chicken and egg

Does use of high-speed Internet service in rural areas follow economic growth or stimulate it?
Photo: via Cincy Blog

Some of the best minds in rural economics and online technology gathered at the Economic Research Service in Washington, D.C., this week to explore broadband Internet ““ its reach and its potential in small communities.

A broadband connection, in contrast with dial-up, speeds access to the Internet and makes it possible to send and receive a much wider range of media ““ large data sets, photographs, music, videos, even entire movies.

The workshop atmosphere was wholly congenial (economists don’t throw off many sparks). But in two days of presentations there were plenty of crossed wires. The experts disagreed over two core questions — whether rural areas indeed do lack access to broadband technology and whether high-speed connectivity can appreciably diminish the “rural penalty” ““ chronic disadvantages in personal income, employment, health care services, and education.

John Horrigan reported from Pew’s latest survey (August 2008), showing 64% of rural adults use the Internet at home; 41% of rural adults connect at home via high-speed/broadband service (57% of urbanites use broadband at home). Horrigan’s survey found that rural customers paid only slightly more on average for broadband than urban subscribers. In the Pew survey, 24% of rural Internet users said they would move from dial-up to broadband if high-speed connection were available; this finding alone suggests that significant stretches of rural America do lack high-speed Internet service.

But the fact is no one really knows how available broadband is throughout the rural U.S. Because of how the FCC handles its Internet technology (IT) data, a whole county may appear to have high-speed access when in fact one large company has paid for a broadband connection and is its sole user.

high speed internet 2006

The number of high-speed Internet providers as of Dec. 31, 2006. Blue=7 or more providers; orange=3-6; peach=1-3; green=0. FCC overestimates broadband access in rural areas because a “provider” may only connect one local business to the Internet.
Map: Federal Communication Commission

With the extent of broadband access so unclear, research for the most part can only be tentative in assessing how high-speed connections have affected or might affect rural schooling, work, health care, and civic engagement. “Measuring the rural economic effects resulting from the investment in broadband is challenging,” wrote Peter Stenberg of ERS, a conclusion echoed many times over the two days.

Janet Poley, a distance education expert from the University of Nebraska, said that demand for online study is growing, and as online teaching tools increasingly involve not just pages of text but “bandwidth hogs” like complex simulations, broadband will be a requirement for at-home learners. “I think we’re lagging,” she said of broadband availability in rural communities. Yet Poley also stressed that there has already been far greater investment in technology than “in educational applications” ““ the kinds of teaching materials that best serve distance learners.

Robert Crandall of the Brookings Institution cast doubt on the efficacy of federal subsidy for broadband. “We want to be very careful about selling broadband to increase overall job growth in the rural economy,” he said ““ because there’s very little evidence that increasing broadband access indeed does create jobs.

Crandall also made reference to University of Chicago economist Austan Goolsbee’s study of a major subsidy of IT in California schools; Goolsbee found no significant effects on student performance.

John Leatherman of Kansas State, looking at the dynamics of e-commerce and IT producers and users in Kansas, argued “There is no evidence that technology will do away with the rural penalty.” His study, available here, concludes that geography remains a strong feature in economic success: in his research, “as distance from the metro hub increased, the worse e-commerce-intensive industries performed.”

Catherine Mann of Brandeis, a specialist in global economics, argued that Internet technology benefits some business sectors far more than others. Service industries, she found, showed a bigger return on IT than manufacturing; further, she demonstrated that manufacturers more wisely invest in IT linkages to their suppliers, service industries in technologies that connect them to consumers.

As for small businesses, they generally, “cannot determine the benefits of investing in IT,” Mann said.

farmer computer

Only 30% of U.S. farmers use the Internet as part of their farm business
Drawing: Jackie Stafford-Snider

The topic of rural culture, submerged throughout the two days at ERS, was nonetheless visible swimming just below the surface. Brian Whitacre of Oklahoma State University, studying why relatively few farmers have adopted the Internet, found that the number of local IT providers in a rural area had no impact on their decision. It wasn’t that farmers had no access to broadband, it’s that they didn’t want it.

One especially revealing finding, from Leslie Stoel of Ohio State, was that rural residents who had yet to implement e-commerce ideas were more positive about the benefits of technology than were ruralites who’d actually set up business websites. “Users are more realistic,” Stoel said.

At the outset of the gathering, Mary Bohman of the ERS acknowledged a chicken and egg problem: “Is broadband in places that are already vibrant?” Or does improved Internet technology bring vibrancy to rural communities?

Answers to these and many more questions will require having more reliable information about who actually has access to broadband, and where.

This week, despite more pressing obligations, both the Senate and House managed to pass The Broadband Data Improvement Act. The quality of FCC ‘s information about broadband access and use is bound to improve. At the next meeting of experts on rural broadband, there should be sharper disagreement or clearer accord.

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