Published in Manufacturing

Lack of broadband access threatens rural manufacturers’ ability to compete

BY Sunday, January 20, 2019 11:38pm

As Larry Lewis advanced in his career as an engineer in the manufacturing, construction and telecommunications industries, he relied on computers as an essential tool for his everyday work.

His aptitude grew alongside the technology, to which he was first exposed at Dartmouth College in the late 1960s and early 1970s.

Then, in 2004, Lewis moved to Lake County, about 70 miles north of Grand Rapids, and detected a bug.

“I got here and I didn’t have access to the internet. We had dial-up and no one was providing any service at all,” Lewis told MiBiz. “We had hot spots, and you’d go to the library and the download speed is so slow that it takes hours. I spent 12 hours doing an update on my machine — 12 hours doing an update. We have suffered here for a very, very long time.”

Lewis became the Lake County champion for Connect Michigan, the state chapter of a national group that works with the Michigan Public Service Commission to expand access to broadband internet in unserved areas. Through his volunteer work with the organization, Lewis uncovered that he was part of a much bigger — and largely unseen — group of residents and businesses who were struggling to stay connected.

In manufacturing, Michigan’s largest industry, a lack of broadband access is threatening the ability for rural companies to compete with industry 4.0 technologies, according to The Right Place Inc., a Grand Rapids-based economic development organization.

“I don’t think we’re doing enough about broadband, and I mean that nationally and I mean that in most every state,” said Birgit Klohs, president of The Right Place. “We just are not getting there. There is a lot of discussion. The Right Place has been involved in studies in our rural communities about the last mile. We know the problem, and yet who do you get to build the last mile and where?”

The “last mile” refers to rural areas that have historically been the last to receive nationwide basic infrastructure like electricity, telecommunications and pipes that deliver water and natural gas.

Klohs related the need for broadband in rural parts of the country to the issue that spurred the Rural Electrification Act of 1936, a part of FDR’s New Deal that provided federal loans for the installation of electrical systems to serve isolated areas of the country. At the time, electricity was prevalent in cities but still largely unavailable to farms and other rural places.

Similarly, high-speed internet access, which was once rare, has grown to be commonplace in the 21st century. The term broadband refers to “high-speed internet access that is always on and faster than the traditional dial-up access,” according to the Federal Communications Commission (FCC).

A survey by the FCC found that nearly two-thirds (65 percent) of American adults used broadband internet connections in their homes by 2009. Now, about 80 percent of the 24 million American households that do not have reliable, affordable broadband are in rural areas, according to the FCC’s 2018 Broadband Deployment Report.

‘KICKSTART’ THE MARKET

The Mackinac Center for Public Policy, a Midland-based free market think tank, has followed the issue of access “since the internet started expanding,” Jarrett Skorup, director of marketing and communications, told MiBiz. The organization’s belief is that government programs should be used as “a last resort,” and only when the private sector proves to be inadequate.

“If the private sector is providing something and is capable of doing it, then we’re not big fans of government getting involved in it,” he said, continuing that the process of determining whether the private sector is proficient is called the “yellow pages test.”

“I guess it’s a Google test now,” he added.

High-speed internet is slower to come to rural areas due to lack of market demand, according to Skorup, who notes he is skeptical of comparisons to the 1930s expansion of electricity.

“Here’s a major difference: Everybody needs power, heat, electricity,” he said. “Not everybody needs high-speed internet, and not everybody wants high-speed internet. In fact, the government of the state did a survey, and they found that in a lot of these areas where you don’t have high-speed internet, the lack of demand is because people aren’t willing to pay for it.”

Nevertheless, Skorup said that if it is determined that providers are responding to the rural market too slowly, exploring local regulatory systems and asking governments to lower permit fees could make it easier for networks to expand. Voucher programs for families, seniors or people who cannot afford access could also “kickstart” the private sector, he said.

“What’s going to do it is the private market working on the problem in a way that is much more efficient, much cheaper, at a much better cost for everyone, and isn’t putting taxpayers on the hook for this big network,” he said. “That’s really been causing a lot of problems in different areas where people have gone in on that.”

Dan Manning, community technology advisor at Connect Michigan, said the nonprofit has been working with the Michigan Public Service Commission to expand the access and use of broadband throughout the state since 2011. Part of the organization’s approach is incentivizing the private provider network and demonstrating market need through surveys and community engagement.

“It is a mix of having the free market do its thing, because you get competition between providers that helps keep costs down. It helps get new service out to areas that wouldn’t have it otherwise, but that still leaves some areas where none of the providers can justify the cost,” Manning told MiBiz. “That’s why we have these grant and loan programs to subsidize a piece of that to at least get some of the providers pointed in that direction and started on some rural projects.”

Recently, the U.S. Department of Agriculture announced Congress approved the appropriation of nearly $600 million in additional funds for grants and loans that would help speed up the expansion of broadband infrastructure in unserved rural areas. In Michigan, these federal funds come in addition to the $20 million former Gov. Rick Snyder approved last year.

CONNECTING COMMUNITIES

Lewis, a retired engineer, began volunteering with Connect Michigan to bring broadband to Lake County in 2011.

“It’s been quite a battle, as a rural community, to get that internet service that’s so vital to living here in rural America,” he said.

In 2011, 2012, and 2015, Connect Michigan and a team of engaged residents in Lake County conducted a survey of demand for a broadband connection. The group collected information through an extensive series of boots-on-the-ground engagement, like outreach at festivals and fairs, neighborhood advocates, newspaper ads and mailings.

“We were able to make an argument that the 11,000 people in Lake County, the 4,000 households, were enough of a market to sustain a business model. That’s been a successful argument,” Lewis said. “It’s clear that people want it, they need it for entertainment, for business, for just communication.”

Lake County also has been “very aggressive” when competing for the federal funds that make it possible for providers to get federal grants or loans to service rural areas, according to Lewis.

“That’s why we’re looking this year at being a much more internet-connected county than we ever have been,” he said.

Lewis predicts that Lake County will see “two, three, if not four” new internet services available in 2019.

Peacock Ltd. of Baldwin Inc., a powersports dealer on M-37 north of Baldwin, could not wait, according to President Jim Faiella. Even though a fiber optic cable for another business happened to be laid along the road in front of his company, it still took Peacock Ltd. years to negotiate a connection.

“We have a fiber optic cable hookup now. It’s expensive, but for many years, we didn’t have it. With technology where it is today, we need good, heavy access and so we paid the price and brought in the fiber optic,” he said. “It’s about a two-year process of negotiating with a couple different companies, and again, just paying the price and signing a long-term contract.”

For the businesses in his community that are in need of broadband access, Faiella said satellite and cellular hotspots are still solid options.

“I think the future for our county is going to be when companies come in and put wireless towers up,” he said. “I don’t think that running cable is going to be the answer because everybody is so spread out.”

GOING VERTICAL

Connect Michigan recently entered into an agreement with the West Michigan Prosperity Alliance to conduct a study to identify “vertical assets” — tall structures like grain elevators, silos and water towers — where providers might be able to connect a signal or broadcast antenna. Pinpointing existing vertical assets may allow providers to skip the costs and time necessary to deploy networks to rural areas.

“These things are vital if we’re going to be able to make the case to the providers to bring what we need in these rural counties,” Lewis said. “And that’s big, and it’s all right here in Western Michigan and up in the thumb. Rural counties must have these tools.”

Read 4860 times Last modified on Thursday, 24 January 2019 15:35
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