to 50 Mbps or 100 Mbps represents a sizable jump more likely to have an impact. Differences in benefits among the medium-sized and small towns, the researchers say, reflect which towns are best poised to take advantage of increased broadband speeds. Towns that are far from metropolitan centers and have aging populations are not attractive to employers, even if they have good broadband. And if they have few broadband providers, their broadband prices will likely be high, negating some of the benefit of high- speed broadband. Sudip Bhattacharjee, the lead researcher from the University of Connecticut, explains that increased broadband speed "doesn't suddenly change the economics of the town; there have to be businesses that can use it." The cities most likely to benefit from broadband are mid-sized cities, not too far from bigger cities, with multiple broadband providers and younger populations.

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