Bloomberg ran a recent long feature on why it’s so hard to build the next Silicon Valley. Kansas City was the initial winner in the super-hyped race to be the launch region for Google Fiber, but this hasn’t translated into a tech boom:
Schatz’s disappointment is a tale of misplaced expectations, by both entrepreneurs and city leaders. (The challenges that he and other startup founders face is the subject of the latest episode of the Decrypted podcast; subscribe here on iTunes.) In 2011 the cities’ two mayors called Fiber’s then-future deployment “a once-in-a-lifetime opportunity,” and a way to “spark economic development.” And for Google, which since significantly has pared down support for the project, it was a case of placing too much faith in the ability of its own technology to change lives.
It’s also been hard for the Kansas City area to become the boom town that leaders dreamed of. Some entrepreneurs, like Schatz, were drawn to the city because of the fiber, and some launched businesses. A “startup village” sprang up. But few of the companies really took off, and some frustrated founders ended up decamping to San Francisco, where there was a larger talent pool and greater access to capital. Even the best of intentions and super-speedy internet isn’t enough to create a new Silicon Valley.
I have never understood exactly what it is that gigabit internet is supposed to do. I hear people hype it to no end, but what would I do with it?
Without a doubt, fiber based internet is great. I previously had Verizon’s FiOS service, and it was the best internet I ever had in terms of reliability and consistency. But my bandwidth was well below 100Mbps.
Today I’ve got 300 Mbps on a cable modem and don’t seem to suffer any limitations in what I can do, including streaming high definition movies. Perhaps if I had multiple TVs in multiple rooms all streaming 4K video at the same time I’d need more bandwidth, but that would be a strictly consumption activity.
As it happens, I am a software developer who built my own web app, but needed almost no bandwidth for it. I was hosting it in the cloud, not my home server.
The Bloomberg piece cites some guy running a bootstrapped startup that involves uploading a lot of photos. That doesn’t strike me as worth installing citywide gigabit service for. Remember, we’re talking about residential gigabit, not commercial service, which is available already. This guy could simply go to WeWork or something if needed bandwidth.
I have never heard a compelling story about how gigabit internet would fuel any sort of economic boom.
This story illustrates the folly of speculative build it and they will come infrastructure projects. The good news is that it was Google who privately invested in this. Taking on high risk, speculative investment is exactly what private sector entrepreneurs are supposed to be doing.
The problem is that so much of our discourse around public sector economic development is based on this very thing. Rural area struggling? The proposed solution is a new highway. American economic growth had stagnated? Some want to build a massive high speed rail network.
As the Kansas City example shows, this kind of infrastructure expansion doesn’t generate the same return that it used to. That’s not to say that there isn’t a big need to invest bigly in rebuilding our existing infrastructure. But it’s not realistic to think we are going to prime the pump of economic growth with massive new investments in fiber, rail, highways, etc.
The other thing that this shows is that when it comes to technology businesses, the real X factor is people and culture. This will be the topic of a future column I am writing on why so many cities in the Midwest and Northeast consistently fail on this point.