Without broadband access, Connecticut small businesses are locked out of markets
At Horst Engineering, an aerospace manufacturing company in East Hartford, every machine on the factory floor is connected up to data cables running along the ceiling. They carry detailed designs from engineers’ desks to the precision grinders and tools, which churn out bolts, screws, fittings, pins and other custom components, some with accuracy down to 0.00005 inch.
President and Chief Executive Scott Livingston says connectivity is critical to keep operations going and serve the company’s global customer base. Aside from the machinery, many of the company’s systems, like payroll and project management, are cloud-based and require a reliable high-speed connection. Electricity and internet are like “air and water” for a company like this, Livingston said. “It’s every function in the building.”
The company paid to have fiber optic cable — the fastest and most reliable hard-wire connection available — run to its new headquarters, which opened this year. Internet service and support on that line costs about $15,000 a year. Livingston said many small manufacturers can’t afford such high speeds, including many of Horst’s suppliers.
“It was a sizeable investment for a small business,” he said. “It would be better for us if all our suppliers and all our customers had this level of connectivity. Information would travel faster, more efficiently.”
But not all businesses operate at that level. There is a growing digital divide among Connecticut businesses, and as internet speeds accelerate, more small businesses could get left behind.
In Connecticut, the number of companies with limited or no internet is likely in the tens of thousands — ranging from rural farms to suburban manufacturers and shops in the cities. State officials don’t have a clear sense of how many of Connecticut’s more than 300,000 small businesses lack the access they need to high-speed internet. Nationally, the percentage stands at around 8%, according to recent surveys.
Without reliable, affordable broadband internet, those businesses are disconnected from today’s markets. To participate in contemporary commerce, a high-speed connection is not an option or a luxury — it’s basic infrastructure. And while the newly passed $1 trillion federal infrastructure bill contains $65 billion to build out broadband and make it affordable, the lag time could leave many businesses unable to compete.
“Think of a small business located in a small strip mall that was constructed 20 or more years ago,” said Burt Cohen, broadband policy coordinator in Connecticut’s Office of Consumer Counsel. “The businesses are likely all served by underground utilities, which includes communications infrastructure installed by the phone company.” That may no longer be able to support the speeds today’s businesses need, Cohen said, but it’s expensive to upgrade, involving “not just the installation cost but also the expense of digging up the driveway or parking lot in front of the stores and restoring the surface pavement.”
The cost and logistics of upgrading outdated infrastructure is only the first obstacle to leveling the playing field. The second is the cost of services. Even if high-speed cable were extended to every location in the state, all those connected homes and businesses would need to start using it. In order for them to do that, computers and modems — and internet service itself — need to be affordable.
‘It’s about equity in markets’
High-speed internet needs to be physically accessible and financially affordable, said Awesta Sarkash, government affairs director for Small Business Majority, a national group representing entrepreneurs and small businesses. “It’s about equity in markets,” Sarkash said. “Does the small business owner have just as much access to sell their product that other larger entities do? … Also, do you have the ability to sell and market yourselves online? In some situations, people aren’t even able to do that.”
Companies lacking hardwire connectivity say it presents myriad problems. Basic business operations — from ordering supplies, parts and materials, to systems for hiring and training staff or processing payroll — are now largely based online. Reaching customers also requires a robust digital presence to market products and services, handle orders and manage accounts. Small producers are often required to fill out online applications in order to sell their goods through larger retail chains — without internet, they don’t have access to those markets. Even something as simple as accepting payment from a customer, in person, now usually requires an internet connection.
“You can’t live without it,” Livingston said.
Over the last 20 months, the need to address that digital divide has grown more apparent.
“The pandemic underscored the disproportionate disparities that impact small businesses when it comes to accessing internet,” Sarkash said. “For small business owners in … rural, low-income communities, or more dense populations — where people think or assume high-speed internet is available but it isn’t always — there are a lot of barriers to entrepreneurship and to expanding a business. There’s barriers to contributing to the communities around you.”
A recent study from the Federal Reserve found that expanded broadband infrastructure — specifically in rural areas — has widespread economic benefits, including employment growth, lower costs for businesses and consumers, and rising property values.
A large proportion of Connecticut’s small businesses are sole proprietorships, many operated out of the home, and thousands of Connecticut residents — 387,000, according to independent research group Broadband Now — still don’t have an internet connection at home. Black, Hispanic, low-income and senior households are more likely to lack access.
Many banks, government grant programs and even nonprofit support services now interface with small businesses primarily online. If those websites aren’t mobile-friendly, it can be nearly impossible for small businesses that don’t have hardwire, high-speed connections to obtain the critical financing and services they need.
Democratic State Rep. Brandon McGee, who represents parts of Hartford and Windsor, said communities like his need small enterprises and entrepreneurs in order to thrive. Without connectivity, those proprietors are “falling by the wayside,” he said. “We’re in 2021, and we have businesses saying, ‘Look, I’m going to have to shut my doors,’” because they can’t reliably process payments or send and receive shipments. “I’m certain we’re not a unicorn in all this. It’s happening throughout the state,” McGee said.
Defining broadband access
Connecticut ranks high among states for broadband deployment, policy experts say, and the pandemic drove major advancements. By December of last year, every public school student in the state had a laptop and high-speed internet access, thanks to $68 million in federal and philanthropic funding that was deployed rapidly as several school districts transitioned to remote learning.
This year, the Connecticut General Assembly passed An Act Concerning Equitable Access to Broadband, which establishes a grant program for deploying high-speed internet services in underserved areas; coordinates federal funding opportunities for broadband providers; grants certain access rights that those companies need; and establishes internet infrastructure requirements for new building construction.
It also calls for the Office of Policy and Management “to develop and maintain an up-to-date broadband map” that shows availability and adoption of high-speed internet across the state, including download and upload speeds. This is a critical component to effectively deploying broadband. Policy makers and researchers say the national-level data maintained by the Federal Communications Commission is incomplete and flawed, relying on self-reporting by internet service providers.
“The truth is that we do not have precise granular information on unserved areas and households and businesses,” Burt Cohen, of the OCC, explained in an email. “We know that the northwest corner of the state has significant areas that do not have access to fixed broadband (meaning broadband service provided by wire rather than mobile service). We have reason to believe that there are unserved pockets in eastern Connecticut and elsewhere in the state. Once our granular state map is developed, we will have the data to make sure that … every household and business in the state has access to high speed fixed broadband service.”
Connecticut has also set out new goals for broadband speeds of 1 gigabit per second downloading and 100 megabits per second uploading. That goes well beyond the FCC’s current definition of “broadband,” which is set at 25 megabits per second download and 3 megabits per second upload.
“There have been many attempts to increase the definition of what broadband is,” said Sudip Bhattacharjee, professor at the University of Connecticut’s School of Business. “Of course telecom companies have resisted, because it would mean most of their networks would be deemed not broadband.” As long as broadband is defined as “25/3,” digital capabilities in the United States will lag “far, far behind” other countries, he said.
Connecticut set the baseline higher. Once the state has mapped out where connectivity needs are the greatest, its next task will be to figure out how to extend that high-speed network everywhere it’s lacking. That could mean replacing or supplementing much of the old telephone and cable lines with fiber optic cables. (Connecticut is one of few places in the country where towns and cities have the right to connect new internet infrastructure to any existing poles, even those owned by private companies.)
Cohen said Connecticut is expected to be eligible for at least $100 million in federal grants from the new infrastructure bill, to be used for internet deployment to unserved and underserved areas and providing affordable devices to low-income residents, among other things.
Whatever path Connecticut takes, it will require public-private collaboration.
A piecemeal path to connectivity
The state’s top internet service providers — like Frontier, Cox, Spectrum and others — have strong competitive incentives to build high-speed connections to most homes and businesses in Connecticut, said Kim Maxwell, president of broadband advocacy group Northwest ConneCT, based in Norfolk. But for the furthest outlying locations, or older apartment buildings where space is limited, those companies aren’t likely to do it without financial help from the state or local municipality, Maxwell said. “That’s the sticking point, all over America.”
In Connecticut, it’s not yet clear who will pay for the internet to reach those last outposts. And it’s not clear how much it will cost, since map data is still being gathered and the skilled labor needed to do the wiring could be in short supply.
“Private sector cooperation is necessary for all addresses to be capable of being served on an expeditious basis,” said Cohen of the consumer counsel’s office. He added that Connecticut has applied for a federal grant with Comcast to bring broadband to unserved areas in the state’s northwest region, and a decision is expected by the end of the year. Funding from the American Rescue Plan and the federal infrastructure bill would send Connecticut $100 million to expand broadband.
A recent survey conducted by Small Business Majority found that 76% of small businesses support directing federal funding toward “expanded and enhanced broadband infrastructure.”
None of this is going to happen at gig speed.
“You’ve got a window of six to seven years where fiber optic lines are going to be available to some small businesses and not others,” Maxwell said. “If you’re in Greenwich, you’re in good shape. If you’re in Stamford, some portions of Hartford and New Haven, you’re in good shape. Towns like ours (Norfolk) will not be in good shape unless they do something.”
Rochester, N.Y.-based GoNetspeed has run fiber optic cable (what it calls “Crazy Fast Internet”) to thousands of locations in New Haven, Hartford and Fairfield Counties. The company decides where to build its network based on requests it receives from local businesses and residents through its website.
For Rep. McGee, the delays are becoming a source of frustration.
“Many of the businesses in my district, they’re saying, ‘Brandon, what are we gonna do about the lack of access? You’ve been working on this a long time, and we’re not seeing any movement.'”
Small businesses that can’t wait — for providers to expand networks on their own dime, or for the government to provide funding — are simply paying up.
Like Horst Engineering’s Livingston, Janet Carlson said she spent thousands of dollars to run high-speed cable to her advertising agency’s offices in Cornwall. Carlson moved to northwest Connecticut from New York City 12 years ago, and she said it took a lot of work to get the operation up and running.
“We chose our building knowing we’d have to put in our own network,” Carlson said. With all the large files her staff and clients are regularly uploading and downloading, she said, “We had to jerry-rig a fast enough system so we could do our work.”
Carlson now serves as chair of Cornwall’s economic development group, and she’s working to improve connectivity throughout the town. During the pandemic, the town has attracted transplants from other areas who were transitioning to remote work.
“If you’re a town that says, ‘We’ll let people figure it out,’ people will figure out they’re going to work somewhere else,” she said.
Last month, the town of East Hartford — home to 50,000 residents and a well-established manufacturing industry — announced a novel approach to bridging the digital divide. The town signed a contract with United Kingdom-based SiFi Networks to run fiber optic cable to every home and business in town at no cost to taxpayers.
This week, the town of Sharon announced it’s conducting a feasibility study to determine the cost of developing its own fiber network to all homes, businesses, government agencies and emergency service providers. “Now is the time for local governments to take control to deliver reliable, affordable, and durable high-speed internet access,” said Michael Solitro, founder of Sertex Broadband Solutions, the company conducting the feasibility study in Sharon.
Once the work in East Hartford is complete, internet speeds around town are projected to reach 10 gigabits upload and 10 gigabits download on the fiber network. Mayor Marcia Leclerc said fiber internet will be East Hartford’s “new calling card” as it looks to attract new residents and businesses. She pointed to Pratt & Whitney and the city’s large manufacturing base, including Horst Engineering and others who use advanced machinery and need strong connectivity.
“With this type of technology, we can engage potential new manufacturers and new businesses … because we have the infrastructure that’s needed to run their businesses,” she said.
SiFi will cover the entire cost of the project, an estimated $40 million. The company plans to make back its investment through fees charged to internet service providers, any of whom may offer their services on SiFi’s fiber network for a fee — a model known as an “open access network.” (East Hartford is one of dozens of similar projects SiFi is undertaking in the U.S. but the first one in Connecticut.)
In a statement accompanying the announcement, David Lehman, commissioner for the state Department of Economic and Community Development, said, “This project represents a model I hope to see replicated in other Connecticut communities in the near future.”