The most often cited reasons for communities establishing their own local access networks are for reasons of economic development and the requirement for local businesses to have high-speed Internet services.  There have been a number of studies undertaken to determine whether broadband availability does actually impact community economic development.  The following studies include the most widely referenced in the debate over community owned networks.

2.2.1 Cedar Falls, Iowa

One of the earliest studies undertaken was a comparative study by Doris Kelly (2003 and 2004) [viii] on the relative economic performance of two adjacent communities in Iowa, Cedar Falls and Waterloo.  It is an important study in that proponents of municipal owned local access networks often reference it to provide evidence of the importance of these networks to community economic development.

One of the basic differences between the two communities is the level of telecommunications services available to businesses. Cedar Falls has a citywide municipal hybrid fibre/coaxial network operated by its municipally owned utility, Cedar Falls Utilities.  It provides specialised broadband telecommunications services including fibre connections to commercial and industrial customers in both the City and the industrial park.  In contrast, incumbent cable and telecommunications operators serve Waterloo. They provide cable modem access, DSL and dial-up Internet services, but FTTB connections to businesses are not a standard service offering and the industrial parks do not have a fibre network.

At the end of the 1980s, there were 25 companies located in the Cedar Falls Park employing 750 employees.  With the major projects currently under construction, Cedar Falls is projecting that by the end of 2003, they will have 130 companies employing over 5,000 and occupying 4,000,000 sq. feet of building space.  In contrast, Waterloo had a total of 10 businesses in its three industrial parks and has witnessed companies relocating from Waterloo to Cedar Falls. The types of business attracted to Cedar Falls require high bandwidth availability.

This study is not a rigorous economic study as it is based on a comparison of the two cities and does not incorporate any degree of sophisticated economic analysis.  In many ways the study is not conclusive and as noted by the author:

“It would be extremely difficult to verify that these developments are the direct result of the City’s broadband delivery system. Yet, one cannot disregard the direct link between the ‘Dawn of a New Age’ and the City’s ability to meet the increasing demand for access and dissemination of information.”[ix]

2.2.2 South Dundas Township, Ontario, Canada

This study was commissioned by the United Kingdom Department of Trade and Industry and undertaken by SNG (2003) and was one of the first attempts to quantify the economic impact of broadband deployment on a community. 

In June 2001, the Township of Dundas completed the building of a fibre-optic network to provide fibre access to most of the commercial and community users in the three major villages ranging in size from 2,400 to 800.  Dundas is a rural township of some 11,000 people covering some 520 square kilometres and is located in Ontario, Canada.  The economy of the township is based on manufacturing, construction, agriculture and the service sector. Throughout the 1990’s, the area suffered significant job losses and the township was in decline.

The decision to build the network was based on the belief that a community can influence its economic development by securing appropriate high bandwidth access for services and business within the community.  It was considered a necessary infrastructure investment to both retain and attract business to the area.  Existing telephone and cable operators expressed no interest in providing service to the area, as the investment could not be justified financially.

The system requirements were that it must provide broadband virtual private networks (VPN) and high-speed Internet access for municipal facilities, emergency and public services, businesses and industrial spaces.  It was understood from the beginning of the project that it would never generate sufficient revenues to offset the investment and the justification was based on the economic improvements it would bring. The end customer would make a one-time payment for the installation of the local loop and could then contract with an ISP for service.  Operation and Maintenance of the network was contracted to a third party, which also became the ISP, as there were no ISPs that were interested in providing service to such a small market. The network build cost was $750,000 and the monthly network operation and maintenance costs were about $11,000. 

As of April 2003, there were 24 businesses and organisations connected to this network.  Between June 2001 and April 2003, the following economic effects can be directly attributed to the fibre network in South Dundas:

• 62.5 new jobs
• $2.8 million in commercial / industrial expansion
• $140,000 in increased revenues and decreased costs

The Input Output model indicated that, over the next two to four years, these effects would have the following impacts:

• $25.2 million increase in GDP for Dundas County
• 207 person years of employment for Dundas County
• $8.0 million increase in tax revenues

This network has provided measurable economic benefits to South Dundas and has received favourable reviews from users about its benefits to their organisations.  In the absence of this initiative on the part of Dundas, this level of service would never likely be available to this area.  However, since there is no revenue generated to Dundas from this service and given that it pays in excess of $130,000 for annual operation and maintenance, the Township is in effect subsidising the end user.

2.2.3 Lake County Florida

This study undertaken by Ford and Koutsky (2005) is also widely referenced as evidence of the importance of local access networks to economic development of communities and surrounding areas served by these facilities. 

The City of Leesburg is one of a number of municipalities in Lake County, a central Florida county of nearly 250,000 residents covering 953 square miles. The City, through its municipal owned utility, provides electric and other services to the City and much of Lake County.  Beginning in 2001, it expanded its existing telecommunications network with the deployment of an extensive, fibre-optic broadband network throughout Lake County, Florida.  The City provides fibre optic connections to municipal offices, hospitals, doctor offices, schools and private businesses throughout Lake County.  This is a service that is not generally available throughout the rest of Florida.

Based on their analysis of Lake County as compared to other counties in Florida, they concluded that:

“Our econometric model shows that Lake County has experienced approximately 100% greater growth in economic activity – a doubling – relative to comparable Florida counties since making its municipal broadband network generally available to businesses and municipal institutions in the county.

The findings are consistent with other analyses that postulate that broadband infrastructure can be a significant contributor to economic growth. Our results suggest that efforts to restrict municipal broadband investment could deny communities an important tool in promoting economic development.” [x]

2.2.4 Churchill and Parrsboro, Canada

There are other studies from rural and remote communities that have demonstrated investment in community high-speed Internet access deployment have created measurable economic benefits.  The study on two Canadian communities, Churchill and Parrsboro, followed a methodology similar to that used for the South Dundas study and the main findings have been summarised in Table 2:1.

The ability of the Town of Parrsboro to obtain high-speed Internet services was one of the major determinants in the community retaining its largest employer that accounts for some 140 jobs in the community.  The loss of that number of jobs with the associated payroll along with the other related economic benefits would have had a devastating impact on the Town.

Table 2:1 Economic Impact of Broadband Access in Canadian Communities

* Of the economic results estimated by the I-O simulation, 80% will be realized in the first two years and 100% within four years.

2.2.5 Studies on the Impact of Broadband on Businesses

One of the more recent studies on the economic impact of mass market broadband was conducted on a range of communities across the United States comparing indicators of economic activity that included employment wages and industry mix (Lehr, Osorio, Gillett and Sirbu, 2004).  In those U.S. communities where broadband had been deployed since December 1999, the researchers found that between 1998 and 2002, these communities experienced more rapid growth in employment, number of businesses overall, and businesses in IT- intensive sectors. 

As noted by the authors, “… the early results presented here suggest that the assumed (and oft-touted) economic impacts of broadband are both real and measurable.”[xiv] 

The major reason that access to high-speed Internet access is believed to benefit local communities, particularly in rural areas, is the impact that it has on increasing the competitiveness of businesses by increasing productivity, extending their market reach and reducing costs.  Until recently, there has been little research done on attempting to analyse and document the underlying reasons why businesses are positively impacted by high-speed Internet access. There are two studies, one from Cornwall, England and the other from British Columbia, Canada, which have shown remarkably similar results.

Cornwall is a relatively isolated area that is provided with high-speed Internet access by actnow, a public-private partnership that was established in 2002 by Cornwall Enterprise to promote economic development in the region.  In April 2005, an online survey of companies that were served by actnow was undertaken.  The main findings of the study were:

“Their answers suggest that broadband is generally benefiting enterprises, individuals, the Cornish economy, society and the natural environment by, for example, extending market reach and impact, making organisational working practices more efficient, enabling staff to work flexibly, and substituting travel and meetings with electronic communication. In particular:

• Over 94% of respondents report positive overall impacts from broadband, with 68% stating that they are highly positive.
• A large majority of respondents feel that broadband has positive impacts on business performance (91%), relationships with customers (87%), and the job satisfaction and skills of staff (74%).
• 90% of respondents expect to get continued benefits – and 45% considerable benefits - from broadband.” [xv]

The Peace River and South Silmilkameen regions are located in remote parts of British Columbia, Canada. The area is served by the Peace Region Internet Society which is a not for profit organisation established in 1994 to provide affordable access to the Internet for individuals, businesses, and organizations in the Peace Region of Northern British Columbia. In 2005, an online survey of customers was undertaken to measure the economic impact of high-speed Internet access in these communities.  The major findings were:

“For most businesses in the communities we studied, broadband is an important factor in remaining competitive. Broadband allows businesses to be more productive, to identify and respond to opportunities faster, and to meet the expectations of customers, partners, and suppliers.

• Over 80 per cent of business respondents reported that broadband positively affected their businesses. Over 18 per cent stated they could not operate without broadband;
• 62 per cent of businesses say productivity has gone up with a majority citing an increase of more than 10 per cent;
• Many businesses reported increased revenue and/or decreased costs due to broadband connectivity.”[xvi]

The two studies show a high degree of similarity in the responses with businesses in both areas demonstrating that high-speed Internet access has positively impacted their businesses, through increased productivity and overall efficiencies. The research demonstrates that high-speed Internet connectivity is important to ensure that businesses in rural and remote areas remain competitive and without it, they would be at a severe competitive disadvantage. 

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