PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Rural Broadband Access: An Opportunity to Close the Digital – and Entrepreneurial – Divide

By at 27 July, 2017, 2:33 pm

by Raymond J. Keating-

On July 26th, the American Consumer Institute hosted a panel discussion titled “Can TV White Spaces Close the Digital Divide?” in the Russell Senate Office Building. I was fortunate to be invited as a panelist, alongside Graham Dufault, director of government affairs at ACT (The App Association), Tom Struble, tech policy manager, R Street Institute, and moderator Katie McAuliffe, director of the digital liberty and federal affairs manager at Americans for Tax Reform.

My job was to set the table, if you will, in terms of the challenges of expanding broadband access across all of rural America during a challenging time in our economy. I largely focused on the shortfalls we are suffering in terms of entrepreneurship and the number of U.S. businesses.

The Entrepreneurship Gap and Rural America

As noted in SBE Council’s most recent take on The State of Entrepreneurship and Small Business, we looked at an array of data and trends, and highlighted the fact that, when considering incorporated and unincorporated self-employed, and the number of employer firms, the U.S. is missing some 3.42 million businesses. And that number is probably a bit conservative. For example, if we consider the broadest measure of the number of businesses taken from IRS tax returns and diminished growth in this area, then there are some 4.8 million missing businesses.

That’s deeply troubling, today and in the future, in terms of innovation, job creation, productivity, incomes, and overall economic growth.

But the troubles are even more acute in rural America. This was made clear in two recent reports from the Economic Innovation Group – Dynamism in Retreat and The New Map of Economic Growth and Recovery. A few key points from these reports regarding the loss of entrepreneurship and jobs in rural America must be highlighted here:

• Regarding start-ups: “Only one in seven metro areas now keeps pace with the national startup rate. Meanwhile, the dynamism gap between large and small metro areas is growing, with startup rates falling faster in smaller metro areas on average.”

• Looking at and comparing new business establishments during the three most recent recoveries: “New business establishments consolidated into the country’s largest markets over the 2010s to an extent not seen during prior recoveries. In the 1990s, counties with under 500,000 people generated 71 percent of all new business establishments — a total of nearly 300,000. By the 2010s, counties with over 500,000 people had become dominant, generating 81 percent of all new business establishments — despite housing only 47 percent of the country’s population.” In addition: “In total, counties with over one million people added 99,000 of the country’s 165,000 net new business establishments from 2010 to 2014. Meanwhile, counties with under 100,000 people saw a sharp reversal from the 1990s, swinging from a net increase of 135,000 business establishments from 1992 to 1996 to a net decrease of 17,500 establishments from 2010 to 2014. The steep drop-off in new establishment openings in small and mid-sized counties is responsible for much of the national-level collapse.”

• Employment data largely tracks the business establishments trends during this latest economic recovery compared to the previous two: “Over prior recoveries, large counties did not play a central role in delivering the country’s employment growth. This is no longer the case. The most populous U.S. counties — those with over one million people — created 3.3 million jobs over the 2010s recovery, more than any other size class of counties and more than twice as many jobs as they created over each of the two prior recoveries. By contrast, counties with under 100,000 people collectively created fewer than one million new jobs in the 2010s — substantially fewer than 2.5 million they created from 1992 to 1996 and the 1.2 million new jobs they created from 2002 to 2006.”

Now, there are a host of factors in play when it comes the economic challenges in rural America. However, expanding broadband access in rural areas clearly would be a big positive.

The Benefits of Broadband and the Need to Accelerate Access

As noted in a Wall Street Journal report: “Rural counties with more households connected to broadband had higher incomes and lower unemployment than those with fewer, according to a 2015 study by university researchers in Oklahoma, Mississippi and Texas who compared rural counties before and after getting high-speed internet service.”

But as explained in the same article: “About 39% of the U.S. rural population, or 23 million people, lack access to broadband internet service—defined as ‘fast’ by the Federal Communications Commission—compared with 4% of the urban residents. Fast service, according to the FCC, means a minimum download speed of 25 megabits per second, a measure of bandwidth known as Mbps. That speed can support email, web surfing, video streaming and graphics for more than one device at once. It is faster than old dial-up connections—typically, less than 1 Mbps—but slower than the 100 Mbps service common in cities.”

The focus of the panel, as noted in the title, was on the idea that TV white spaces (TWS) could help close the rural broadband gap. In a recent blog post, SBE Council noted that unused spectrum between TV stations — i.e., white spaces — offers an opportunity to help meet rural broadband needs in a far more affordable way, thanks to advancements on the technological front. For example, a Microsoft paper titled A Rural Broadband Strategy noted the following in terms of potential savings of closing the rural broadband gap: “Specifically, a technology model that uses a combination of the TV white spaces spectrum, fixed wireless, and satellite coverage can reduce the initial capital and operating costs by roughly 80 percent compared with the cost of using fiber cables alone, and by approximately 50 percent compared with the cost of current LTE fixed wireless technology.”

What would expanded broadband in rural America mean for entrepreneurship and small businesses? Just as access to broadband has achieved elsewhere, it means that rural entrepreneurs and small businesses would be able, among other things, to reach national and international customers and suppliers, enhance productivity, create new products and services, and gain access to expanded funding sources, such as via equity and debt crowdfunding, which is important given the devastation wrought by, for example, Dodd-Frank regulation on small community banks.

While other issues in play, such as on the tax and regulatory fronts, must be dealt with when it comes to the economic challenges in rural America, closing the rural broadband gap would be a very big deal for rural small businesses.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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