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GG 22
Increase the Availability of Broadband Internet Services in Rural Areas

Summary

“Broadband” or high-speed Internet connections are critical to the continued growth of e-commerce, long-distance education and telemedicine. To ensure that rural and isolated communities receive broadband access to the Internet, Texas should extend the purposes of the Telecommunications Infrastructure Fund to local governments; allow communities to develop and fund their own broadband initiatives; and require telecommunications providers to file maps of their Internet facilities with the Public Utility Commission. In addition, the Trans Texas Corridor Project should consider requiring broadband providers that place facilities within the proposed utility rights- of-way to install interconnects at regular intervals, to aid local communities in developing a broadband infrastructure.

Background

As Internet usage becomes increasingly critical to the nation, so too does the speed of individual connections to the Internet. High-speed connections usually are called “broadband,” a reference to the amount of data that can flow through an Internet connection in a given amount of time, usually measured in bits per second (bps). The Federal Communications Commission (FCC) defines broadband technologies as any that support transmissions of more than 200,000 bps.[1] By contrast, home computers with telephone modems generally support a maximum speed of 56,000 bps.

Some simple Internet applications, such as e-mail, do not require broadband. The rise of more sophisticated applications, however, such as distance learning (classes offered via a telecommunications link from a distant location), telemedicine (medical consultations and other services offered online), e-commerce activities (such as online shopping, banking and financial trading) and e-government services will make broadband essential.

The growing importance of broadband services in American life is indisputable. The National Telecommunications and Information Administration (NTIA) in a February 2002 report found that between August 2000 and September 2001, the use of cable modems and DSL—the most common forms of broadband—rose by 116 percent. Most of this growth, however, occurred in urban areas. The report noted that the FCC has found that “high-speed subscribers were present in 97 percent of the most densely populated zip codes at the end of December 2000 as compared to 45 percent of zip codes with the lowest population densities.”[2]

Yet broadband could be extremely useful in expanding commerce and educational opportunities and providing governmental services in remote areas. The Rural Caucus of the Texas Legislature has commented, “[b]roadband is an infrastructure tool which is critical to future economic development, similar to highways and electricity distribution.”[3]

For example, in Paw Paw, Michigan, a family-owned grocery store attempted to develop an online business, but found the lack of broadband in the area an impediment. As the store owner said in testimony before Congress last year:

We see the Internet as being the facilitator of commerce for the future and potentially for providing a competitive advantage for small businesses like ours. Currently, information coming from customers is much too slow. We offer on-line shopping now, but find it is not being used because it is too slow. Broadband access could dramatically increase the speed by which information is delivered between my site and my customer’s computer dramatically increasing my Internet shoppers and future Internet capabilities.[4]

A study done on behalf of an economic development corporation in the Mississippi Delta region had this to say about the linkage between advanced telecommunications services and economic development:

In the industrial age, roads, electricity, water and sewers were essential infrastructures whose availability was considered when choosing where to build a factory. In the information age, communications infrastructure is added to the list... In the industrial age, a factory that helped create a nice place to live by bringing infrastructure to a community was more likely to have a ready pool of workers to draw from. So, too, with communications today. Attracting and retaining workers requires ensuring the availability of advanced communications services in local communities.[5]

State support for broadband

Texas began supporting broadband deployment in 1995, with the creation of the Telecommunications Infrastructure Fund (TIF). TIF awards grants to Texas public schools, public and private institutions of higher education, public libraries, nonprofit hospitals and local community networks to provide the equipment, wiring, program development and training and installation services needed to establish broadband telecommunications services for public access.[6]

The fund receives 1.25 percent of the taxable telecommunications receipts of each telecommunications utility and commercial mobile service provider operating in Texas. The fund is capped at $1.5 billion in total collections over its 10-year life, a level it is expected to reach in 2004. Unless renewed by the Legislature, TIF will cease to exist after September 1, 2005.[7] At the end of fiscal 2001, TIF had collected $914 million in tax receipts and earned $81 million in interest.[8]

The Legislature also has appropriated TIF dollars for projects at several state agencies, such as the Texas Education Agency and the Texas Health and Human Services Commission. For the 2002-2003 biennium, TIF provided these agencies with $71.7 million.[9] As of September 2002, TIF’s awards to communities and state agencies since 1996 totaled $1.1 billion.[10]

Of grants awarded specifically to communities as of June 2002, TIF has invested:

  • $488 million in public schools in 252 of Texas’s 254 counties;
  • $66.5 million in 122 community colleges, colleges and universities in 61 counties;
  • $64 million in 447 public libraries in 208 counties;
  • $87.5 million in health clinics, collaborative healthcare networks and health science centers in 194 counties;
  • $43.9 million in 97 collaborative community networks; and
  • $87.1 million in technology innovation and integration research.[11]

Obstacles to broadband assistance

The cost of broadband deployment can be prohibitive for small and isolated communities. The Telecommunications Infrastructure Fund Board (TIFB), which oversees the TIF program, has described one problem concerning Local Access and Transport Areas (LATAs), which were created during the breakup of AT&T and the formation of regional Bell telephone companies to distinguish between local and long distance calls. All calls within a LATA are local; calls between LATAs are long distance. Texas has 16 LATAs.

In written testimony to the House State Affairs Committee in April 2002, TIFB said that:

[Broadband] costs are directly proportional to the cost of crossing...LATAs. The more LATAs that must be crossed, the higher the cost of the connection. ...[A] constituent in Houston, for example, pays only a fraction of the cost that a constituent in a rural area has to pay for similar service. This cost discrepancy exists because the Houston connection is typically within one LATA, while the rural area must cross multiple LATAs...[B]oth pay virtually the same base rate (depending on the carrier), yet the number of LATAs crossed dramatically affects the overall cost.[12]

Statutory and bureaucratic divisions between governmental entities also contribute to the problems communities face, according to TIFB:

Fabens ISD is an example of a public school in far West Texas that does not have the density of population to encourage providers to offer broadband services at any cost...The public library in Fabens is literally across the street from a county facility that has broadband connectivity. The county officials do not share resources to allow the library to take advantage of the existing connectivity.[13]

A further impediment is Chapter 54 of the Texas Utility Code, which expressly prohibits municipalities and municipal electric companies from offering or reselling Internet services in their communities.[14] County governments, on the other hand, derive their powers solely from those allowed by the Texas Constitution and state law, and at present the law is silent on their ability to provide telecommunications services. For either municipal or county governments to provide such services, then, would require a change in state law. State law also does not allow municipal and county governments to apply directly for TIF grants.

In written testimony to the House State Affairs Committee in April 2002, the Coalition of Rural Cities noted that the Texas Public Utility Commission (PUC) had advocated before the NTIA “a limited exception in state law to allow municipally owned utilities (MOUs) to provide broadband services. The Rural Coalition supports this proposal for rural MOUs.”[15]

Interestingly, a provision in the Government Code appears to contradict the municipal prohibition in the Utility Code. Section 2170.058(c) says, in part,

...it is the policy of this state that a state agency or unit of state government may not provide telecommunications products or services to the general public in competition with private enterprise unless there is a finding that providing the products or services is in the public interest.

This provision is found in a section of the law pertaining to the Department of Information Resources’ (DIR’s) authority over the state’s telecommunications system. But the law does not provide DIR with a mechanism for making the finding of public interest, which generally requires some analysis of the level of competition between providers. PUC, which regulates telecommunications rates and has issued rules encouraging rural broadband deployment, does perform this sort of analysis.

In several rural areas in Texas, local telecommunications providers have demonstrated an apparent lack of interest in providing broadband because of legitimate concerns of profitability. Furthermore, TIF-funded broadband facilities can be used only by TIF-eligible entities. Schools or hospitals cannot share their excess or off-peak broadband capacity with local citizens except in public places. The result is that some rural residents or businesses may live in a county or town with broadband facilities without being able to access the broadband network. The prohibition on city- and county-owned broadband services thus denies rural areas without a willing broadband provider access to a useful alternative. In some areas, government action may be the only solution for long-term network sustainability.

Several TIF grantees have considered converting a community network into a certified nonprofit corporation as defined by the federal Internal Revenue Code. Although such certification would require Internal Revenue Service approval, it could provide an effective alternative to commercial and governmental solutions. IRS-approved nonprofit networks then could lease all or part of their broadband networks to local governments.

Infrastructure maps

The 1999 Legislature created the Public Utility Regulatory Act, or PURA, whose Section 55.014 (g) states in part:

It is the policy of this state to ensure that customers in all regions of this state, including low-income customers and customers in rural and high cost areas, have access to telecommunications and information services, including interexchange services, cable services, wireless services, and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at prices that are reasonably comparable to prices charged for similar services in urban areas.

PURA authorizes the PUC to regulate telecommunications and broadband deployment. PUC has no authority, however, to require telecommunications providers to submit infrastructure maps detailing the general location of fiber-optic lines, digital subscriber line access multiplexers (DSLAMs—equipment at a phone company’s central location that links several DSL connections to a single high-speed line) or other critical broadband infrastructure. Communities could use such maps in determining how best to link to existing Internet facilities in their areas.

Ohio, Georgia and North Carolina, by contrast, require telecom providers either to submit facility maps of varying specificity to the state utility commission or place such information on the Internet as a public service.[16]http://www.e-nc.org

At this writing, a working group of state agencies, under the auspices of the House State Affairs Committee, is compiling a Geographic Information System (GIS) map of telecommunications facilities used by the state. The maps under development give some detail on the infrastructure dedicated to the state’s TEX-AN telecommunications network, and on those areas that have received TIF grants to buy broadband services from local carriers. More detailed information on non-state or non-TIF infrastructure would be very useful to broadband providers and users.

Trans Texas Corridor Project

In February 2002, the Governor’s Office and the Texas Department of Transportation (TxDOT) announced a proposal to build 4,000 miles of 1,000- to 1,200-foot wide transportation corridors throughout the state. These corridors would provide for three lanes of vehicle traffic, two lanes of truck traffic, several freight and passenger rail lines and substantial utility rights of way in each direction.[17]

Current state law allows utilities—such as telephone, natural gas and electric companies—free access to highway rights-of-way. Utilities that intend to place broadband Internet facilities within the corridor rights-of-way could greatly simplify the task of bringing broadband to rural communities by placing “taps” or interconnects on their lines. These would allow communities to establish links to an existing high-speed infrastructure.

Recommendations

A. State law should be amended to extend the purposes of the Telecommunications Infrastructure Fund (TIF) to local governments.

TIF grants should be made available to local governments for broadband infrastructure development and interconnection. State law also should stipulate that all TIF grantees provide area local governments with access to TIF-funded broadband facilities.

B. State law should be amended to allow local governments and economic development corporations in rural and underserved areas of the state to invest in community Internet networks if the Public Utility Commission (PUC) finds that area supply and demand is inadequate to warrant commercial investment in broadband infrastructure or services.

Upon receiving a request to make such investments, PUC should conduct economic analyses to determine if the local government’s area is underserved and that no provider can reasonably be expected to provide service in the area under current economic conditions. If PUC determines that such “market failure” exists, it should be authorized to allow local governments to supply businesses and residents within a limited jurisdiction with broadband services at rates comparable either to the same services in areas with competitive markets or at cost, whichever is higher.

C.State law should be amended to require all telecommunications providers to provide PUC with maps and other critical information relating to their telecommunications networks, to assist the agency in its determinations of market failure in rural and underserved areas.

Because such information can be of a highly sensitive business nature in an extremely competitive industry, it should be exempted from the state Open Records Act. PUC should be charged with keeping such information secure and determining how much mapping detail should be released to the public and how much should be protected under existing confidentiality laws.

D. The Trans Texas Corridor Project being developed by the Governor’s Office and the Texas Department of Transportation should consider requiring broadband providers that place facilities within utility rights-of-way, as currently contemplated, to install interconnects or “taps” at regular intervals.

As planning for this project progresses, planners should consider offering telecommunications and cable companies lower-cost access to rights-of-way in exchange for interconnects installed at regular intervals. These interconnects would allow local communities attempting to develop a broadband infrastructure to connect with existing high-speed networks.

Fiscal Impact

PUC may incur some costs if it holds hearings to determine when and under what conditions local governments and economic development corporations may resell broadband services to local businesses and residents, but these costs could be paid from the agency’s existing resources. Local governments would incur costs if they invest in a network, but the fiscal impact of such moves would depend upon future actions and cannot be estimated.

Requiring telecommunications and cable companies to install taps on facilities within the transportation corridors contemplated in Trans Texas Corridor Project would have no fiscal impact on state or local governments.



Endnotes

[1]47 CFR § 1.7001 (a).

[2]U.S. Department of Commerce, National Telecommunications and Information Administration and the Economics and Statistics Administration, A Nation Online: How Americans are Expanding Their Use of the Internet (Washington, D.C., February 2002), p. 36, available in pdf form at http://www.ntia.doc.gov/ntiahome/dn/index.html. (Last visited September 25, 2002.).

[3]Rural Caucus of the Texas Legislature, comments submitted to the House State Affairs Committee, April 3, 2002, http://www.jeffblaylock.com/broadband/pdf/rural_caucus.PDF. (Last visited October 4, 2002.)

[4]Food Marketing Institute, Access to Broadband Technologies in Rural Areas: Testimony of Marvin Imus, Vice President, Paw Paw Shopping Center, Paw Paw, MI, on Behalf of the Food Marketing Institute before the Subcommittees on Rural Enterprise and Technology Policy and Regulatory Reform and Oversight of the House Small Business Committee, May 17, 2001, http://www.fmi.org/gr/testimony/report.cfm?issueID=365. (Last visited September 26, 2002.) May 29, 2002.

[5]Marengo Research, The Delta Technology Zone (Needham, Massachusetts, October 2001), p. 6, http://www.ecd.org/emp/Telecom_Paper_final.pdf. (Last visited October 4, 2002.)

[6]Tex. Util. Code, §57.046.

[7]Tex. Util. Code, §57.048.

[8]Telecommunications Infrastructure Fund Board, Annual Report 2001 (Austin, Texas, January 14, 2002), pp. 1, 25-29.

[9]Tex. S.B. 1, 77th Leg., R.S. (2001), Article III, page 8, Rider 1 and Article II, page 49; and fax communication from Wendy Latham, Telecommunications Infrastructure Fund Board, “TIF Funds Appropriated by the Legislature,” Austin, Texas, October 7, 2002.

[10]Telecommunications Infrastructure Fund Board, “Presentation to the Joint Budget Hearing of the Legislative Budget Board and Governor’s Office of Budget and Policy,” Austin, Texas, September 3, 2002.

[11]Telecommunications Infrastructure Fund Board, “Investing in Texans,” http://www.tifb.state.tx.us/Home%20links/Investing%20in%20Texans.doc. (Last visited September 26, 2002.)

[12]Telecommunications Infrastructure Fund Board, “TIF’s Responses to the House State Affair [sic] Interim Study on Broadband,” http://www.tifb.state.tx.us/Publications/TIF_Broadband_response.htm. (Last visited September 26, 2002.)

[13]Telecommunications Infrastructure Fund Board, “TIF’s Responses to the House State Affair [sic] Interim Study on Broadband.”

[14]Tex. Util. Code, §54.202.

[15]Coalition of Rural Cities, Comments in Response to the [House State Affairs] Committee’s Ten Questions on Broadband Policy, April 2, 2002, p. 7. http://www.jeffblaylock.com/broadband/pdf/ruralcities1.pdf. (Last accessed October 4, 2002.)

[16]See “Broadband Ohio” at http://tycho.cfm.ohio-state.edu/ecomgis/index.htm; the “Georgia High-Speed Telecommunications Atlas” at http://maps.gis.gatech.edu/telecomweb/; and the Rural North Carolina Access Authority at .

[17]Texas Department of Transportation, “Crossroads of the Americas,” Austin, Texas, June 2002, http://www.txdot.state.tx.us/ttc/ttc_home.htm. (Last visited September 26, 2002.)