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From Site Selection magazine, September 2011

The Importance of Broadband To Economic Development

Corporate site selectors consider it a critical piece of infrastructure.

Director of Domestic Business
Development, Columbus 2020
The Arena District, a nationally recognized urban redevelopment project anchored by Nationwide Arena (home of the NHL’s Columbus Blue Jackets), has grown into one of the Columbus Region’s largest office markets. Already home to companies like Nationwide Insurance and American Electric Power, the Arena District soon will welcome a new headquarters building from Columbia Gas of Ohio.
Battelle Memorial Institute’s world headquarters in Columbus, Ohio
Battelle Memorial Institute’s world headquarters in Columbus, Ohio

tility service has always been among the most heavily scrutinized factors in the site selection process.Locations are routinely eliminated due to issues pertaining to inadequate — or lack of — electric, gas, water, wastewater, or telecommunications infrastructure. Advances in technology have elevated the importance of the Internet in economic development and site selection. The availability, quality, and competitiveness of broadband service have become and will continue to be a key issue for many locations. Moreover, the United States has a "broadband problem" that is impacting the country's competitiveness for new investment.

Broadband service connects businesses and individuals to the global marketplace. It has flattened the world by allowing businesses to communicate and collaborate in ways never before possible due to the increase in the amount of information that can be transferred at faster speeds and new software technology made possible by its bandwidth. While many dial-up plans charge for minutes used, broadband is always on and can be less expensive due to unlimited usage and, in certain locations, competitive market. The difference in speed saves companies money when considering the increased productivity.

People want to live where there is broadband service. It improves the manner in which health care and many public services are delivered. Moreover, it has become an essential quality-of-life amenity for many as it opens new doors to entertainment and communication options like downloading or streaming movies and television shows directly to a computer or TV, accessing music through applications like iTunes, and video conferencing through applications like Skype or Facetime. Broadband allows for a more flexible lifestyle by providing greater access to education through distance learning programs or remote employment.

Broadband and the Site Selection Decision

Corporate site selectors expect broadband. It is not a perk or special benefit.For communities, it is a critical piece of infrastructure for attracting new capital investment. Specifically, a company is likely to require a direct fiber connection and redundancy. As with electric service, the reliability of the service is heavily scrutinized to ensure the operation will not be placed offline (especially for information-intensive projects like data centers) or that the risk of being offline is minimal. The competitiveness of the service is also important. Locations with numerous providers have an advantage because competitiveness will drive up speeds and drive down cost.

Locations with inadequate connectivity are quickly passed over for projects requiring broadband. Communities lacking broadband infrastructure make the process of elimination easier for investment decision-makers and influencers. That said, merely having broadband likely places a location on a level playing field with other communities. It will be the only reason a company selects a certain location.

Investments in Broadband

Numerous case studies and empirical analyses demonstrate how locations were able to develop a competitive advantage by installing broadband before other communities. In her 2006 econometric study of U.S. communities, Sharon Gillett found that broadband added about 1-1.4 percent to the employment growth rate and 0.5-1.2 percent to the business establishment growth rate between says that for each $5 billion in new broadband investment, 250,000 jobs are created. Moreover, with every percentage point increase in new broadband penetration, employment expands 300,000. Estimates by Accenture in 2003 suggest that broadband could contribute $500 billion to U.S. GDP.

Some communities don't stop at merely having broadband service. Many use publicly owned networks to their advantage by providing service to the private sector. In 2001, Lake County, Fla., began offering private businesses access to its municipally owned broadband networks. In 2005, George Ford and Thomas Koutsky analyzed the impact and found that Lake County experienced a doubling in economic activity relative to comparable Florida counties.

Case Study

In the Columbus Region, the City of Dublin owns and operates the DubLINK broadband system, which consists of 125 miles of conduit and optical fiber and 24 square miles of WIFI covering both business and residential areas. It is therefore no surprise that the City of Dublin has been named a Smart21 community for four consecutive years, achieving Top Seven status in 2010 and 2011, by the Intelligent Community Forum, which is dedicated to economic growth in the broadband economy.

The Broadband Problem

The term "digital divide" speaks to the disparity between geographic areas with regard to their opportunities to access information and communications technologies. The gap will continue to grow as long as locations with low or no broadband connectivity do not invest in broadband development. Businesses that rely on broadband will have no choice but to invest in locations with it. Demographic changes will occur as people choose to live elsewhere.Educational and health care systems in non-broadband locations will lag behind those with broadband that access, share, and use otherwise unattainable information.

Federal and state governments have long sought to close or eliminate the digital divide. The American Recovery and Reinvestment Act allocated $7.2 billion for broadband investment with local economic development being the goal. Despite best efforts, many locations still lag behind their competition and the divide continues to grow. More importantly, the country as a whole lags behind much of the developed world.

Matt McQuade
Matt McQuade is Director of Business Development for Columbus2020, the economic development organization for theColumbus region of Ohio.

While we have the digital divide problem within the U.S., there is also the important issue of how the country's broadband standing fares relative to the rest of the world. Various rankings such as those released by the United Nations and the Organization for Economic Cooperation and Development find that the U.S. ranks in the middle of the pack globally in terms of broadband adoption per capita. There is also the issue of the growing disparity of cost of broadband in the U.S. versus other developed countries.

Broadband and the Future of Economic Development

Various econometric analyses have demonstrated a positive correlation between broadband and economic growth, and its importance in the site selection process will not diminish. With public and private investments in broadband infrastructure still surging, communities lagging behind will be placed in an ever more competitive disadvantage. More importantly, domestic policy must address the nation's competitive broadband standing to ensure that future capital investment and job creation that should occur in the U.S. does.

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