The rural broadband train arrives at the Gold Dome. Grab your wallet.
Last May I was asked to present some of my Trouble in God’s Country research to the opening session of the House Rural Development Council down in Tifton. The first question I got after completing my presentation was about something I hadn’t even touched on – the idea of running broadband to rural Georgia. The next morning the legislators heard four presentations about rural broadband. It was clear even then that the rural broadband train was being stoked up and prepped for a high-speed run to the Gold Dome.
It pulled into the State Capitol last week in the form of House Bill 887, aka the Georgia Communications Services Tax Act. I first heard about it from Bill Torpy, The Atlanta Journal-Constitution’s “At-Large” columnist. Torpy is an occasional reader of my TIGC blog who also tends to get a little worked up when the state government siphons money out of Metro Atlanta to fund cockamamie schemes in, as he puts it, the boonies. He called to talk about it and get my take for a column that ran in Sunday’s paper.
He’s not wrong about Metro Atlanta getting hosed, of course; it was ever thus – although H.B. 887 may constitute the most audacious attempt to fund a rural boondoggle with Metro Atlanta tax dollars since Sonny Perdue’s “Go Fish Center” in Houston County. My admittedly unkind assessment is that Metro Atlantans are now being expected to sit in grid-locked traffic so that Donald Trump’s South Georgia supporters can get faster downloads of old Stormy Daniels videos.
H.B. 887 is a beast of a bill. It’s 45 pages long and has a ton of moving parts. The basic funding mechanism calls for slapping a new four percent sales tax on a whole slew of communications products and services – apparently including premium streaming services like Netflix and Amazon Prime – to help pay for rural broadband. Because the vast majority of those subscriptions and services are in areas that already have high-speed internet (e.g., Metro Atlanta), their taxpayers will be footing most of the bill.
How would that work? Well, another component of the bill is something called the “Georgia Reverse Auction Broadband Deployment Program.” This is a scheme our leaders cooked up to pay telecom and cable companies to run broadband technologies throughout rural Georgia. I’m guessing it’s called a “reverse auction” because ordinarily governments auction the right to use right-of-way or wireless spectrum to serve specific areas to companies that are in that business. Under H.B. 887, our state government would use largely urban tax dollars to pay companies like AT&T, Verizon, Comcast and no doubt others to deploy fiber optic cable and other high-speed broadband technologies to areas they won’t serve on their own.
With the new tax revenues, though, the pot is obviously right. One tip-off is that, by my count, the telecom and cable industries are now flooding the zone at the State Capitol with more than three dozen lobbyists.
What kind of money are we talking about here? Well, let’s do some rough math. At last May’s House Rural Development Council, Blake Doss of the House Budget and Research Office gave the legislators a presentation and told them that an estimated 626,070 rural Georgians don’t have access to what the Federal Communications Commission (FCC) defines as broadband: 25 megabits per second of download speed and 3 MBS upload (more about this below).
Doss also told the legislators it could cost up to $40,000 per mile to run fiber optic cable “in rugged areas.” He never got around to saying how many miles of cable would need to be run, but we can swag that.
I’m working with five-year-old Georgia Department of Transportation (GDOT) data here, but these numbers don’t change much in that amount of time. I find just under 800,000 people living in the unincorporated areas of 85 largely rural counties in Middle and South Georgia (never mind the small cities and towns). Those same areas, according to the GDOT data, were covered by 36,285 miles of road. For the sake of discussion, let’s be charitable and assume that half of those folks already have access to broadband and that only about 400,000 don’t.
Let’s also assume a 50 percent split in road miles – that the 400,000 unserved rural Georgians south of the gnat line live on about 18,000 miles of road. Let’s also assume that Mr. Doss’s $40,000-a-mile estimate is high and that it’s really only $30,000. Do the math and, conservatively, you’re looking at more than half-a-billion dollars to wire rural Middle and South Georgia.
So, real money. More than Medicaid Expansion money. In the general vicinity of Port of Savannah money.
Now, taxpayers won’t be picking up the whole tab. As proposed, the aforementioned “reverse auction” program calls for telecom providers interested in wiring rural Georgia to bid for the rights in a given area, with what amounts to the high bid being a key criteria for selection. Which means they’ll have some skin in the game. Which means they’ll need a return on the investment. Which is going to be tough, even with a big state subsidy.
Let’s use Early County, hard on the Alabama line down in Southwest Georgia, to flesh out an example. H.B. 887 calls for pouring money into “unserved” areas first (more about which in a later post), and I’m pretty sure Early County qualifies. Early County is home to right at 11,000 people who live in just under 5,000 homes strung out along 560 miles of road (including incorporated and unincorporated areas). Even at my reduced estimate of $30,000 a mile, that’s about $16.8 million to wire Early County for broadband, or about $3,400 per house.
Even if the telecom provider that wins the reverse auction to serve Early County puts up only half the capital, that’s still a big investment it will have to recover. Let’s round the telecom provider’s share of the capital investment down to $8 million. If they sign up every single household in Early County, that’s about $1,700 in capital costs, per subscriber, the company has to recoup before it can begin to make money.
Which brings us to one of two final problems with H.B. 887 that we’ll deal with today. First, the broadband as defined in this legislation ain’t all that broad – 10 MBS on the download and 1 MBS on the upload. The current FCC definition of broadband is 25 MBS up and 3 MBS down. Full gigabit service – 1,000 MBS – is now available throughout much of Atlanta. Scanning the web, I couldn’t even find a 10/1 offering. That’s your granddaddy’s broadband – think DSL with a shot of espresso.
Which brings us to the second and final issue we’ll deal with today. H.B. 887 requires the vendors not to charge their new rural customers any more than they charge customers in other parts of the state for “the same or similar services.” AT&T’s full gig service – 1,000 MBS on the download – costs $80 a month in Atlanta; I found an Xfinity 25 MBS offering for $19.99 a month, or less than a buck a megabit. There’s a lot of wiggle room in “same or similar,” so let’s say the providers can get away with charging the folks in Early County $20 a month for 10/1 service. At that rate, with all 5,000 homes signed up, they’ll get their capital back in just over seven years.
As I said above, this is a swag and no doubt flawed. Maybe I’m missing some puts and takes that’d help this make more business sense. I sure hope so. Because H.B. 887 is pulling out of the station, and it sure looks like we’re all about to get taken for a ride.
(Up Next: The real problem with House Bill 887.)