We won’t bridge the digital divide without community connectivity providers. Here’s why.
Photo: Jerry Hawkins installs satellite internet dish in East Carroll Parish, Louisiana. Courtesy of Delta Interfaith.
When a long-term resident of East Carroll Parish, Louisiana, called her internet provider to ask if they could provide better service, she was told to be happy with what she had. She wasn’t. Few people in East Carroll are happy with their internet service. Many pay over $100 a month for unreliable service at crawling speeds. Some are on dial-up. Others can’t get any service at all. 63% of households have no internet subscription.
TIME Magazine once called East Carroll the poorest place in America. Poverty rates approach 50% and there are few job openings. This small, rural town is crying out for the opportunities internet access can bring, but, like 120 million Americans, too many residents have inadequate connectivity — or none at all.
How is it that in the United States — one of the wealthiest countries in world history, the birthplace of the internet, and the home of the most successful tech companies — so many people are without the tools they need to fully participate in a digital society? Why isn’t the broadband market working?
Traditional ISPs won’t solve this problem
For too long we’ve thought of the digital divide as a problem the market would solve. And specifically, that large, incumbent telecom providers would get this done. While these companies have made great strides in connecting about half of humanity, that was the easy half. It’s become increasingly clear that connecting the next half will be harder.
Traditional operators expect certain profit margins, with targets for costs and revenue per household. It’s simply not in their business model to build out to places like East Carroll Parish. These operators instead usually focus on where they can make the highest profit margins: typically population-dense communities that can afford high subscription fees. Billions of taxpayer dollars designed to connect the unconnected have done little to change this, with Deloitte calculating that $54 billion in subsidies in the last 10 years — largely flowing to incumbent ISPs — has closed the digital divide by just 1%. That’s public dollars padding private pockets. We need not only more money but smarter money.
We can change how broadband is built
If we’re to deliver digital equity, we must invest in the community connectivity providers — like municipal networks, cooperatives, and community networks — that have proven themselves able to deliver faster speeds, at lower prices, and in communities that have so far been left out.
In PC Magazine’s 2022 list of America’s fastest internet providers, all but one of the top ten are community connectivity providers. The idea that we need the expertise and the scale of incumbent operators is a myth.
Local communities often care more, know more, and can do more than far-flung executives, shareholders, and government bureaucrats. They are getting the job done because they have different incentives and business models. Some of these community connectivity providers are owned by local residents. Others may be privately owned, but nevertheless community oriented. When your major stakeholders are local residents and the town mayor, that makes a difference to how you act and operate. When a network goes down or needs maintenance, it matters how far away the truck is. At the height of the pandemic, AT&T left Hope Village, a majority Black neighborhood in Detroit without internet access for 45 days. It’s hard to see that happening with a community connectivity provider accountable to residents.
Residents in Ammon, Idaho have access to 1GB fiber on plans as low as $10/month because the city council built an open access network to encourage more providers to compete. That’s a model that creates incentives that benefit the local community, not inflates the profits of a single provider. Municipal networks like this are valuable community assets. The former mayor of Chattanooga, Tennessee told us that their network is so cost-effective that when the pandemic hit, the city was able to provide a 300MB symmetrical broadband connection to 18,000 families who were eligible for free or reduced lunches. Cost to those families: nothing. Cost to the city: less than $3.50 per household per month.
Community connectivity providers also tend to tackle digital equity holistically, thinking not only about access but also affordability and adoption. The communities we’re working with typically have programs to build digital skills; do workforce development so residents benefit through high-skill jobs as they build, maintain, and operate the network; and provide affordable devices and data for those on low incomes. This approach is invaluable to the long-term success and positive impact in a community, but it’s not how traditional telecom companies typically operate.
Investing to connect humanity
Despite their strong track record of success, community connectivity providers face several barriers to accessing capital. This is a big part of the gap in the ecosystem that Connect Humanity was founded to address, focusing specifically on low-income, rural, and communities of color, where the need is greatest.
Many traditional lenders won’t fund these projects because they don’t offer the returns on investment they demand. Or they offer loans at rates that are not sustainable for the many communities that are underserved and already struggling. Connect Humanity leads with the needs of communities, not profit maximization. We blend various forms of funding — including grants and capital at below-market rates — to support underserved communities on terms they can afford. This comes with rigorous due diligence to ensure projects are sustainable.
Few financial institutions are familiar with community connectivity provider models and don’t have the technical knowledge to due diligence network designs. We bring decades of experience investing in successfully scaling these kinds of projects. And we have the technical, community-building, and financial expertise to guide communities to make informed choices through our planning process.
The amount of capital unserved and underserved communities need to achieve digital equity also presents a challenge for traditional sources of capital. The required funding is often too much for philanthropy and too small for commercial banks and traditional infrastructure investors. This leaves a “missing middle” which Connect Humanity can fill.
While some communities will receive funding from the Infrastructure Investment and Jobs Act, senior government officials have told us that even if perfectly spent, that money will meet 30% of the need at best. Moreover, the communities most in need are the least likely to have the capacity and knowledge to engage in the complex grant writing and planning processes needed to access these funds.
Join us to accelerate digital equity
The digital divide is not only one of the biggest challenges we face but also one of the greatest opportunities. The internet is a critical lifeline to let kids keep learning, to start a business, to find a job in a country where 80% of job postings are online only, to participate in our democracy, and to talk with a doctor. And in a country where 29% of Black Americans, 35% of Latinos, and 32% of tribal land residents lack broadband internet at home, connecting the unconnected is a powerful way of addressing systemic inequities.
The financial returns are real too. A healthcare provider in Maryland saved $2 million a year when they gave a group of high-risk patients a tablet and a broadband subscription. That hospital is now on track to save $20 million a year. In Chattanooga, the city’s $220 million investment in fiber generated economic returns of $2.7 billion. These networks generate returns far beyond subscription fees.
Today, in East Carroll Parish — the Louisiana town long-underserved by traditional operators — residents, led by church-based coalition Delta Interfaith, are taking their digital future into their own hands and building a high-speed fiber network. A grant from Connect Humanity funded a Digital Equity Master Plan which helped Delta Interfaith secure $4 million in state funding which will partly pay for the build of a 220-mile fiber network to connect the town’s 2,500 homes and businesses to the fast, reliable, affordable internet they deserve.
The digital divide isn’t just unfair to those on the wrong side of it, it’s bad business. It’s bad economics. It’s bad education and health care policy. And we know how to fix it. We need to change the way we build broadband in America. If you’re a foundation or an impact investor and you’re ready to put your money to work to accelerate internet access, economic growth, and equity at large, please get in touch. We want to talk.
This is the second post in a series about our work. Read the first, about why we created Connect Humanity, by Chris Worman, and the third about why new financing approaches are necessary to bridge the digital divide, by Brian Vo.