Will Amazon’s Flywheel Consume the Rural Broadband Advantage?

What is the Amazon Flywheel? It is best described in a Bloomberg article examining Amazon’s Market Reach.

As Amazon grew, the company adopted a business school concept called the flywheel, loosely defined as a sort of self-reinforcing loop. Where possible, projects were to be structured to bolster other initiatives underway at the company.

Here is an example of the flywheel in action:

By the time Amazon began breaking out the revenue of Amazon Web Services in 2015, the cloud-computing unit had reshaped how businesses used technology. It was also Amazon’s biggest money maker, churning out billions of dollars a year in profit that the company could put to work investing in new services and expansion of its core retail business. Once again, the flywheel in action.

With the announcement that Amazon will be launching 3,236 low earth orbiting satellites to provide broadband internet services from space the potential competitors SpaceX, OneWeb, Telesat and LeoSat took notice. The most vocal was Elon Musk who claimed Amazon was copying SpaceX.

Perhaps those that Amazon’s broadband network will impact the most, the mom and pop stores across the nation, may not have given the announcement a passing thought.

While the Amazon LEO satellites will be providing high-speed internet access to 14 million rural US citizens who do not have access now, they will also be providing these rural consumers access to Amazon’s e-commerce kingdom. While Amazon can offer cloud services to small business in rural communities at the same time, they could be stealing those small business customers with their lower cost e-commerce options.

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According to the Foundation for Rural Service study current rural broadband users account for $1.4 Trillion in an online transaction, 14% of all internet driven transition, or 7% of GDP. However, they’re 19 million users that do not have Internet access or have access too slow for effective e-commerce. Amazons LEO network will provide easy access to these unserved broadband customers and at the same time adding them to the Amazon e-commerce customer base. The flywheel in action.

While SpaceX, OneWeb, Telesat, and LeoSat are planning to provide broadband services, Amazon will be providing broadband service, but the primary goal is the creation of marketing and sales infrastructure, which is a far different business model than the service based competition.  The depth of Amazon’s offerings gives them an advantage.

The problem remains, will Amazon’s space-based broadband access be an advantage or detriments to rural communities? Given Amazon’s market penetration so far, it appears that a ubiquitous internet will transform communities, there will be more information based businesses and fewer street side shops selling commodities that Amazon can deliver for less.

Your thoughts?

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A Cyber Economy: The Transactional Value of the Internet in Rural America

The above title is from an iGR White Paper on internet transaction and spending, including the spending by rural internet users. The details are in the study HERE and the Foundation for Rural Service infographic which provides an excellent summary if you are in a hurry.

From the website with links to the white paper and infographic.

This report examines the nature and quantifiable value of online transactions, and draws comparisons between online usage habits among urban and rural consumers. The report was produced by iGR, a market strategy consultancy focused on the wireless and mobile communications industry, and commissioned by the Foundation for Rural Service (FRS).

Major findings include:

  • Internet usage among urban and rural consumers is largely similar.

  • Rural consumers are responsible for approximately 15% of all consumer, internet-driven transactions annually, which equates to more than 10.8 billion online transactions altogether.

  • Internet-driven transactions make up nearly 50% of U.S. gross domestic product (GDP) or $9.6 trillion annually. These transactions are estimated to grow to more than 65% by 2022, to $14 trillion per year.

  • The estimated value of rural online transactions is nearly $1.4 trillion—or 7% of GDP.

This is an impressive study with some interesting numbers, but it only looks at the transaction made by those with a broadband connection, what about the potential of the 14 million rural citizens that do not have any broadband connection?

I predict these 14 million unserved are future users of satellite broadband.

Unlocking the Digital Potential of Rural America

Unlocking the digital potential for rural small businesses across the country could add $47 billion to the U.S. GDP per year. This new study by the U.S. Chamber of Commerce and Amazon estimates the economic impact of digital technologies on rural small businesses based on official statistics and a survey to more than 5,000 rural small businesses across the country.

There are 37 million working-age adults and 18 million households in the rural U.S. While accounting for close to 15% of the adult population and nearly 75% of the country’s land mass, annual revenues of rural businesses represent only 3.7% of total gross revenues in the U.S. economy.

Despite some improvement in the adoption of digital tools by rural businesses over the past decade, this new research shows how increased use of digital technology in rural America could help drive faster growth in the rural economy.

Key findings:

  • Increased adoption of online tools and digital services for businesses across rural America could create more than 360,000 jobs in the next three years.
  • Increased adoption could grow annual revenues of rural small businesses by more than 21% over the next three years – the equivalent of $84.5 billion per year – with states in the South seeing the greatest benefit
  • Online tools and technology have the highest potential impact on rural small businesses with revenue under $100,000

Read the full report HERE, including additional insights and interactive graphics.  Select California for a breakdown by state. 

Hat Tip to barberadvisors.com blog for the link to the Chamber Report.

Bridging The Digital Divide In Nevada County

The Union has the details HERE.

Race Communications’ mission is to “bridge the digital divide in California,” and this project has the potential to do just that for Nevada County. Local businesses are severely limited by what they can accomplish with copper internet speeds. Businesses and professionals looking to relocate to Nevada County won’t even consider doing business here without a fast, reliable internet connection. The Fourth Industrial Revolution, which is changing the way we do everything through the internet of things, requires the same. Technology is changing fast, and everyday activities increasingly rely on the internet. Our county and our local businesses will soon be at a severe disadvantage without fiber internet. We’re all glad it is finally here.

Nevada County High Speed Internet
The Green shading is the Race Communications coverage for Phase 1. 

If Broadband is Essential Infrastructure it Should be in the General Plan

In California, the General Plan is a document providing a long-range plan for a city’s and county’s physical development. Local jurisdictions have freedom as to what their general plans include, however, there are specific requirements under California state law that each general plan must meet; failure to do so could result in suspension of future development.

Each general plan must include the vision, goals, and objectives of the city or county in terms of planning and development within eight different “elements” defined by the state as: land use, housing, circulation, conservation, noise, safety, open space, and environmental justice which was added as an official element in 2016.

To assist cities and counties to develop and refine their planning document the Governor’s Office and Planning Research published some guidelines in August of 2017.  These charts capture the essence of that guidance.

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Please note that broadband is not mentioned in either graphic, yet broadband has a significant relationship to land use, circulation, housing, conservation, and social justice.

Broadband is mention in the General Planning Guidelines three places:

Chapter 4, Required Elements, Page 81, broadband as a “relevant utility.”

Chapter 4, Page 82 Broadband:

“Both state and federal governments are implementing various funding programs that serve the goal of expanding broadband access to unserved and underserved areas. Within California, the California Public Utilities Commission (CPUC) manages the California Advanced Services Fund (CASF), which invests hundreds of millions of dollars annually in broadband deployment. The state also created the California Emerging Technology Fund (CETF), which was designed to be a public-purpose venture capital fund.”

Dig once policies can substantially reduce costs for providing broadband service to communities. A new provider can run ber through leased conduit space at a fraction of the costs, incentivizing more private actors to deploy or reducing costs to the city if self-provisioning broadband services. For example, if conduit construction was promoted along ongoing civil work projects, fiber deployment costs drop by $30,000- $100,000 per mile. On average, 60 to 90 percent of network deployment costs come from civil works as opposed to equipment and maintenance.

Chapter 6, page 211:

In addition, general plan policies may improve access to health services through integrated public transportation and provisions for access to broadband, allowing for telemedicine capacity. 

If California planners were serious about the benefits of every home and businesses having broadband access, they would provide General Planning Guidance beyond dig once.

According to a recent Brookings Metro Policy Paper in less than two decades broadband access has become one of the foundations of the American Economy, joining water, sewer, power, transportation, and energy as essential infrastructure.

If broadband is essential infrastructure, and a “relevant utility”, it should be included in the general planning requirements:

Land Use:  Reduce the cost of installing fixed and mobile wireless antennas, including G5 mini towers.  See Nevada County Land Use, Communications for WiFi example.

Circulation: Use of broadband reduces the need to travel, enables work from home, promoter online shopping all which can reduce greenhouse gas emissions. According to a California, Emerging Technology Funds report Broadband as Green Strategy, access to broadband reduces vehicle miles traveled, office-space construction, energy use, while increasing online shopping, all which can reduce greenhouse gas emissions by 1.1 billion tons over ten years,

Housing:  All new development should include broadband networks, especially in multi-family housing in low-income neighborhoods, where adoption is hindered by high-cost access.

Conservation:  Broadband reduces the consumption of natural resources. See Circulation.

Environmental Justice: Broadband internet improves access to health care, education, and employment. Broadband opens the doors to entrepreneurship by individual and small groups, especially in rural communities creating community wealth.

Also missing from the Governor’s Office and Planning Research planning guidelines issued in August 2017 are topics and elements related to economic development. An issue worthy of a future post. 

Your thoughts? Should Broadband be given more attention in General Planning?

Telecom Predictions for 2019

POTs and PANs as some insight to the future of telecommunications in 2019. Doug Dawson has these rural broadband predictions. My emphasis added in red.

Rural America Will Realize that Nobody is Coming to Help. I predict that hundreds of rural communities will finally realize that nobody is bringing them broadband. I expect many more communities to begin offering money for public/private partnerships as they try desperately to not fall on the wrong side of the broadband divide.

We’ll See First Significant Launches of LEO Satellites. There will be little public notice since the early market entries will not be selling rural broadband but will be supporting corporate WANs, cellular transport and the development of outer space networks between satellites.

Big Companies Will Get Most New Spectrum. The biggest ISPs and cellular carriers will still gobble up the majority of new spectrum, meaning improved spectrum utilization for urban markets while rural America will see nearly zero benefits.

Full Article is HERE.