The rural broadband penalty

This piece was previously sent out in a CGO email.

As a kid, I spent much of my time off in the summer months at my grandparent’s home in Olney, Illinois. This area near the Illinois, Indiana, and Kentucky border is not what you’d expect to find in a state normally known for its flat fields of soybeans. It is a rural town that lives in the shadow of Illinois’ oil drilling boom in the 1950s.

I learned a lot in Olney: how to fish poorly, how to grow vegetables, and then, how to keep out the deer once the garden was ready to be harvested. But I also became painfully aware of how density can shape a small town. For years, my grandparents lived just outside of the reach of cellular and Internet service. Take a trip into town and your cell bars would start reappearing. And when you stopped into the coffee shop downtown, you could easily get onto their WiFi.

Even today, the line is readily apparent when you look at Google Maps. On one side of the road are homes and shops, and on the other are open fields. Though they are less dense than urban areas, rural regions are still dominated by the economics of concentration. Jobs, homes, and consumption still cluster, although the clusters are smaller. Broadband availability clusters as well. 

An analysis I conducted a couple of years back of official FCC data found that rural population cores, main streets in other words, have high-speed broadband at around the same rates as densely populated metropolitan regions. Move away from main street and access to broadband quickly drops. How close you are to the town square matters. 

For urban economists, none of this should be surprising. Rural regions are shaped by their distance from an economic hub like a small town. Researchers sometimes call this the rural penalty, which in its classic definition, is “the economic disadvantage of having to overcome some costs that are lower in other places that are less rural.” But, the costs of overcoming distance aren’t fixed. Transportation and communication innovations can radically alter what economic remoteness means and thus what it means to be rural. 

Having access to broadband can help rural communities reduce this economic remoteness but that doesn’t mean the region will remain unchanged. Traditional retail will be subject to competition from online stores. Broadband rollouts tend to skew the demand for skills, so new broadband in a region will likely improve the outcomes of skilled workers while worsening the outcomes of low skilled workers. Just as important, broadband tends to shift rural economies towards its nearest metro region, so broadband should be expected to hasten rural depopulation.

Rooting rural broadband in economic theory doesn’t mean priorities should shift. Rather, it requires a shift in expected outcomes.

First published May 6, 2021