Gigabit Broadband in Michigan: New Tool for Economic Development

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1 !! Authors: Joe Ross, Tiffany Khoury and Samantha Stein of C&R Gigabit Broadband in Michigan: New Tool for Economic Development The positive connection between Gigabit broadband and economic growth is well documented by academics and economic developers in high growth regions. They ve learned that the economic benefits of Gigabit broadband come to those communities that deploy it first. The few regions that currently have Gigabit broadband adopted it because it gives residents and businesses world-class speeds at a low cost. This next-gen broadband is a magnet for entrepreneurs, startups and folks in tech-savvy demographics. The Gigabit movement promises much more than just faster downloading and streaming. It opens the door to the future of driverless cars, life saving tele-health tools, 3D teleconferencing, and high tech industries of all sorts. For Michigan communities that are the early adopters, Gigabit is Giga-good. It s all about timing. The wide scale deployment of Gigabit will probably reach a saturation point over the next five to ten years. A community s competitive advantage of having Gigabit broadband will be reduced as it becomes widely available in the U.S. The first regions to ride this next broadband wave will attract businesses and entrepreneurs to their well-wired regions, providing quality broadband at a fraction of the current costs. The strong link between economic growth and deeper broadband penetration with better Internet performance has been shown in numerous studies. The World Bank found increased economic growth of 1.2 to 1.4% per 10% increase in broadband penetration.

2 The Brookings Institution found positive associations between broadband use and employment in several industries. For every 1% increase in broadband penetration, an annual employment increase of 0.2% to 0.3% was projected among U.S. states. The McKinsey Global Institute found that small businesses with a high-speed Internet connection reaped a 10% improvement in productivity, stimulating job growth. The Analysis Group found that 14 communities with widely available Gigabit broadband enjoyed an increase of over $1 billion in GDP, compared to communities where next-gen Gigabit broadband was not widely available. What s the quickest path to a Gigabit community? The clock is running fast on the implementation of Gigabit Communities, according to Kevin Schoen, CEO of ACD.net, a company creating Gigabit communities in the Midwest. It s an elegant and simple equation to start down the path to become a Gigabit Community, Schoen said. Economic developers and municipal officials need to streamline their permitting process, allowing tech firms to quickly build out these next generation broadband networks. Time is money in this race. Wondering how to get started? Here s how! STEP 1. Upgrade cell networks with DAS Current cell phone networks are failing because they were built for phone calls. The network engineers never intended these networks to be used for surfing the Web. Cutting-edge technology connects to old cell towers that border cities, but those towers simply cannot supply the data demands of smartphones, tablets, and emergency vehicles such as police and ambulances. What s needed is a set of mini-antennas called a Distributed Antenna System, or DAS, in greater urban areas and downtown districts. These mini-antennas are attached to utility or light poles and linked together by fiber optic lines. Silicon Valley and other tech centers have had proven success with this technology. It is also being deployed by the world s largest wireless cell carries, such as AT&T and Verizon.

3 STEP 2. Get fiber to small and medium businesses With your DAS network in place, it s time to leverage the fiber that connects those DAS antennas. That connecting fiber, strung on telephone poles and run underground in business districts, can be strung cost effectively to surrounding businesses. The backbone of the global Internet is fiber optics. With your every technological need connected, these fibers offer game-changing benefits. Businesses will acquire greater data security, connection reliability, competitiveness, and, most importantly, blazing fast speeds at a lower cost than traditional broadband. STEP 3. Create fiberhoods As fiber reaches more businesses, those commercial fiber connections will often grow out to surrounding neighborhoods, creating fiberhoods. Fiber-wired homes offer residents many benefits. Many highskilled professionals are limited or cannot work at home with standard broadband. Fiberhoods take working from home to a new level. Health care professionals, programmers, engineers, graphic artists, architects, stock traders and many other bandwidth-hungry occupations need the low cost speeds found in fiberhoods. Fiberhoods typically grow and multiply this way: Areas close to the DAS systems are built out first, since fiber is already in the area. Neighborhoods closest to urban centers are connected next, followed by nearby suburbs and, finally, by rural areas. STEP 4. Behold the Gigabit community When a community has a DAS system for smartphone and tablet coverage, and low cost fiber is readily available to businesses and homes, a Gigabit community is created. The benefits of broadband for small and medium businesses include an increase in opportunities, market accessibility, effectiveness, efficiency, and, most importantly, speed that will boost online businesses, global competitiveness, sales, marketing, and customer service, all while reducing the cost of communications and operations. The benefits of broadband for workers include better access to opportunities such as distance learning, online vocational training, remote work, and solo entrepreneurship. These networks will create the ability

4 to share ideas online through social media channels and video conferencing, promoting the self-marketing of talent and jumping across the digital divide that often isolates lower income workers. Who is making the move towards a Gigabit community? Dozens of Michigan towns and cities have recently put in DAS systems, not just the state s largest metropolitan statistical areas. Wonderful little regions such as Franklin, Hastings and Waterford Township have DAS systems energizing their residents mobile devices. Larger cities such as Lansing, Midland and Kalamazoo now have DAS systems in their business districts and in residential areas. The municipal leaders in those cities now have an eye on watching competing tech firms build fiber out from these DAS systems to local business and residential areas. All Michigan regions that have DAS systems have something in common: an efficient permitting system. They all process requests for new technology investment quickly. Tech firms with proven track records of offering cost-effective broadband to businesses and homeowners are drawn to regions with efficient permitting processes. Why are cell phone networks collapsing? Cell phone usage has soared in the past five years, far beyond the wildest dreams of any telecom engineer when these systems were first put up. It s a situation that needs serious attention. Cell networks in Michigan were built for phone calls and voice mail, not the Internet, with its immense amounts of data, photos, and videos. A study showed that as of 2015, 80% of all Internet users owned a smartphone. And it isn t the Internet usage that s bogging down these network towers. Users spend 89% of their smart phone time on apps, rather than even a mobile Internet browser. Watching a YouTube video is the equivalent of sending 500,000 text messages at once. The technology advances of smart phones have completely outpaced the capacity of the cell phone infrastructure. They just weren t meant to handle this much data. Problems for communities that don t upgrade smart phone networks If you ve ever attended a University of Michigan football game or visited Grand Rapids annual ArtPrize, you have no doubt experienced the outdated condition of the state s cell phone infrastructure. These systems collapse in peak usage periods due to their inability to handle an influx of data traffic. Imagine needing to make a 911 emergency call during such a collapse, or having to text to the 911 centers when text messages can t get through. Gigabit communities not only enjoy more opportunity and access to education, jobs and entertainment they are also safer.

5 ! Report Authors!Joe Ross is a partner at Communications & Research. His past broadband research includes leading a team of researchers and engineers that completed a one-year study of telecom infrastructure in Michigan for the Michigan Economic Development Corporation. Joe served on the Federal Reserve Economic Round Table for 12 years. He is now a board advisor to the Michigan Health & Hospital Association and a health policy committee member at the Michigan Chamber of Commerce. He has served three Michigan governors on business and health advocacy committees. Tiffany Khoury is an assistant project manager at Communications & Research. She is a sophomore pursuing a degree in the James Madison College at Michigan State University with an additional degree in communications. Tiffany sources data for literature-search reports, leads social media campaigns and develops a variety of content for C&R client projects. Samantha Stein is an assistant project manager at Communications & Research. She sources data for literature-search reports, leads social media campaigns and develops a variety of content for C&R client projects. She graduated from Michigan State University with a degree in communication. Sources Bosomworth, D. (2015, January 15). Mobile Marketing Statistics Retrieved March 19, 2015, from Burns, C. (2014, September 5). Can the Internet be the boon Maine town s need? Local governments look to fiber optics to buoy economies. Retrieved January 12, 2015, from need-local governments-look-to-fiber-optics-to-buoy-economies/. Markovich, S. (2013, May 13). U.S. Broadband Policy and Competitiveness. Retrieved from Mobile Technology Fact Sheet. (2013, December 27). Retrieved February 11, 2015, from

6 Oxley, R. (2012, December 10). City of Bainbridge Island talks about potential role as Internet service provider - Bainbridge Island Review. Retrieved January 13, 2015, from Schoen, K. (2015, February 9). Early Evidence Suggests Gigabit Broadband Drives GDP. Retrieved February 11, 2015, from Warman, M. (2010, December 15). Data overload: why mobile networks are struggling. Retrieved March 19, 2015, from Wyatt, E. (2014, February 3). Fast Internet Is Chattanooga s New Locomotive. Retrieved January 14, 2015, from