Fast track to fast Internet service?

While most government entities are bracing for budget cuts, the Massachusetts Broadband Institute is crossing its fingers for a windfall of cash. The MBI, whose full board met for the first time last week, wants to bring high-speed internet to sparsely populated areas of the state – and thanks to the American Recovery and Reinvestment Act (ARRA), the institute may soon have a budget three or four times as large as it had originally anticipated.

That news is likely to warm some hearts out in western Massachusetts, where thousands of people have no internet option other than dial-up service. Companies eager to compete for Greater Boston’s business have largely stayed away from the rural part of the state, citing an unprofitable combination of high start-up costs and a small customer base. Under MBI’s plan, government would assume many of the start-up costs by building the infrastructure; private companies would provide the actual service. MBI Chairman Stan McGee hopes that a big influx of federal funds (there’s $7.2 billion up for grabs among the states) will mean better connections sooner for western Massachusetts towns where, reportedly, frustrated residents now pile into cars with their laptops and go cruising for Wi-Fi hot spots.

I spoke with McGee in his office, which overlooks the State House and downtown Boston.  At one point, he gestured out his picture window at the city below and asked me to imagine what would happen if all Internet service vanished, even for a moment: how many businesses couldn’t operate and how many workers couldn’t do their jobs (never mind how many college students would go into Twitter withdrawal). That, he says, is currently the situation in much of Berkshire County -– one he hopes MBI is in the right place at the right time to remedy.

You’d been banking on a $40 million budget, and now you might get three or four times that. How does that change the scope of the project?
When the governor came in, one of his first priorities was broadband as an economic development priority. It was submitted to the Legislature as a $25 million initiative and came out at $40 million. It’s not appropriated; it gives us permission to borrow up to $40 million, and use that to offset the capital deployment costs for providers. In western Mass, many people say, “It’s outrageous that Verizon isn’t here.” But Verizon has to show a return to stockholders – it’s never going to be cost effective to deploy out there. The idea is, we’re making it more feasible for providers. But it’s not just that we were at $40 million and now we may be at $250 million. It was never going to cost just $40 million. There was going to be more that the private sector was going to spend, but their capacity to borrow money is different now than it was in August, when the governor signed the bill [authorizing the borrowing]. So we may potentially have more, but the private sector’s ability to borrow money and partner with us has changed dramatically. It shifts the ratio. What I’m hoping is the combination of federal stimulus and actual economic recovery will mean that by the time we’re engaging in private-public partnership, they’ll be able to partner with us more effectively.

The state will be investing a lot so private companies can turn a profit. What's the return for the state?
What’s anticipated is that we spend the funds on publically owned assets. What we don’t know yet are the rules that will come along with any federal money. My sense is that what we’d be investing in are long-lived durable assets: It might be fiber, it might be towers, it might be spectrum. The solution might look different in different areas of the state. The financial relationship between MBI and the companies who would use what we build has not been determined. But we expect that any license-fee arrangement would cover the operating costs but not the capital build-out.

Does that make the state the perpetual steward of the infrastructure?
No, because I think that although the state would own the publicly purchased assets, maintenance and operating costs would be covered through licensing agreements with these privates. And many of the benefits we get – public safety benefits, educational benefits, quality-of life-benefits – accrue to the state, but not to private stockholders.

So the state will not actually provide Internet service?
No. The hope is that with us taking some of the capital costs out of the equation, providers will be able to turn a profit more effectively. The way I would think about it is, when electricity first expanded across the U.S., it would go into urban areas first. There were farms where it took government intervention to result in some communities getting electricity, and if the government hadn’t done it, they might still be without electricity.   In the same way that we wouldn’t expect a business to locate in an area without adequate roads, or sewer or phone lines, we really can’t, particularly in our knowledge-based economy, expect people to locate in an area without quality high-speed internet access.

How many people is this an issue for?
When the governor signed the law in August 2008, there were 32 towns in Mass without any high-speed Internet, and 63 we deemed underserved. Since that time, private providers, including Verizon and AT&T, have expanded their own broadband infrastructure – we believe as a direct result of the state’s commitment to this initiative and to position themselves to take better advantage of any future public investment in broadband – and this has reduced the number of communities  with nothing whatsoever  to 11. But just because a community has some service doesn't mean every household does. What we’re trying to do now is identify exactly who has it and who doesn’t. We are woefully behind in our capacity to say where we have it and where we don’t. 

Where are we on access, compared to other states?
As of December 2007, the FCC [Federal Communications Commission] estimated that 74 percent of Massachusetts citizens had broadband, but that data is highly suspect since it assumes that if any individual in a zip code has access, everyone has access. The FCC is aware that this isn't accurate, which is why ARRA includes money for mapping. Using the FCC numbers, Massachusetts ranks eighth in the nation as far as broadband penetration. But we’re also more dependent on broadband as a nature of our economy than many states are. Having most of our population covered isn’t enough. We want to have a critical infrastructure available so that people can go anywhere in Massachusetts and know that in the same way they’d expect quality bridges and schools, this will be available as well.

What’s the time frame?
The governor committed that we’d deal with all underserved communities by August 2011. The federal stimulus means we’re both accelerating and slowing down at the same time. If we get federal money, there is more that we can do. But we’re taking the time right now to direct a lot of our time and attention to Washington, which I think is time well spent.  By the end of the summer, we should know what the nut is that we have to spend. What we’re doing now is trying to move quickly. Out in western Mass, if you don’t have access,  every day makes a big difference.