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Community Developments Investments (November 2018)

Closing the Digital Divide: How Banks Can Help Rural Communities With Broadband

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Andy Spurgeon, Chief of Operations, Office of Telecommunications and Information Applications, National Telecommunications and Information Administration

Rural communities and farmers across the nation struggle with unreliable internet access, but in some areas boadband development is helping to close the digital divide.
Rural communities and farmers across the nation struggle with unreliable internet access, but in some areas broadband development is helping to close the digital divide. (Getty Images)

Broadband is an enabling technology that drives many socioeconomic benefits for American citizens and their communities. The benefits of broadband include economic growth, improved educational opportunities, access to better health care information, greater employment prospects, improved public safety, and enhanced global competitiveness for American businesses. Conversely, communities with insufficient broadband capacity are disadvantaged by reduced manufacturing, employment, population, and educational opportunities.

Unfortunately, despite enormous private and public investments in broadband development initiatives and infrastructure in recent years, there is still a gap between segments of American society—the so-called digital divide—which separates communities and demographics that have access to and use of broadband technologies from those that have limited access and adoption.

The National Telecommunications and Information Administration (NTIA), part of the U.S. Department of Commerce, is a valuable resource for American communities intent on closing the digital divide by expanding broadband access and improving digital inclusion. The NTIA offers communities expert support, technical assistance, guidance, and research to help them deploy broadband infrastructure and promote digital inclusion. The NTIA provides this support through its BroadbandUSA program and publishes findings on broadband adoption in America through its Digital Nation reports.

Defining Broadband and Community Challenges

Broadband infrastructure includes a combination of wired and wireless services that connect households, businesses, and anchor institutions to the internet. Most frequently, wired connections are made using fiber optics, coaxial cable, and traditional copper telephone lines (or a combination thereof).

Microwave links remain the most common form of long-haul wireless connectivity,1 while a mix of microwave, 4th Generation Long Term Evolution (4G-LTE) wireless, satellite, and unlicensed radio communications are used to make wireless connections to end users. The capacity of each of these technologies to carry data varies tremendously, from 100 gigabytes per second on the high end in certain fiber-optic networks to roughly 2 megabytes per second (Mbps) on the low end for high-traffic LTE networks, and even lower transmission rates among older coaxial and copper systems. Together, these technologies permit high-speed internet access for homes, businesses, and mobile users.

Digital inclusion refers to the adoption of broadband technologies and its meaningful use for social and economic benefits. This definition is intended to bring together broadband access, information technologies, and digital literacy in ways that promote success for communities and individuals trying to navigate and participate in the digital economy.

In 2016 alone, according to U.S. Telecom, U.S. broadband providers invested more than $76 billion in capital expenditures on network infrastructure. There is much progress to be made, however, among American communities seeking to expand broadband access and close the digital divide. After assessing nearly 100 local broadband programs that BroadbandUSA has supported through the end of fiscal year 2016, agency data show that more than 90 percent of communities are still struggling with the essential efforts needed to plan a broadband program. Further, greater than 65 percent are struggling with options to finance or fund their planned programs. More than 90 percent are facing challenges that prevent them from implementing their desired programs. These statistics include a variety of business and funding models (publicly led, privately led, and public-private partnerships), urban/suburban/rural geographies, and socioeconomic situations.

The problem is particularly acute among rural communities. Research by the Federal Communications Commission (FCC)—which defines home broadband as 25 Mbps download and 3 Mbps upstream—indicates that 10 percent of all Americans (34 million people) do not have access to these services at home.2 Worse still, 39 percent of rural Americans (23 million people) lack access to the FCC's recommended broadband speeds, while 41 percent of Americans living on tribal lands lack access to these services. Meanwhile, household access to broadband is not the only issue.

Research suggests that approximately 6.5 million American children do not have the bandwidth sufficient for digital learning because 2,049 schools still lack access to fiber broadband connections that meets the FCC's minimum requirements.3 Similarly, 34 percent of non-metropolitan health care facilities lack sufficient broadband connectivity to upload electronic medical records and exchange health information. Only one-third of library users find the internet speeds adequate for their needs.4 Forty-two percent of public libraries lack broadband connections because they have speeds less than 10 Mbps. Seventy-five percent of rural libraries have lower download speeds than their urban counterparts. Yet, public libraries fill a critical connectivity gap and average more than 4.5 million wireless sessions annually.5

The digital divide also varies by family income with even higher disparities among low-income rural residents. Data from the 2015 NTIA internet use survey shows that the biggest gap in internet use is among rural and urban Americans with incomes between $25,000 and $49,999.6 Black, Native American, and Hispanic households reported lower internet subscription rates compared with national averages, indicating that specific actions are needed to improve adoption among those populations. These 2015 NTIA data illustrate that that among non-adopters, 25 percent attribute cost of service as the primary reason for not subscribing and 54 percent say that they do not need or are not interested in the service.

Public Sector Broadband Development Initiatives

Addressing issues described above requires cooperation between the public and private sectors. Through the Broadband Interagency Working Group (BIWG)–led by an Executive Leadership Team from the White House, NTIA, and the U.S. Department of Agriculture –BroadbandUSA works with other federal agencies, including the U.S. Department of the Treasury (Treasury), to: (1) improve coordination across broadband programs, (2) reduce regulatory barriers to broadband deployment, (3) promote awareness of the importance of federal support for broadband investment and digital inclusion programs, and (4) collect and share information with communities about federal resources that are available to them for broadband deployment and digital inclusion efforts. The efforts of the BIWG complement BroadbandUSA's work to help communities across the country expand their broadband capacity and utilization.

Acknowledging the vital role that broadband technologies play in workforce and community development, the federal agencies responsible for banking regulations and interpretation of the Community Reinvestment Act (CRA)—the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System—issued revised guidelines in July 2016 specifying that certain activities (e.g., financing for the construction, expansion, improvement, maintenance, or operation of essential infrastructure) receive CRA consideration if they “revitalize or stabilize” an underserved nonmetropolitan middle-income area, such as projects relating to broadband internet service that serve the community, including low- and moderate-income residents. In a similar show of support for broadband investments, the Community Development Financial Institutions Fund updated the New Markets Tax Credit (NMTC) Program's Frequently Asked Questions (FAQ) to include the financing of broadband infrastructure among eligible activities, provided the financing meets certain Internal Revenue Service regulations.

Both the CRA and the NMTC program have created a number of interesting financial incentives for banks to engage in local broadband programs and address the digital divide. Banks frequently have deep ties to their communities, and there are several ways that they can support the planning, funding, and implementation of local broadband programs.

Public-Private Partnership Opportunities

Planning for broadband infrastructure and digital inclusion programs requires up-front work to assess local needs, garner stakeholder support, and develop studies and plans for implementation. Local, regional, and national banks can participate in these efforts to organize and convene stakeholders or provide logistical or financial support for needs assessments and project planning. In addition, expert staff knowledgeable in financial planning and analysis may be able to support local project teams by offering their expertise and input to project budgets, financial forecasts, and investment options.

Banks should consider the ways they can support the financing and funding of broadband deployment programs. The NMTC program offers banks the opportunity to leverage tax credits that are reinvested in communities that meet specific guidelines. In addition, banks that understand the mid- to long-term economics of infrastructure investments can provide loans for the capital investment required to deploy broadband networks as well as the working capital required to operate a broadband network and connect new customers following implementation. Banks should also consider the opportunities to partner with the public sector and public financing through programs that offer loan guarantees or in concert with public funding vehicles like grants or local bond measures.

The following are examples of such investments in broadband projects:

  • Ohio's Next Generation Health Care: Using a $15 million NMTC investment, Next Generation constructed a fiber-optic network connecting rural Ohio health care facilities with the larger national interconnected broadband network. When the network is completed, Next Generation Health Care is expected to offer telemedicine services to more than 7 million residents in northeastern Ohio.
  • Chattanooga Gigabyte Network (Chattanooga, Tenn.): The Electric Power Board of Chattanooga (EPB) issued $229 million in revenue bonds in 2008. Of this amount, $162 million was used to build a fiber-optic network, which is owned by the EPB's Electric Division and used for the Smart Grid system and broadband services. In November 2009, the bond funds were augmented with a $111 million federal grant from the U.S. Department of Energy to expedite the construction and implementation of the Smart Grid system. An additional $39 million of the bond issue was used for electric equipment such as transformers associated with the smart grid. About $26 million was used to cover the first three years of interest payments, and the remainder to cover the financing charges. The 25-year bond carried an average 4.5 percent interest rate. Since launching in 2009, EPB Fiber Optics now serves 61,000 homes and more than 5,000 businesses.
  • NoaNet (Tacoma, Wash.): Several Washington public utilities districts in Washington state formed the Northwest Open Access Network in 2010 to enable broadband connectivity to their rural underserved counties. The original bond of $27 million was used for startup expenses. Members paid all principal and interest for the first 10 years, with final payment due by December 2016. All long-term bonds were paid off on time and revenues are positive. Combined with two federal grants from the NTIA's Broadband Technology Opportunities Program, which totaled $138.8 million, the network supports 61 last-mile providers7 ;that serve more than 260,000 customers, many of whom have never before had access to advanced telecommunication services.

Broadband infrastructure programs are organized and led in a number of different ways. In some cases, telecommunications providers—either existing local providers or new market entrants—lead efforts to expand broadband access. Local and regional governments (e.g., city or county) may take the initiative to lead infrastructure or digital inclusion programs based on public feedback or input from political constituencies. In other cases, particular groups representing public education or health care, nonprofit groups, or local activists may start a more grassroots campaign to build support for a local broadband program.

This variation offers banks many different opportunities to engage. In a privately led venture, a bank can serve as a lender or engage more deeply as a strategic partner based on the bank's ties to the community. Public-private partnerships offer banks the opportunity to work with local governments, community groups, and nonprofit organizations in a wide range of roles such as advisor or funder or even as employee-volunteers, depending on the needs of a specific program and the depth of the relationship that the bank is seeking.

Taking Action

If a bank is looking for opportunities to invest in a local or regional broadband project, BroadbandUSA recommends the following five steps:

  1. Make contact with local government or other groups that may be involved in local and regional broadband planning. These groups generally have a public presence in the form of websites as well as public meetings or forums. The groups may include local or regional economic development experts, nonprofit groups, or other stakeholders who may already be conducting needs assessments or feasibility studies. Discuss their situation and the types of partners they are seeking for a project.
  2. Research available data about a community's level of connectivity to assess the need for expanded access, new providers, or additional services.
  3. Sources may include the National Broadband Map and service provider data collected by the FCC.
  4. Evaluate your institution's investment options, risk profile, and desired investment and partnership models.
  5. Work with the local or regional broadband planning team to consider how your institution's support and partnership might increase the likelihood of another public investment, such as a state or federal grant.
  6. Consider contacting BroadbandUSA to determine if there is a local project that NTIA is aware of that may benefit from a bank partner.

Investment in broadband infrastructure and digital inclusion efforts are critical to efforts to keep America's communities competitive in an increasingly connected world. Both the public and private sector have a role to play. In the last two years, BroadbandUSA has provided advice to more than 150 communities eager to improve their broadband connectivity and close the digital divide. Our team is available to support banks that are interested in participating in these programs.

For more information on the NTIA's BroadbandUSA program, visit or email

Disclaimer: Articles by non-OCC authors represent the authors' own views and not necessarily the views of the OCC.

1 Long-haul wireless connectivity spans long distances and is used to connect multiple users, such as connections to rural communities, schools, hospitals, and other anchor institutions.

2 FCC, “2016 Broadband Progress Report” (January 29, 2016).

3 FCC, “2018 Broadband Deployment Report” (February 2, 2018).

4 FCC, “2016 Broadband Progress Report” (January 29, 2016).

5 Ibid.

6 NTIA, “Computer and Internet Use Supplement” (July 2015).

7 Last-mile providers build the leg in a telecommunications network delivering services to retail customers in homes.

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Banks are helping to finance broadband development initiatives in rural communities across America that are struggling without reliable, high-speed internet access.

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Articles by non-OCC authors represent the authors’ own views and not necessarily the views of the OCC.

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