Lack of Access to Cloud Computing May Hinder Rural Innovation

Rural America’s lower rate of broadband access is interfering with the adoption of cloud computing, a major factor in business innovation, according to a new study from Penn State and the National Science Foundation. 

“If you don’t have broadband, you can’t do cloud computing,” said Timothy Wojan, who co-authored the study and is a fellow with the National Center for Science and Engineering Statistics (NCSES). “People who don’t have high-speed broadband cannot adopt this new way of doing business.”

In cloud computing, users store applications and data on remote servers and gain access to that information via the internet, rather than via a local hard drive. It requires a speedy and stable internet connection.

Cloud computing provides businesses with lower upfront costs for computer hardware and software, leaving them more leeway to experiment with new innovation strategies, Wojan said. 

Cloud computing shows a strong correlation to innovation, the study found. “Innovation rates among urban and rural firms that have cloud computing is almost identical,” Wojan said. “Likewise, urban and rural firms without cloud computing also have similar innovation rates.” 

The study defined innovation as any marked change in business operations, such as new-to-market product production, updating marketing strategies, renewing quality assurance control and streamlining service delivery. It signifies healthy businesses.

“There are a lot of good ideas out there in rural areas, but what the digital divide suggests is that many rural firms may have less capacity or capability to exploit those innovative ideas,” Wojan said.

The digital divide is due to the internet being much less accessible, slower, and costlier in rural areas on average than in urban ones.

Speeds have been improving. “It has gotten better year by year,” said Wojan. “It has traditionally been a last-mile problem, in that getting high-speed broadband to rural areas is a very costly thing to do.”

The more urban a county, the more likely businesses were to use cloud computing. The graph shows percent of businesses using cloud computing by Rural Urban Continuum Codes, a system created by USDA Economic Research Service. Counties on the left side of the graph are more urban; counties on the right side of the graph are more rural. (Data from “Experimenting in the cloud: The digital divide’s impact on innovation,” Telecommunications Policy, August 2023)

The Bipartisan Infrastructure Deal, passed in 2021, has sped up the process. The bill has provisions for increasing broadband access in underserved or unserved areas, and has appropriated $43 billion to ensure that Americans in every locality have access to high-speed internet. “Hopefully that takes a big dent out of the digital divide,” Wojan said. 

“We are in the early days of the rollout of that funding – thus far, much of the funding has gone to the planning. Some of it, in the states that are most prepared, has actually gone to start putting fiber up on poles and getting people connected,” said Matt Dunne, founder of the Center on Rural Innovation (CORI) and former Vermont state representative. “It’s super exciting to see that progress, but this is going to be a multi-year endeavor. Similar to rural electrification, this is not going to be a simple process, but we are excited to see it continue to accelerate.”

CORI acts as an advocate, an educator, and a partner to close the digital divide. “We do that in a variety of different ways ranging from helping states with their state plans, to helping regions and counties to be able to navigate the federal funding challenges and make sure they are able to realize that potential,” Dunne said. “We do a lot of work to help rural communities have the infrastructure so that everyone from businesses to consumers in their home can have access to fiber speed broadband.”

Despite the challenges, Dunne said change is coming in rural broadband. “I would say the progress that’s been made today is still pretty fast,” said Dunne. “Having spent almost my entire adult life working on this particular subject, it is a huge moment for the U.S.”

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