Research undercuts government argument Internet is for economic development

By Chris Butler | Tennessee Watchdog

NASHVILLE — Research shows that more than half the people who use the Internet do so for entertainment, calling into question whether taxpayers and ratepayers should bring broadband into rural areas under the pretense of economic development.

Plenty of important people in Chattanooga are calling on the Federal Communications Commission to overrule state laws, such as those in Tennessee, that restrict government-owned networks from selling Internet service beyond municipal boundaries.

EPB competes in the city with private providers such as Comcast. The public utility offers ultra high-speed Internet through a smart grid, which taxpayers paid $111 million for, via federal stimulus money.

Will government investment in broadband really bring jobs to rural areas?

Many of these same officials gathered in Chattanooga last month and said bringing broadband to rural areas through these GONs would create jobs in areas that private Internet Service Providers care nothing about.

At one point they compared broadband to vital infrastructure, such as roads, electricity and even water.

But the CEO of a Jackson-based ISP pointed Tennessee Watchdog to data showing a majority of people go online for entertainment, with almost 32 percent of all North American Internet traffic using Netflix.

Nearly 20 percent of online users, meanwhile, were on YouTube.

“Everybody knows that half the traffic on the Internet is for entertainment,” said Jonathan Harlan, CEO of Aeneas Internet & Telephone services.

Many remaining Internet users, according to zdnet.com, are on iTunes, Hulu or Amazon Instant Video.

Harlan, who has been in the business since 1996, said he was the first to provide broadband service to west Tennessee.

“I don’t subscribe to the thesis that Internet is infrastructure,” Harlan said.

“Our government is there in many cases to meet public needs. There is no other way to provide them. This could be sanitation, law enforcement, guaranteed weight measures, our system of laws, several things. If there’s a private sector enterprise that will meet a need then the government has no business being in that area.”

Jonathan Harlan

Harlan said branching out into rural areas is expensive for an ISP, but, in the coming decade, less expensive solutions will present themselves through the free market.

“Wireless technology will be the solution certain in the next 10 years to reach extreme rural people,” Harlan said, citing AT&T as one likely example of a company that will introduce it.

Representatives from AT&T, however, didn’t immediately return messages left seeking comment Tuesday.

Officials from some of the towns and counties cited as most desperately in need of broadband Internet through GONs also didn’t respond Tuesday.

At last month’s gathering, Beth Jones, director of the Southeast Tennessee Development District, spoke of a widow in one rural Tennessee area who’s unable to sell her house because broadband access is unavailable.

When told of Jones’ comments, Harlan responded by calling it “salesmanship propaganda.”

“I’m sorry the woman doesn’t have broadband, but that is not a hardship to be met with a lot of money in public financing,” Harlan said. “There are many, many factors pointing to real estate values and Internet access is a minor one compared to crime and larger real estate trends, and everybody knows that.”

Photo courtesy of useducationtv.com

Beth Jones, director of the Southeast Tennessee Development District at an event in Chattanooga last month.

The nonpartisan Public Policy Institute of California, meanwhile, released research in 2010 reporting that government investment in broadband only has limited benefits.

“The economic benefits to residents appear to be limited. Our analysis indicates that broadband expansion is also associated with population growth and that both the average wage and the employment rate—the share of working-age adults that is employed—are unaffected by broadband expansion,” according to the report.

“We also found that expanding broadband availability does not change the prevalence of telecommuting or other home-based work. Of course, local employment growth might still raise property values and the local tax base, but in the absence of more direct benefits for residents in the form of higher wages or improved access to jobs, we can only say that the local economic development benefits of broadband are mixed.”

Contact Christopher Butler at chris@tennesseewatchdog.org

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Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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