Thursday, July 14, 2011

$7M per household from Stimulus funding

Part of the Stimulus was spent to increase access to broadband in rural areas.  A study has analyzed the cost per household served, and it's staggering:

Eisenach and Caves looked at three areas that received stimulus funds, in the form of loans and direct grants, to expand broadband access in Southwestern Montana, Northwestern Kansas, and Northeastern Minnesota. The median household income in these areas is between $40,100 and $50,900.  The median home prices are between $94,400 and $189,000.

So how much did it cost per unserved household to get them broadband access?  A whopping $349,234, or many multiples of household income, and significantly more than the cost of a home itself.
Except it's worse.  It seems that Montana has 7 service providers.  In the whole state, it appears that only seven households had no access to any of them.  If you divide the Stimulus funding by those households, you could have bought each of those families a condo with a nice Central Park view.  Maybe two.

Admittedly, it wasn't just 7 families that benefited.   There was a whole set of broadband providers that lobbied the government for free cash.  Millions went to rolling out a service that may or may not be actually being used by formerly unserved households.  But the investment in lobbyist budget clearly seems to have paid off handsomely.

Back at the startup companies I've worked at, a common theme was "spend money like it was your own".  Prioritization counted, because otherwise the company might not make it.  The Fed.Gov is completely incapable of this sort of prioritization, which is the best argument against the expansion of the Fed.Gov.


genedunn said...

But on the bright side, now I can move to middle-of-nowhere Montana and keep my awesome work from home job!

Old NFO said...

Good point BZ...

SiGraybeard said...

If you divide the Stimulus funding by those households, you could have bought each of those families a condo with a nice Central Park view But then they'd have to move out of Montana, and who would want to leave Montana for that God-forsaken place?

If I was in Montana you couldn't pry me out with a team of men with crowbars.

KurtP said...

I hate to say it but WildBlue satellite was probably available to those seven houses- if they wanted to run afoul of the FAP policy every Thanksgiving week-end.

TJP said...

If we take the $349,234 and a typical cable bill (just the Internet gateway cost) at $50 a month, it would take 582 years to break even on the installation. There was a reason why the seven ISPs weren't providing upgrades to all those customers.

That's if every single one of the households decided to purchase the service. I'd say the fact that they live in the wilds of Montana indicates that high-bandwidth Internet access was not a priority. So some of those people aren't going to be customers, and the ones that are will be contributing what amounts to a drop in the bucket toward the cost of maintaining that infrastructure. If the ISPs take on that cost with so little revenue, they will be bankrupt.

lelnet said...

Forget a cable bill, TJP. Let's buy them a T1 line. After all, supposedly they couldn't get cable or DSL before...that being the "problem" that this was supposed to solve. But anybody can order a T1 line. In fact, I just did.

It's $300/mo, plus taxes. Your tax rate may vary, and it's not a very big component of the cost anyway, so let's just go with the $300. It's about the highest amount any household is likely to pay for internet access, ever.

At a cost of $349,234 per household, that amounts to 97 years (plus about 3 days) of uninterrupted internet service along the same class of line that, when I got into the business, was the standard connectivity for a commercial ISP, assuming that the price stays constant for that long, which of course it wouldn't.

And unlike the cable analogy, this one is very scrupulously fair. If you order a T1 line, the phone company _will_ deliver it. Doesn't matter where you are.