Democratization of broadband

Today, an estimated 42 million Americans—nearly 13 percent of the U.S. population¹ —don’t’ have access to broadband services, making it a struggle for them to engage in the increasingly essential tasks of working remotely, attending online classrooms, engaging in e-commerce, or benefiting from telemedicine.

A unique and compelling opportunity exists for telecommunications companies (Telcos) to have a significant socio-economic impact by enhancing broadband service and internet-accessibility tools in these underserved populations.

For Telcos, making infrastructure investments to help address the digital deficit in underserved geographies is the first step in embracing their social responsibility to further the democratization of broadband. The potential short and long-term impacts of providing adequate broadband are significant. Moreover, greater digital connectivity can attract other businesses to these disadvantaged areas, spurring a ripple effect of economic development.

For these reasons, providing quality connectivity in underserved areas is also an opportunity for Telcos to burnish their “social” credentials with their Environmental, Social, and Governance (ESG) initiatives. Along the way, Telcos could be eligible for additional incentives including an array of federal and state tax benefits.

Why adequate connectivity matters

In many low- to moderate-income areas, broadband service is still at the 3G or 2G level—in some areas, it’s even slower. That puts residents of these communities at a considerable disadvantage in accessing basic digital resources, especially related to health, education, and employment.

Without highspeed broadband, quality of life suffers. Accessing telemedicine services—a time, money, and, in some cases, a life-saving option for patients and doctors—is a near impossibility. Students can’t easily view supplemental educational resources, such as YouTube and TED Talks, when slow internet capacity prevents content-heavy webpages from loading. And employees can’t work from home if their connection can’t keep up with their company’s network, while those unemployed or looking for new opportunities would find their virtual job hunting hindered by substandard connectivity.

These disadvantages became even more acute during the COVID lockdowns, when access to digital resources on the internet was vital.

Responsible growth for shareholders and stakeholders alike

For Telcos, adopting an ESG-principled strategy to introduce or enhance broadband services in these low-income areas is an opportunity to enhance quality of life among people who have been historically under-connected, while building their brand and growing their subscriber base.

In doing so, Telcos can take advantage of certain tax incentives, including if these areas are in a state-designated Qualified Opportunity Zone (QOZ). These QOZs were established by the Tax Cuts and Jobs Act of 2017, and their purpose is to spur economic growth and job creation in low-income communities while providing tax benefits to investors. There are more than 8,700 QOZs in the United States including nearly all of Puerto Rico.

But more important, investing in these QOZs has social value. Investors and other stakeholders are increasingly holding companies accountable to make meaningful ESG progress. And the fact is, Telcos in general have been scoring lower ESG grades from ratings agencies compared with other industries.

Telcos that want to enhance their ESG credentials should be looking at using these QOZs to create a substantial societal impact through direct infrastructure investment which, in turn, will likely draw other corporate and government investment spurring a wave of economic growth.

In the next blogs in this series, we’ll take a closer look at the potential social benefits of these investments, unpack the process and economic incentives of investing in QOZs, and how enhancing an organization’s ESG ratings can benefit its brand—both with customers and employees.

Footnotes

¹Source: BroadbandNow Research, FCC Reports Broadband Unavailable to 21.3 Million Americans, BroadbandNow Study Indicates 42 Million Do Not Have Access (May 5, 2021)