Broadband payback not just about subscriber revenues

Jonathan West, general manager for Twin Lakes Telephone Cooperative, was asked a question on a recent panel about broadband stimulus that a lot of small telcos hear quite often. The panel was part of an Adtran press event in December, and West had told attendees that the fiber-to-the-home project for which the rural Tennessee telco won stimulus funding was going to cost a total of about $6,000 per home passed. The project was funded on a 50% grant/50% loan basis, with the company having more than 20 years to repay the loan.

“Isn’t that an awfully long payback period?” someone in the audience asked.

“We’re a non-profit cooperative,” West answered. “Our goal is to invest in the community.”

Because of the rural nature of its serving area, West explained that many of the infrastructure projects Twin Lakes has undertaken—including cutting over to a digital switch or getting rid of party lines--have had a long payback period. Every time one of these projects was undertaken, he said, the same questions about payback were asked and each time, the determination was made that the investment was important for the community.

In retrospect, it would have been crazy to leave people on party lines. But at the time that decision was made, people who looked at payback only in terms of customers’ monthly bills may have had good reason to question the investment, just as many people are questioning rural telcos’ investment in broadband today.

A broader cost/ benefit analysis

The upshot is that in doing a cost/ benefit analysis on telecom infrastructure investment, it’s important to take into account not only the direct revenues that the infrastructure generates but also the dollars that flow into a community as a result of the investment.

Imagine trying to sell a home today that only had party line phone service and think about the impact that would have on the value of the home. Now apply that logic to broadband. With two-thirds of U.S. households accustomed to having broadband connectivity, I’m already hearing that homes in areas with inadequate broadband coverage are becoming more difficult to sell. And that situation is only going to get worse as young people who never knew a world without broadband begin to buy homes.

Indirect benefits quantified

It’s not easy to quantify the indirect benefits that flow from modern telecommunications infrastructure, but now and then someone takes a crack at it. Nokia Siemens Networks, for example, commissioned a study that found that the U.S. could increase its GDP by $100 billion with an increase of 10 additional broadband lines per 100 individuals. Another study, from the Internet Innovation Alliance, found that using broadband could save U.S. households an average of nearly $8,000 a year.

And although some broadband benefits are difficult to quantify, most people recognize that modern telecommunications infrastructure can help communities attract and retain business and that broadband applications—such as telemedicine and distance learning--can save money and improve a community’s quality of life.

Taking these factors into account, perhaps broadband payback periods aren’t as long as they might seem, particularly for community-oriented telcos like Twin Lakes.

And besides, twenty years can go by awfully fast.

I realized that recently when I tried to replace the slouch socks that I like to wear to the gym. After failing to find new ones anywhere, I realized that not only were they completely out of style but that I’d bought some of mine when I lived in Brooklyn—and that was just over 20 years ago.