Broadband changes shift business models in Arkansas

Editor’s note: Roby Brock, with our content partner Talk Business, wrote this report. He can be reached at [email protected]

Broadband’s potential is exciting Arkansas leaders as changes to a national universal service fund could spur further investment to transform the state and nation’s rural communications backbone.

Earlier this month, the Federal Communications Commission (FCC) revealed that it had come to an agreement with major telecommunications groups on revisions to the Universal Service Fund (USF).

The USF was formed decades ago to collect fees from phone users to supplement the costs of more expensive rural phone service. The fund was a core revenue contributor for many companies providing rural phone service, which made it politically difficult to achieve major changes to the fund’s use.

But with the decline in traditional wireline users, more desire has evolved to use the USF for broadband development among those companies, such as Little Rock-based Windstream Corp., which received about $100 million in federal USF funds last year.

Windstream’s SVP for External Affairs, Mike Rhoda, who worked with the FCC on the USF changes, tells Talk Business that rules and regulations must still be developed.  Once that process is completed, the overall $4.5 billion federal fund can be used in a more diversified fashion.

“The larger companies like Windstream are typically regulated differently than smaller companies who are regulated on a rate-of-return basis,” Rhoda said. “What this change will do is it will eventually move away from rate-of-return, so that they’re providing just enough subsidy to meet the need.”

“The goal of that is to stretch that $4.5 billion and make everyone more efficient, yet expand broadband farther than it already is today,” added Rhoda, who said Windstream would use much of its USF funding to invest in broadband for customers.

GOING MOBILE
There have been a number of efforts to define and advance broadband’s growth in Arkansas — particularly in rural counties — such as Connect Arkansas, a group led by Arkansas Capital Corp. that has been tracking infrastructure investment in rural broadband.

Earlier this year, Connect Arkansas president Sam Walls said wireless broadband access could be more transformational in rural Arkansas versus traditional hard-wired Internet service. He notes it’s cheaper to deploy and society is becoming more portable.

“The Internet today is characterized by it’s movement to mobile devices.  As the capability of these tools continues to increase, with the advancement of 4G, they offer amazing opportunity to expand utilization of Internet technology. Application development and growth will expand along with 4G technology following the previous experience with 3G,” said Walls.

“Not only does it hold the promise of expansive use of new applications, it also will be the solution to access issues which exist in the current digital divide,” Walls added.

Steve Smith, president of Verizon Wireless’ South Central region headquartered in Little Rock, agrees. His company is rolling out 4G long-term evolution (LTE) service in central Arkansas this week. 4G has speeds up to 10 times faster than current Internet speeds on mobile 3G devices.

“What that does for the average consumer is it opens up a whole different set of opportunities of things to be able to do wirelessly,” he explained.

Mass consumer appeal for wireless broadband’s faster speeds will be evident with video sharing, texting and Internet surfing, Smith says. For businesses, however, Smith contends 4G and broadband’s growth will be revolutionary.

“It’s not just about faster smart phones or faster connectivity. At the end of the day from a business perspective, it goes beyond just surfing the web or using a smart phone for communications.  Whether its videoconferencing capabilities from a smart phone to a tablet or a PC back in the office or whether it’s things like asset tracking or vehicle management,” he said.

For instance, 4G will allow for a company vehicle to become a wi-fi hotspot, allowing in-the-field employees to use laptops at stops in their daily service routines.

It’s all about productivity,” said Smith. “For every dollar invested in wireless broadband, it returns between 7 and 10 dollars in GDP growth. So we really think what we’re doing here in Arkansas should generate significant returns in terms of economic growth.”

Verizon has already rolled out 4G service in northwest Arkansas, Fort Smith and Jonesboro. More territory will be added this year, and by 2013, Smith says most of the state — as much as 96% — will be blanketed with Verizon’s 4G service.

BROADBAND ALLIANCE FORMS
The broadband revolution has also led to a new interest group’s emergence.

The Internet Innovation Alliance (IIA) has formed an Arkansas chapter to “achieve universal broadband.” The IIA is comprised of business and non-profit leaders from a variety of backgrounds.

“Broadband drives opportunity in everything, from our economy to education and entrepreneurship to healthcare,” said John Chadwell, executive director of the Newport Economic Development Commission and charter member of Arkansas IIA. “High-speed Internet helps businesses connect to new markets and students access educational resources anywhere in the world. These opportunities should be available to every family and business person in the state, no matter where they live.”

Others charter members of Arkansas IIA include Polly Martin, president of the Arkansas Grocers and Retail Merchants Association, Randy Zook, president and CEO of the Arkansas State Chamber/Associated Industries of Arkansas, and Montine McNulty, executive director of the Arkansas Hospitality Association. A number of local chamber of commerce officials are also involved and the IIA group claims “more than 1,000 Arkansans” are a part of its grassroots movement.

One of the group’s missions will be to promote more mobile broadband access in the state. Arkansas ranks No. 32 in the country in Internet access, according to the National Broadband Map, and U.S. Census Bureau figures show that more than 29% of households in the state report no Internet usage.

“Our collective focus is ensuring that everyone has access to high-speed broadband Internet,” said Chadwell. “Until we meet that goal, communities and businesses, including agri-business, that want to innovate and expand will be at a disadvantage.”

The IIA supported the reforms to the USF and it is also touting a proposed merger of telecom giants AT&T and T-Mobile. Industry experts suggest that the AT&T/T-Mobile deal would speed up bringing AT&T’s 4G high-speed broadband Internet service to nearly every corner of Arkansas like Verizon’s network.