Along with approving the FY 2020 budget in the dark of night, our blizzard-spooked legislators pulled $6.6 million out of reserves to balance this year’s budget. Among the items onto which legislators poured some sugar was a new “rural broadband fund” under the Governor’s Office of Economic Development, for which Governor Kristi Noem asked and got $5 million.
Oh, look—another $5 million ceded to the Governor’s mostly unspuervised spending authority. What could go wrong?
The money comes a couple years after the Obama stimulus money that originally filled South Dakota’s broadband fund ran out and forced the state to axe the nice little website it was using to share information and help providers get grants to build the info-infrastructure that is necessary (but not sufficient!) to sustain rural economic development. This $5M also comes as the press picks up a January 2019 study by Old Dominion and the University of South Dakota on rural broadband discussing the urban-rural digital gap.
The researchers got hold of Internet users around the state, from the comfy confines of the Vermillion-Yankton corridor to farther-flung outposts on the high lonesome:
Broadband connections are spotty all over. An EMT said unreliable mobile signal hinders sending EKG information to hospitals. One respondent on the USD campus said our second-largest university doesn’t offer enough bandwidth for reliable video conferencing. Respondents said that signal becomes unreliable during big events like Dakota Days and county fairs (we Brown County Fairgoers can attest to that), during which our temporary population densities are still ridiculously small compared to big cities where people get reliable signal every day.
The report indicates the best way to spend Governor Noem’s $5 million (and whatever federal dollars and private donations she can conjure up to match it) to close the urban-rural digital gap won’t be on wires:
A recent estimate by the South Dakota Telecommunications Association (SDTA) highlights the challenge of fixed broadband investments in less populated areas of the state. The estimated average per-mile cost of installing backbone fiber was $16,000 for rural areas of South Dakota but was $60,000 per mile in the metropolitan Sioux Falls area. However, while the SDTA estimated the population density of the Sioux Falls metropolitan area was 2,490 residents per square mile, it estimated that the population density of its rural customers was only 4.5 residents per square mile. The low population density of rural areas meant that the average cost per resident of installing backbone fiber was $3,571 per resident, compared to $25.54 in the Sioux Falls metro area [McNab, Earnest, et al., Improving Rural Broadband Access, Old Dominion/University of South Dakota, January 2019, p. 11].
At those rates, Noem’s $5 million would run fiber to another 1,400 South Dakotans, or 0.16% of our state population.
Whatever infrastructure we build, empirical evidence suggests that improving broadband access does all sorts of good:
The question of broadband access is not only one of improving the consumption of video and associated consumer and business services, it is directly and positively related to questions of employment and productivity. For the United States, the available empirical evidence suggests that broadband availability lowers the unemployment rate at the county level and these effects are concentrated in technology-concentrated and high-end service industries such as finance and insurance, education, and heath care (Bai, 2017; Crandall, Lehr, & Litan, 2007; Forman, Goldfarb, & Greenstein, 2012; Kolko, 2012). The empirical evidence also lends credence to the argument that increased mobile network capacity and speed reduces information asymmetries between rural and urban areas, improves the acquisition of human capital and agricultural productivity, and improves connections between governments and the citizens that they serve (Baumüller, 2018; Beratarrechea et al., 2014; Haftu, 2018; Mittal, Gandhi, & Tripathi, 2012). Improving access to mobile networks also appears to reduce the incentives for rural-to-urban migration by improving economic opportunities in rural communities [McNab, Earnest, et al., 2019, pp. 11–12].
Notice that the research above shows benefits to agriculture and several other important South Dakota industries. The study authors emphasize the decreasing importance of agriculture and the increasing importance of those other information-dependent service industries:
While a significant proportion of economic activity and employment may continue in the agricultural sector, its relative importance to other sectors of the South Dakota economy has declined over the last two decades.
In 2017, a slight majority of the South Dakotan population resided outside the two Metropolitan Statistical Areas (MSAs) of Rapid City and Sioux Falls. It is highly likely, however, given current trends that sometime in the next two decades, more than 50 percent of the population will reside in these metropolitan areas of South Dakota. People follow jobs, and jobs have continued to migrate from rural to urban communities as South Dakota evolves from an agriculture-based economy to a more diversified economy based on financial services, health care, education, and tourism. The growth in these sectors is, in part, dependent upon the availability of access to the Internet, access which appears to be constrained in rural areas of the state.
… fully one quarter of the value of South Dakota’s economic activity is generated by finance, insurance, real estate, rental, and leasing, dwarfing
that sector’s approximate 10.7 percent share of the state’s employment.
…The state’s traditional economic base, agriculture, accounted for 5.3 percent of total employment and 6.6 percent of economic output [McNab, Earnest, et al., 2019, p. 12, 14].
Expanding broadband to Tyndall, Highmore, and Zeona isn’t just about helping farmers and ranchers keep up with the markets; it’s about providing rural folks with other skills a chance to participate meaningfully and optimally in the other 93% of the South Dakota economy without having to move to Sioux Falls or Rapid City. And even that network-enabled opportunity, Dr. Bottum will remind us, may not be enough to reverse some areas of rural decline, because most people don’t want to live their whole lives online.
Governor Noem has $5 million to spend right now on rural broadband, and a new study telling her how to spend it reasonably. Let’s keep an eye on the $5 million to see if the Governor follows through on her promise to connect the rest of South Dakota to the 21st century.