Google, Kansas City and the Nation’s Gigabit Economic Policy

Brent Miles of WEDC

Want to improve the economy? Then demand better broadband. The National Broadband Plan attempts to create a path from broadband policies to economic recovery. Policymakers at all levels of government, though, need to watch municipal efforts such as those in Kansas City, Kan. because it’s at the local level where economic recovery has a fighting chance to ripple out through counties and then states.

Google (s goog) has said one of its main goals with its gigabit network giveaway is to create a test bed for all kinds of wonderful technology apps, but independent of Google’s intent, expect the municipally owned Kansas City network to also act as a test bed for showing how broadband can jumpstart local economic development. From the outset, Kansas City’s government, civic leaders and stakeholders pursued this deal from the perspective of “What can you do with a gigabit?” to affect various business and personal economic outcomes.

The Wyandotte Economic Development Council has brought some big economic development projects to Kansas City, which sits within Wyandotte County, including Sara Lee (s sle), GM (s gm) and Sealy Mattress (s zz). WEDC President, Brent Miles, and members of his team were key influencers in the Google courtship dance. According to Miles, who addressed the network’s future recently at Broadband Community Magazine’s Broadband Summit (scroll down to “A Tale of Two Cities”) in Dallas, they have settled on three primary economic goals for the network:

  1. Recruit the types of businesses we’ve never landed before;
  2. Increase the retention and expansion of existing businesses; and
  3. Significantly improve the socioeconomic standing of individual constituents.

These broadband goals reflect a similar thinking among economic development professionals in a 2010 national survey conducted in cooperation with the International Economic Development Council (IEDC). Survey respondents were asked to gauge broadband’s potential impact on a variety of economic outcomes. Fifty-five percent and 42 percent respectively say fiber “definitely impacts” business recruiting and business retention, while 31 percent and 22 percent believe fiber networks do the same for worker training and individuals’ ability to earn income.

The high profile of Kansas City’s network should help clarify several issues related to broadband and economic impact, particularly the role of broadband in urban communities. In D.C. policy circles, the conventional wisdom appears to be that price and low-income constituents’ failure to understand broadband’s benefits are the main barriers to adoption. Reading between the lines of broadband stimulus rules could lead one to believe the urban poor have plenty of options, and adoption campaigns (and computers) will win over the holdouts. However, the problem is deeper than that.

Kansas City is a distinctly urban, albeit mid-size city of around 150,000 people. “But we had been asking providers for a decade to bring service to our unserved communities with no luck,” states Miles. “I gather that, because of the poverty rates, low median income and high unemployment in these communities, incumbents have no incentive to serve them.” Recent research adds to the speculation.

Earlier this year, a study from American University in D.C. reported that the 25 poorest zip codes in the Washington, D.C. region spend about three times more for faster megabit per second connections than the 25 richest zip codes for similar Internet access speeds. released a report that showed seven of the bottom 10 U.S. cities in terms of broadband speeds received relative to average monthly subscription fees are urban centers with populations greater than Kansas City.

Harvard law professor and author Ychai Benkler summed the situation up last month at the National Conference on Media Reform: “You sell people crappy service for a lot of money, they won’t want it.” The Center for Social Inclusion’s (CSI) report, The Promise and Challenge of Community Broadband Models, concludes that without competition in urban areas such as what Kansas City’s network now represents, low-income communities will remain unserved.

Clearly network speed and quality heavily influence local communities’ ability to use broadband to recruit businesses, and the federal government must address this issue if it really wants broadband to be an economic engine for urban or rural areas. Global commercial real estate services firm Colliers International recently surveyed corporate real estate directors and senior portfolio managers to determine the importance Corporate America places on factors that can influence where businesses locate. On a scale from 1 to 10, fiber optics rated 9 or 10 across most industries surveyed.

“There are multiple factors in the decision to pick a site to re-locate or expand,” observes Miles. “Every industry is different. We’ve been asking businesses, ‘how much weight does a gigabit network carry?’ We know it’s a factor though we haven’t quantified how much. We’re still synthesizing data and plan to create metrics.” However, Miles’ team has reviewed enough evidence to feel confident that the network will make a difference attracting businesses, and that a gigabit (at least) is the benchmark for any community serious about this pursuit.

Broadband’s impact on existing local businesses is equally important. Miles states, “From the beginning, we’ve asked them, ‘what would you do with a gig?’ This is an on-going exercise, of course, and as the network is deployed businesses will find uses we didn’t expect.” For example, with smart grid, they can more effectively control how they use utilities and reduce operating costs. Kansas City’s large medical center will run applications no one else has, and subsequently be able to get more grants, hire more surgeons and so forth.

The power of individual transformation perhaps will be the network’s greatest impact. Miles says:

“When we recruit a manufacturing plant, we have to hope residents get a job. We don’t have direct influence on them getting those jobs. At end of day, businesses have to make that decision whom to hire. But when we can deliver a gigabit to someone’s home, we offer a technology that gives individuals unlimited potential to make something of themselves, and this affects what kind of community you create. Residents can get a better job and more easily afford to pay for their homes. New home-based and other entrepreneurial ventures can generate enough taxes to fix streets where they live.”

Finally, Kansas City offers a strong lesson in unconventional thinking. Google’s investment here, as well as Corning’s (s glw) similar three-county investment in rural New York state, represent a new type of broadband public private partnership in which non-ISP businesses with shared economic interests can align with visionary local communities. This could be the next big step forward in local economic development.

Craig Settles is a broadband industry analyst, co-director of Communities United for Broadband and was named one of Huffington Post’s 16 Tech Titans on Twitter (@cjsettles).