Editor’s note: Edward J. Lopez is a Professor of Economics and the Director of the Center for the Study of Free Enterprise at Western Carolina University.
CULLOWHEE – To be included in today’s digital world, all North Carolinians need access to reliable, high-speed broadband. Yet, today nearly 472,000 in our state – primarily in rural communities – remain without broadband access, limiting their options to work, learn, pray, socialize, see their doctors, and more. In a new co-authored study, I calculate the economic gains of connecting these homes and small businesses. The economic implications of broadband expansion for North Carolina are significant.
State and federal grant funds have recently been awarded to help defray the total cost of broadband expansion and bridge the digital gap that still exists in the state, particularly for rural communities.
Our new study finds that full realization of just one grant program we analyzed would create an estimated $3.5 billion in new economic gains to North Carolina businesses and households. This is a dollar estimate, using standard economic analysis, of the productive, commercial, educational, health, civic, and other social benefits that full broadband expansion would achieve.
In many cases, however, the buildout process can be held up, thus delaying or preventing connections to unserved rural homes. In North Carolina, as in many other parts of the country, utility poles form the backbone of broadband infrastructure, particularly in rural areas. The public’s return on its broadband investment requires efficient, equitable attachment of broadband wires without delay to existing utility pole networks. Unfortunately, current policies give pole owners – primarily municipal and cooperative electric utilities — significant market power over access to these poles.
Significant concentration of market power over an essential input in an otherwise competitive ecosystem always harms the public interest. In too many cases, pole owners use this advantage to impose lengthy timetables, demand costly permitting fees, enact unnecessary pre- and post-construction requirements, and make broadband deployment costs unfeasible for internet service providers who need to attach to these poles. These opportunistic practices often delay and prevent broadband expansion to the “last-mile” regions that need internet service the most.
State leaders can take steps to improve the utility pole hold up problem and more quickly bring broadband to every corner of North Carolina.
First, the rules of the game should promote efficient and equitable cost-sharing arrangements between attachers and pole owners. This should ensure that pole owners are compensated adequately so that broadband providers can maintain cost-feasible plans for new broadband infrastructure buildouts. The rules should scrutinize broadband providers bearing the full burden of replacing aging poles as a precondition to new attachment, and should instead take into account the age and net book value of the replaced poles.
Further, the rules of the game should reduce transaction costs by providing reasonable time frames for the process of attaching broadband cables to utility poles – called “make-ready work” within the industry – which includes everything from permitting to renting space for equipment to replacing old or out-of-code poles. Current delays caused by ineffectual and complex pole regulations can result in setbacks of up to a year – another year in which the unserved communities remain without access to the internet.
Fortunately, the North Carolina House of Representatives is taking action to close this digital divide by investing American Rescue Plan funds to help with the cost of new utility poles and establishing reasonable timelines for the work to take place. If the North Carolina Senate and Governor also support, it will allow broadband providers to connect more rural North Carolinians to high-speed broadband and will be able to do it faster.
The time for efficient and equitable policies that reform the utility pole hold up problem cannot come soon enough. We estimate delayed broadband expansion forfeits $14 to $16 million of economic gains per month, or $186 million per year. By streamlining our state’s utility pole policies, North Carolina will not only more effectively use dedicated public funds intended to connect every corner of our state, but also spark our entire state’s economy.