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Broadband Development Group report shows subsidies needed for broadband expansion

Broadband Development Group
Arkansas hired Broadband Development Group to provide a masterplan on broadband inequality in the state.

State officials are looking at the best ways to provide high-speed internet access to all Arkansans. The 2022 Arkansas Rural Broadband Forum was held in Benton on Monday.

Participants at the forum mainly discussed the results of a report released last month that looks at ways to bridge the broadband internet gap. According to the report by Broadband Development Group (BDG), a firm hired by the state to help develop a plan for broadband expansion, about 110,000 homes aren’t receiving aid from the federal government to help pay for broadband.

BDG’s report found the cost to expand broadband to the 110,000 houses could cost up to $550 million. Tom Flak, a consultant with BDG, says the report looks at two ways to provide subsidies to internet service providers to bring service to areas that normally wouldn’t be profitable. One would involve the state matching 75% of their costs, while the other would involve the state ensuring the provider would make a 15% return on their investment or IRR.

“The idea of calculating the subsidies with these two ways is to kind of put a bracket on it,” Flak said at the forum. “An IRR based subsidy is sort of the minimum subsidy needed to give the operator a decent business case. The 75% over subsidizes in the lower cost areas but the IRR-based calculation is going to be needed in the high-cost areas.”

Flak says the state could potentially receive as much as $1 billion from the $1.2 trillion bipartisan infrastructure package approved by Congress last fall and that could help subsidize broadband coverage of the 110,000 households.

According to the White House, Arkansas will receive a minimum of $100 million for broadband coverage for the 461,000 Arkansans who lack it as part of the Infrastructure Investment and Jobs Act. The state also has 34% of its residents eligible for the Affordability Connectivity Benefit, which helps subsidize broadband for low-income families.

Flak says any policy recommendations should accommodate rapidly expanding internet speeds, which some experts say could increase by as much as 50% each year.

“Recently, we’ve seen AT&T announce two gig and 5 gig services. There are communities out there with metro broadband w 10 gigabits. I think we have more data points that keep growing and don't know where it’s going to stop,” Flak said.

The data from BDG's report comes from a six-month statewide study to help the state develop a plan to address broadband inequality.

Daniel Breen is News Director of Little Rock Public Radio.
Ronak Patel is a reporter for Little Rock Public Radio.
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