Broadband key to rural economic
development and regional competitiveness
A Civic Caucus
Focus on Competitiveness
Interview May 9, 2014
Dave Broden (vice chair),
Pat Davies, Randy Johnson, Sallie Kemper, Dan Loritz (chair), Dana
Schroeder, Clarence Shallbetter. By phone: Janis Clay, Paul Gilje
Minnesota State Senator
Matt Schmit believes broadband connectivity can promote economic
development in rural Minnesota. Today, 500,000 Minnesotans, across 20
to 25 percent of the state, don't have access to state Internet speed
goals, which are 10 Megabytes-per-second (Mbps) for downloads and five
Mbps for uploads. This lack of high-speed access led Schmit to author
the 2014 Border-to-Border Broadband Law, which creates a competitive
matching grant program to expand broadband connectivity in rural
Minnesota. The Legislature appropriated $20 million for the program,
which will give priority to the hardest-to-reach areas.
Schmit says the state funds are intended to
leverage an infusion of capital from the private sector. The state
matching grant program, he says, begins to address the problem of lack
of capital and could convince private or cooperative providers that
some formerly questionable broadband projects are now feasible.
Connect Minnesota is collecting data to
track levels of connectivity over time, which Schmit feels is
important for accountability. He calls high-speed broadband Internet
access "the rural electrification project of the 21st
century" and says the state must commit to expanding that access.
Minnesota Senator Matt Schmit,
(DFL-Red Wing) represents Senate District 21, which includes portions
of Dodge, Goodhue, Wabasha and Winona Counties.He was first elected in
2012 and serves on the following Senate committees: Jobs, Agriculture
and Rural Development (vice-chair); Capital Investment; Environment
and Energy; and the Environment, Economic Development and Agriculture
Division of the Finance Committee.
Schmit worked for the Minnesota Senate
Education Finance Committee right out of college. He runs his own
consulting firm, P3 Strategies (Public-Private Partnerships), and
works in the areas of economic development, technology development and
He received his B.A. degree from St. John's
University and his Master's in Public Policy (M.P.P.) from the
University of Minnesota's Humphrey School of Public Affairs.
Following Minnesota Senator Matt Schmit's discussion with the Civic
Caucus, the 2014 Legislature passed the Minnesota broadband initiative
at the end of the session as part of the Senate's supplemental budget
bill. The provision includes the establishment of a border-to-border
broadband fund and the appropriation of $20 million for the fund. The
money will be distributed as matching grants to local communities,
businesses and organizations who are unserved or underserved by
high-speed Internet connections and who wish to improve broadband
infrastructure in their area. The fund will be administered by the
Office of Broadband Development in the Department of Employment and
Economic Development (DEED). More information about the fund's
distribution and the grant application process will be available later
Broadband connectivity can promote economic
Schmit said one of his campaign points when he
ran for office in 2012 was the need for investment in 21st century
infrastructure. He noted that the 2013 Legislature created the Office
of Broadband Development in the Department of Employment and Economic
Development (DEED), because there are pockets around the state where
people are struggling to get connected to the Internet. He said the
Legislature wants to use broadband as a means for economic
development. He is the Senate author of the 2014 Border-to-Border
Broadband Law, which creates a competitive grant program through the
office to expand broadband connectivity in rural Minnesota.
The Legislature has set Internet speed goals
for the state. Schmitnoted that in the last 10 years, there have
been two governor's task forces on broadband in Minnesota. The task
force created by Gov. Tim Pawlenty identified speed goals for the
state: by 2015, every household in the state would have access to 10
megabytes-per-second (Mbps) download speed and five Mbps upload speed.
Those goals were put into state law in 2009. Gov. Mark Dayton also
appointed a broadband task force.
Schmit said Minnesota's goal is to be in the
top five states in broadband deployment. Now Minnesota is in the
middle of the pack, ranking 23rd in average broadband speed. He said
the state will have trouble meeting the 10 Mbps download/five Mbps
upload speeds by 2015 for about 25 percent of the population.
The federal definition of minimum broadband
service is four Mbps download and one Mbps upload. Those speed goals
are insufficient, Schmit said, for teleworking, student access to
lectures and video streaming. And as the applications for broadband
change, we'll need even greater bandwidth, he said.
An interviewer asked what difference it
makes for the state to set goals, since private industry is going to
be doing the job of expanding connectivity. "What gets measured gets
done," Schmit replied. "Unless you set goals and measure them, you're
not shooting for something. We wouldn't be where we are now without
the great work of the private sector providers and the cooperatives in
People want action on better Internet
Schmit said last fall and winter, he attended
meetings around the state on broadband access with economic
development officials, health care leaders and citizens. He said the
following themes emerged:
1. It comes down to economics. There are
parts of the state where there isn't the population density or the
market to drive private-sector investment. Even though that service
is coming, it's not coming fast enough to get us what Greater
2. Because of the changes in markets of
providers from one area to the next and because of the individual
needs of different communities, we can't have a one-size-fits-all
approach to the problem. If the state's going to be involved at all,
it has to be a facilitator, not putting forth one policy that would
apply equally to every part of the state.
3. People are tired of talking about it;
they want action. There have been lots of local conversations and
many people have been talking about broadband for a long time. They
want to do something about it.
The state is trying to leverage an infusion
of capital from the private sector.
"Maybe we'll invite new
providers in, if there's not a provider that wants to expand that
network," he said. "We want to give communities more say in their
technology futures." Real estate agents have said people moving to a
community still ask about the education system, but now, they ask just
as often about Internet connectivity. The agents say that communities
are competing over Internet access and it's essential to their
"Right now, communities don't have enough
say in their technology futures," Schmit said. "We need more
constructive dialog between individual communities, their hospitals
and their schools and the Internet providers." One solution, he said,
is the border-to-border broadband program the Legislature passed in
the 2014 session.
It could cost anywhere from $900 million to
$3 billion to meet the state speed goals by 2015.
figures come from Gov. Mark Dayton's task force on broadband access.
In January, the group said the state needs a $100-million fund to spur
on new investments in broadband infrastructure.
"There's no way the state can do this
itself," Schmit said. "The most we can do is have a state incentive
program to spur on conversations at the local and regional level, to
tap local and federal resources and to get private providers to
realize that if they put more money into certain markets, the state
can help them extend their return on investment (ROI) over a longer
period of time. So, maybe instead of looking at a three-to-five-year
ROI, they could be looking at seven to 10 years, which could make a
The internet access system should be
technology-neutral and should focus on the applications to be used and
the end-user experience.
"The last thing we want to do is
invest any public money in a system that will become obsolete," Schmit
said. He called fiber "future-proof" and said some areas have had
fiber in the ground for decades. "Once you have that fiber, you can
change the electronic components to increase the bandwidth," he said.
"If you put fiber-optic in, you can keep it there for decades. This is
a long-term investment and fiber is not going to become obsolete."
A solid wireless connection could be an
Schmit said a wireless solution would
cost less than a fiber-to-the-home solution. "We can't let the perfect
become the enemy here," he said. "While many communities would like to
have fiber to the home, a solid wireless connection may be an
intermediate solution. Towers would be connected by fiber and people
would get access wirelessly."
He said the problem with wireless is that
the spectrum is limited as bandwidth goes up and the system gets more
users. You hit a point of diminishing returns. You can put more towers
out there, but every tower must be connected by fiber. Whether you use
wireless or not, he said, you have to make the investments in fiber.
"We're saying we want any investment we make to be scalable to 100
Mbps upload and download speed," he said. "We want a significant
investment in fiber."
Fiber connectivity can provide phone, video
content and data services.
An interviewer asked how the
discussion of broadband is different from that about cable TV 25 years
ago. "We've seen a migration towards fiber," Schmit said. "It's a
confluence where you can have phone service and access to television
content over the Internet." He said a poll of industry would show that
they're making investments in fiber to deliver a variety of services:
phone, video content and data. "We're focusing our efforts and
investments in that one area," he said. "I don't see any competing
technology coming that's going to take us away from that."
Cooperatives are a big part of the
In response to a question, Schmit said there are a
lot of cooperatives in rural Minnesota offering vital services, such
as electricity. "One hundred years ago, we said we had to get
electricity out to every house," he said. "People in rural Minnesota
say Internet access is just as important."
He said the cooperative model can work well
in installing fiber-optic cable. He noted that Paul Bunyan
Communication is doing great work in northwestern Minnesota. "I think
our cooperatives are a big part of the solution," he said. Just like
the private providers, though, they need access to additional capital
to improve their return on investment.
Broadband would provide benefits to public
An interviewer commented that the benefits of
broadband to public safety are immense and are a good reason for the
state to be involved. Schmit responded that the state invested a lot
in 800- MHz radio in the past, which is providing great return on
investment. But broadband would provide advantages, such as
e-arraignments, rather than transporting prisoners long distances, and
faster dispatch connections.
There are strong agricultural implications
of broadband connectivity.
Schmit noted that farm implements
are expensive and high tech and can apply nutrients, water and
chemicals to the nearest centimeter. High-speed Internet can help
farmers to be more efficient and use less fertilizer. But, he said,
that only works if farmers can collect data on the field and then
access it back when they're out in the field. "You need to have
connectivity for precision agriculture to work," he said. "Farmers are
promoting this." Farmers can also use the Internet to buy or sell
Existing Internet providers don't want state
money to prop up competitors.
An interviewer asked why
certain Internet providers in rural areas are opposed to the state's
investment in broadband access. Schmit replied that their biggest
concern is competition. "Providers put a lot of investment in and
don't want state money to prop up a competitor, whether public or
private," he said. "My priority is not focused on competition. It's to
get vital, high-speed access. It's expanding high-speed access and
working with existing providers and co-ops."
Currently, 20 to 25 percent of the state, or
500,000 people, don't have access to state Internet speed goals, which
are 10 Mbps for downloads and five Mbps for uploads.
"If we're going to reach our economic
potential, we must be able to tap into the entrepreneurial spirit of
all Minnesotans, not just those located in regional centers or in the
metropolitan area," he said. All people throughout the state must have
access to high-speed Internet that will allow them to use today's and
tomorrow's applications, he argued.
The broadband matching program will give
priority to the hardest-to-reach areas.
An interviewer asked
if we look ahead five years, will the initial funds will have gone to
the most underserved areas first. The broadband provision that passed
in 2014puts $20 million in a border-to-border broadband matching grant
program. For every dollar the state puts into a project through a
grant, there must be a public or private local match of at least a
dollar. "My sense is the local match is going to be more like
10-to-one," he said. "I think we're going to have a lot of local
investment based on a small state match. It's clear we're going to
give particular priority to the hardest-to-reach areas, those that
fall short of the FCC definition of broadband: four Mbps download and
one Mbps upload."
He added that all state money would have to
be utilized for connections that would be scalable to 100 Mbps. "This
is built for the long haul," he said.
There is a great opportunity for "synergy"
between investment in cell phone technology and broadband access.
In some places, Schmit noted, both are vying for space on towers. He
said these investments can overlap. If the state broadband fund
results in investments in infrastructure that result in more fiber in
the ground connecting end users and more fiber connecting towers for
wireless access, that creates more opportunity for cellular providers
to put their technology and their dishes up on the new towers, as
"We need more fiber in the ground and more
fiber connecting towers," he said. "Cell phones provide a great
opportunity to get to the Internet, but you need other kinds of
connectivity to run a business or for students to watch the next day's
The most active co-ops are providing
broadband access with fiber in northwestern Minnesota, in parts of
southern Minnesota and along the North and South Dakota borders.
In some counties, federal funds have funded broadband connectivity.
"That layer of technology is so important," Schmit said. "It plays off
our strength in human capital."
Connect Minnesota is collecting data to
track levels of connectivity over time. An interviewer asked how
in five years the state would be able to tell whether it has succeeded
or failed in expanding broadband connectivity. Schmit said there is a
federally funded mapping project going on right now called Connect
Minnesota. Every year, the project is collecting proprietary data from
private providers to show where connectivity is moving. "We'll be able
to track where we are today, where we were three years ago and where
we'll be three to five years down the road," he said.
No one is opposing the grant program, but
there's some ongoing discussion over which communities would be
eligible. Some people want to focus on those areas defined as "unserved,"
i.e., those that fall short of the FCC minimum speeds. He said he's
advocating that any area in Greater Minnesota that falls short of the
state speed goals be eligible for funding. "I want to give
communities and providers a way to invest in technology that makes
economic sense," he said. He wants to give DEED the ability to fund
good applications for funding. He said people are rallying around the
$20-million funding for the program.
An interviewer asked why the amount of
funding dropped down from $100 million. "It's competing interests,"
Schmit said. "It's a down payment. If we can demonstrate a lot of
interest in this program, maybe we can ask for a full $100 million
At least 12 states have matching broadband
programs and other states are looking at establishing them. An
interviewer asked if there is a state that's been adept at broadening
their coverage. Schmit replied that California has two infrastructure
funds in place and New York already has devoted $68 million to its
fund. New York's program has brought broadband access to 153,000
individuals, 8,000 businesses and 400 anchor institutions, such as
hospitals or schools. The state is moving up in the top 10 in average
connection speed. "It's having a real impact on the state," he said.
"So, other states are doing this. We would not be reinventing the
Long-term prospects for federal funding are
dim. An interviewer asked about the role of FCC funding. Schmit
said the money is collected on people's phone bills and, in the past,
was targeted to phone service. Now it can be used for Internet
connectivity. The problem, he said, is that there's no guarantee these
funds will be sufficient into the future. "You're seeing less and less
of a commitment from the federal government to infuse new dollars into
markets," he said. "It's not happening fast enough and the long-term
prospects for getting more funding are very dim. We can't rely on the
federal government to bail us out."
Recently, Schmit said, the FCC put out an
inquiry to see how many rural communities across the country would be
interested in creating broadband demonstration projects. At least 50
communities in Minnesota responded. "Communities are thinking about
this," he said. 'They want to leverage new capital. They'll be just as
interested in a state program. Communities are chomping at the bit for
this sort of opportunity."
Regulation of Internet providers varies
widely. An interviewer asked how the fee structure would be
established for Minnesota and who would regulate it. Schmit responded
that people can get Internet access from their phone company, their
cable company or from new Internet service providers (ISPs).
"Depending upon your provider, it's regulated in wildly different
ways," he said. Phone companies are highly regulated, cable companies
less so and ISP providers not at all. The FCC needs to take that issue
on seriously, he said. The state's Public Utility Commission wants to
get into the issue, as well. He said Internet access should be treated
more and more like a utility. It shouldn't necessarily be regulated in
the same way, but there should be consumer safeguards, so people are
getting what they pay for.
Connections for anchor institutions, like
schools, libraries and health care have gotten much better, but are
still not sufficient. An interviewer asked whether all schools in
the state have fiber connectivity. Schmit replied that there are some
funds in place for technology. "We have not had a comprehensive
approach in Minnesota that has passed the Legislature," he said. "The
connections for our anchor institutions, i.e., schools, libraries,
health care, have gotten much better than our end-user connections.
That's not to say they're sufficient."
Schmit said anchor institutions are very
important and should have access above our state speed goals,
preferably 25 Mbps to 100 Mbps. For end users, he said, access at home
is so important to entrepreneurs, who might start or run their
businesses from home. In education, students can take iPads home from
school and listen to the lecture the night before. The next day, the
teacher can see who understands the material and who needs help. He
noted that only works if everybody can have Internet access off the
"We're getting the state
involved in a very important conversation that much of Minnesota has
been having for a decade," Schmit concluded. "In the Legislature,
we've had some great proposals in the past, but we haven't taken the
necessary steps to do something: to promote partnerships, to meet
meaningful speed goals and to become a leader in broadband
infrastructure deployment and utilization. There's the access and
there's what you do with it. Both of those discussions need to be
promoted at the state level. There is no one-size-fits-all solution."
He said the state must recognize the great
need in much of rural Minnesota. Broadband access has a fundamental
connection to competitiveness. "This hits at the brain-drain issue, at
rural economic competitiveness, at attracting young families to rural
Minnesota, at the future of our state as a whole," Schmit said. "The
Office of Broadband Development will do great work in giving
communities more options. We're getting the state involved in the
fundamental economic problem of lack of capital. This is the rural
electrification of the 21st century. We have to make that
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Ted
Kolderie, Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman