South Dundas Township and their broadband experience

This study was commissioned by the United Kingdom Department of Trade and Industry and undertaken in 2003. It was one of the first attempts to quantify the economic impact of broadband deployment on a community.

In 2001, the rural Township of Dundas completed the building of a fibre-optic network to provide fibre access to most of the commercial and community users in three villages ranging in size 800 to 2,400 population. The economy of the township is based on manufacturing, construction, agriculture and the service sector. Throughout the 1990s, the area suffered significant job losses and the township was in general decline.

The decision to build the network was based on the belief that a community can influence its economic development by securing appropriate high bandwidth access for services and business within the community. It was considered a necessary infrastructure investment to both retain and attract business to the area. Existing telephone and cable operators expressed no interest in providing service to the area, as the investment could not be justified financially.

The system requirements were that it must provide broadband virtual private networks (VPN) and high-speed Internet access for municipal facilities, emergency and public services, businesses and industrial spaces. It was understood that the system would never generate sufficient revenues to offset the investment, but the justification was based on the economic improvements it would bring. The end customer would make a one-time payment for the installation of the local loop and could then contract with an ISP for service. Operation and Maintenance of the network was contracted to a third party, which also became the ISP, as there were no other providers interested in providing service to such a small market. The network build cost was C$750,000 and the monthly network operation and maintenance costs were about C$11,000.
 
As of 2003, there were 24 businesses and organisations connected to this network. Between June 2001 and April 2003, the following economic effects can be directly attributed to the fibre network in South Dundas:

  • 62.5 new jobs;
  • C$2.8 million in commercial / industrial expansion;
  • C$140,000 in increased revenues and decreased costs.

The Input Output model indicated that, over the next two to four years, these effects would have the following impacts:

  • C$25.2 million increase in GDP for Dundas County;
  • 207 person years of employment for Dundas County;
  • C$8.0 million increase in tax revenues.

This network has provided measurable economic benefits to South Dundas and has received favourable reviews from users about its benefits to their organisations. In the absence of this initiative on the part of Dundas, this level of service would never likely have been available to this area. However, since there is no revenue generated to Dundas from this service and given that it pays in excess of C$130,000 for annual operation and maintenance, the Township is in effect subsidising the end user.

Source: Department of Trade and Industry (UK), 2003 http://www.berr.gov.uk/files/file13262.pdf

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