Where $28 billion of broadband stimulus goes – the 'underwater bridge to nowhere' costs $50,000 per household
Our recent post on the broadband stimulus package has been attracting a lot of attention, and in particular some people seem concerned about our characterization of the Kodiak-Kenai proposal as an ‘underwater bridge to nowhere‘.
Kodiak Kenai's proposal costs $344 million (image from Fierce Broadband Wireless)
It motivated Scott Slater of the Personal Broadband Industry Association to comment that:
Your post seems to miss the large point and intent of the broadband funds in the Stimulus Act…
…At PBIA we give well thought out, well designed, and scalable projects in rural Alaska, just as in other remote and rural parts of the country, the benefit of the doubt as it appears they qualify as well as anyone, if not more, for the intended uses of the rural broadband funds in the Stimulus Act. It just so happens that after our review of total reach, total design, total scalability, and total shovel readiness of the proposed Alaska projects, we think the Kodiak Kenai Cable Company’s proposal should move forward and be funded under the Stimulus Act…
…It is important to know the facts. Your post did not demonstrate this understanding. There are larger federal policies at play here and the Kodiak Kenai Cable Company’s project appears to hit all of them.
Actually, we agree 100% with a couple of the key points that Scott makes:
The rural portions of Alaska are in, in fact, the most remote and unserved in America (see our earlier post on population density and broadband economics)
[T]he broadband funds in the Stimulus Act…were designed to deploy true broadband to locations that are ”unserved” and “underserved”
But the unfortunate reality is that these funds are finite, so that one of the key considerations here must be how much the service is improved, for how many people, and at what cost. There is a huge opportunity cost to very expensive projects that serve small numbers of people; the much larger number of people who could have benefited had that spending been allocated to its highest and best use.
As my colleague Moe Kelley (the author of the original post) put it in responding to Scott’s comment:
I am struggling with how hundreds of millions of dollars for undersea fiber could possibly be the most cost effective solution to serve only thousands of customers. I am also struggling with how this investment will ever pay itself back or reap any meaningful benefit in terms of job growth, new business formation, or economic recovery.
Kodiak Kenai's 'underwater bridge to nowhere'
The question at hand is not: “How do we reach every man, woman, and child in the US with super fast broadband regardless of cost?”
The question is more like: “What is the best way to spend $7.2 billion to provide the greatest improvement in broadband service affordability and availability to unserved and underserved areas while also creating jobs and spurring economic growth?”
From that perspective, $344 million dollars to connect a few people in Western Alaska will deny the benefits of the broadband stimulus to much larger numbers of people elsewhere; rural communities somewhere else in the United States will lose out.
Here’s a quick calculation to provide some context:
- a quick search suggests that the population of Western Alaska is about 30,000 people (http://www.dced.state.ak.us/bsc/CDQ/cdq_handbook/9_cdq_chapt2.pdf)
- so with an average household size of 2.59 (http://factfinder.census.gov/servlet/SAFFFacts) there are about 11,000 households
- average US broadband penetration is about 60% (although the Broadband Stimulus will increase this)
- so we could anticipate that there would be about 7,000 or so households subscribing to broadband service
On that basis, $344 million dollars is about $50,000 per household subscribing to broadband service. That’s a very expensive underwater bridge to nowhere.
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I find your reference to the Bridge to Nowhere insulting and ill-informed. The Broadband Stimulus Package calls for broadband to be provided to un-served or underserved rural areas of the United States. It was passed with the intention of doing several things:
1. Create Jobs
2. Aid the economic development opportunities of rural communities by providing a robust digital infrastructure
3. Make broadband equally affordable for all citizens of the US, including those in rural America, regardless of age, ethnicity or economic status
By taking the easy route and comparing Alaska on a per capita basis you overlook the premise of the Broadband Stimulus Package and dismiss Alaska as unworthy to be considered part of the communication highway. Strategically for the United States this is incredibly shortsighted.
As the Polar Ice Cap melts, sea lanes like the Bering and Davis straits become busier, port towns like Unalaska/Dutch Harbor are projected to see significant growth as they transform from key fishing depots into key shipping hubs. Other countries are clearly anticipating this change and are investing heavily in new Arctic Ocean seaports. Russia recently committed $7 billion to port development in Murmansk. The United States needs to be continually looking ahead as well.
Shell Oil Company has active plans to turn Unalaska/Dutch Harbor into a major seaport to support the proposed oil and gas exploration in the Bering Sea. According to state reports, Alaska’s shelf contains an estimated 27 billion barrels of oil and 130 trillion cubic feet of natural gas of potentially recoverable resources. Citing a University of Alaska study, Alaska Governor Parnell said shelf production could provide an annual average of 35,000 jobs for 50 years, and a $72 billion payroll. The use of high speed real time communications will be critical to the safe, efficient, and environmentally friendly extraction of these resources, and protect the vital active fishing grounds that currently help feed the entire United States.
Commercial fishermen unloaded 612.7 million pounds of fish and shellfish at the port of Unalaska/Dutch Harbor, in 2008 making it the country’s top port for the amount of fish landed for the 20th consecutive year. In order to maintain this vital food source for the United States commercial fisherman must seek new ways to control the fishing harvest, efficiently process all stocks, and minimize waste. High speed reliable communications is the only way to make this happen.
Communications for rural Alaska is completely inadequate to take Alaska into the next technological age. The President and Congress clearly understood that without federal support Rural communities, such as Unalaska/Dutch Harbor, would not be able to build the infrastructure to be part of the communication age and would be left behind. Unalaska/Dutch Harbor is at the forefront of the United States future in shipping, energy, and food. It would be a shame to leave this strategic resource out on its own.
As for your basing your analysis on a cost per household I can tell you from firsthand experience that health care, schools, libraries, government and business uses in Unalaska/Dutch Harbor will far outpace the use by individual households in our community. Plus, I’m not sure how you use a 60% take number since 100% of our traffic will shift to fiber once it lands at Dutch Harbor. Satellite service in AK is so costly ($10,000 or more per month for a satellite 1.5 MB/s T1 line) and the cost for available data packet size via fiber is just a fraction by comparison. I‘d encourage you to rethink this project on a cost per kilobit, not per capita basis, since it never reflects the truth and challenges of rural areas.
(Wendy Svarny-Hawthorne is the Chief Executive Officer of the Ounalashka Corporation. The Ounalashka Corporation is the Alaska Native Village corporation for Unalaska, Alaska, formed in 1973 under the Alaska Native Claims Settlement Act of 1971.)
Great points, Wendy. I’d like to add one more, providing technology to the students in rural Alaska. As a teacher in Unalaska it is practically impossible to utilize the internet in the classroom. Many online educational games do not run as the internet is too slow to support them. Even basic research is difficult when you get 20 students online at once. If you haven’t lived in rural Alaska, I’m sure it’s difficult to understand. How many YouTube videos do you watch in a day? If you want to watch a video clip here, first you need to wait 30 minutes or more for it to load. Here there is no other choice. Without improvements, like this project proposes, are we really preparing our children for the technology of the future? They aren’t even prepared for the technology of today.
Yeah right “underwater bridge to nowhere”…the shipping crossroads of the world is Dutch Harbor….more container ships come through here than many other places in the world…It is no 3 in the ports in the U.S. with the most container ships going throughfor the huge ILLWU union. (International Longshore Workers Union) Number 1 is LA they have good phone lines and internet…number 2 is Tacoma great internet no 3 Dutch Harbor terrible connections and sky high prices…….plus the fishing operations are huge here and eventually oil will be huge here….yeah right we don’t need better communication here…. Dutch Harbor is the worlds second richest fishing port and the largest in amount of fish caught…..we don’t need better internet though….we feed the world and are integral in the shipping industry, plus the important spot it will be with global warming when the ice melts more and they are shipping and fishing in the arctic circle….plus the strategic military spot it is here…the only place ever occupied by another country (Kiska)…the Japanese invaded Kiska (nearby island) for a reason this place is very important!……yeah right we don’t need better internet here (which is not only slow but sometimes non-existent) even though we feed the world fish and ship more stuff all over the world than 99 percent of the other ports in the U.S. and the oil’s coming like it or not…which being a fisherman I don’t really like but the US needs oil. Sooner or later they’ll be drilling here…hopefully safely! Oh yeah and did I mention the military strategic spot…one of the first lines of defense? Yeah guess I did …starting to get the picture all you “underwater bridge to nowhere naysayers? Wake up and smell the coffee/oil/fish oil/army boots/shipping paper ink!