Thursday, February 06, 2014

What Matters More in Building an Ultra-High-Speed Infrastructure - Speed or Reputation?

This morning NPR profiled the city of Chattanooga, Tennessee - which is the first American city with an ultra-high-speed fiber-optic network providing Internet access with speeds of up to one gigabit per second to every business, residence, and public and private institution.  For context, that's 50 times the average speed for homes in the rest of the country.

We hear all the time about the importance of creating a high-tech infrastructure for the 21st century.  How it will spur new businesses and job creation and stimulate new economic climates based on innovation.  But what does the case of the "Gig City" - which was rolled out in 2009 - say about infrastructure's actual importance?

A few things to factor into the equation...  First of all, there is the public vs. private issue to consider.  Chattanooga's gigabit network is taxpayer-owned, resulting from a $111 million federal stimulus grant in 2009 that was actually designed for the local power utility to create a smart grid, and that public utility then borrowed an additional $219 million to finish the project.  The fact that the network is publicly owned stands in contrast to privately owned gigabit networks now found in other cities around the country run by firms like Google.

Second, in the four years since its rollout, less than 8% of subscribers and only about 55 businesses have signed up for the gigabit service, which is priced at $70 per month.  This low adoption rate could seemingly make the case against the importance of a high-speed infrastructure, however, as J. Ed. Marston from the Chattanooga Chamber of Commerce has said, the high-speed infrastructure has done much to "invigorate the entrepreneurial scene".  For instance, the Chamber's INCubator includes 20 tech companies and a 91% success rate.

Third, on the job creation front, it is unclear statistically how much the high-speed infrastructure has made an impact.  According to the New York Times, while "The Gig" created about 1,000 jobs in the last three years, the Department of Labor reported that Chattanooga still had a net loss of 3,000 jobs in that period, mostly in government, construction, and finance.

Fourth, there is the familiar problem that, whenever a new ultra-high-tech infrastructure is rolled out, no one quite knows what to do with it.  As explained by Blair Levin of Gig U., no one is going to design products that can run only on a one-gigabit-per-second network if hardly any such networks exist elsewhere.

Which brings us back to our original question.  If a gigabit network has such low adoption rates, and it is unclear how much business growth or new job creation can be attributed to it, then how important is such an ultra-high-speed infrastructure, really?

Proponents will argue that its value shouldn't be quantified so narrowly, and that having such an infrastructure attracts capital and talent into communities that probably wouldn't flow into them otherwise.  However, while I agree with this line of reasoning, what must be remembered is that this isn't an argument in favor of ultra-high-speed networks themselves, but rather for what they represent.  What's most valuable for a community that invests in such a network is not necessarily the speed of their network, but rather the reputation that a community acquires for showing a willingness to invest in it in the first place.

Chattanooga's "Gig City" demonstrates that reputation trumps speed.


  

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