The Metro Open Network

The Metro Open Network

The Metro Open Network is a non-profit created to build an open-access fiber network in the unserved and underserved parts of the New York City Metropolitan Area.
According to a New York Times article, the United States ranks in 14th place behind countries like Sweden, Japan, South Korea, Romania and Macau in fiber connectivity. The fastest are in countries where the government has paid for fiber upgrades. But in the United States it has been left to cable and telecom companies, which have been slow to make the investment.
Christopher Mitchell

Christopher Mitchell, Director of the Community Broadband Networks Initiative at the Institute for Self-Reliance

From a Crain’s New York article, “It’s foolish to think that we can just leave it to the market to use this limited space under the street efficiently,” Christopher Mitchell, Director of the Community Broadband Networks Initiative at the Institute for Self-Reliance, said. “The fiber needs are tremendous, and if New York over time can expand access to a lot of fiber at low cost, we’ll see all kinds of [innovation].”
The New York City Metropolitan Area needs a vastly expanded fiber network to attract startups and create a thriving independent business community.
According to a report by American Express OPEN:
Neighborhoods with thriving independent businesses saw home values outperform citywide markets by 50 percent over the last 14 years.
In the New York Metro area, the average home value would have increased 176% or $291,672 to $457,672 from 1997 to 2011 if it was located near a successful independent business district.
And according to a national study by sociologists at LSU and Baylor University:
Counties and parishes with a greater concentration of small, locally-owned businesses have healthier populations — with lower rates of mortality, obesity and diabetes — than do those that rely on large companies with “absentee” owners.
Living in a neighborhood with thriving independent businesses, makes it more likely that your home is worth more and that you and your family are healthier.

Seven Magazine

Jack Dorsey is the chief executive of Square and the interim leader of Twitter.

A critical aspect of improving the U.S. economy is actually improving the small business economy and making it easier to start a business and to grow small businesses.
~ Jack Dorsey

According to an interview of Michael Shuman, author of Local Dollar, Local Sense:
There is overwhelming evidence that the best form of economic development is not to give away money to attract and retain outside businesses, but instead, to nurture locally owned businesses.

"Local Dollars, Local Sense" by Michael Shuman

According to a press release by Good Jobs First:
92 percent [of leaders of small business organizations representing 24,000 member businesses in 25 states] believe that the spending balance on incentives between small and large businesses in their state is biased toward big businesses (69 percent strongly believe).
Yet, governments at all levels (local, state, and federal) subsidize large corporations. As David Cay Johnston writes in an Al Jazeera America article:

State and local governments have awarded at least $110 billion in taxpayer subsidies to business, with 3 of every 4 dollars going to fewer than 1,000 big corporations, the most thorough analysis to date of corporate welfare revealed today.

Federal, state and local governments publish exhaustively detailed statistical reports on welfare to the poor, disabled, sick, elderly and other individuals who cannot support themselves. The cost of subsidized food, housing and medical care are all documented at government expense, with the statistics posted on government websites.

But corporate welfare is not the subject of any comprehensive reporting at the federal level. Disclosures by state and local governments vary greatly, from substantial to nearly nonexistent.

New York State subsidies

One initiative at The Metro Open Network is to build a 10 Gigabit Network.
Salisbury, North Carolina recently announced it’s now the first city in the nation to offer 10 gigabit-per-second-internet connections to its citizens. The millions of dollars that New York State, Westchester County, and the local municipalities have given away to large corporations could of instead gone to upgrading broadband access. Gigabit broadband would have done far more to develop the economy.
In American cities like New York, you can buy a 500 Mbps connection that’s 58 times faster than the U.S. average. Here’s the catch: It’ll cost you $300 a month, according to the New America Foundation’s Cost of Connectivity report. In Seoul, Hong Kong, and Tokyo, however, you can get twice the speed, a 1000 Mbps (1 Gbps) connection, for under $40 a month. In New York and Los Angeles for under $40, Time Warner Cable offers a 15 Mbps download and 1 Mbps upload connection.

Download speeds

In the United States broadband is both more expensive and slower at the same time. And this is mostly due to government policy as Susan Crawford writes in Captive Audience:

Instead of ensuring that everyone in America can compete in a global economy, instead of narrowing the divide between rich and poor, instead of supporting competitive free markets for American inventions that use information—instead, that is, of ensuring that America will lead the world in the information age—U.S. politicians have chosen to keep Comcast and its fellow giants happy.

Susan Crawford

Susan Crawford with Bill Moyers (

It is worth mentioning that all of the top-performing American cities in the study are those that are disrupting the business for incumbent ISPs, such as Verizon, Time Warner Cable and AT&T. Remember Verizon’s $300 for 500 Mbps plan? In Kansas City, Google Fiber offers 1000 Mbps for $70 a month. Chattanooga, Tennesse also offers 1000 Mbps for $70 a month.
A second initiative at The Metro Open Network is getting federal grant money for broadband (e-rate) for a consortium of library and school districts.
The Schools and Libraries program, also known as the E-rate program, makes telecommunications and information services more affordable for schools and libraries in America. Mandated by Congress in 1996 and implemented by the Federal Communications Commission in 1997, the E-rate provides discounted telecommunications, Internet access, and internal connections to eligible schools and libraries, funded by the Universal Service Fund (USF).
$15 Trillion to Main Street
Another problem with we face in creating an environment that is welcoming to startups and small businesses is government policy regarding investing. We have about $30 trillion in Americans’ long-term savings in stocks, bonds, mutual funds, pension funds, and life insurance funds. Yet less than 1 percent of these savings touch local small businesses—even though roughly half the jobs and the output in the private economy come from local businesses.
From a Forbes article by Steve Denning we learn that a magisterial study by Deloitte’s Center for the Edge shows the rates of return on assets and on invested capital for 20,000 US firms from 1965 to 2011. It shows that “managerialism” has been steadily failing for the last half century.

Economy-wide Return on Invested Capital

The graphic shows that something has gone so terribly wrong with the type of businesses supported by Wall Street—the supposed engine of economic growth and the supposed creators of jobs. When these firms have rates of return on assets or on invested capital of, on average, just over one percent, we have a catastrophe on our hands. An ROA of just over one percent means that firms are dying faster and faster: the life expectancy of firms in the Fortune 500 is now less than fifteen years and declining rapidly.

If our capital markets were functioning efficiently, roughly half of our $30 trillion savings or about $15 trillion would be going into the half of the economy that is local small business.
David Weild IV, chief executive of IssuWorks and a former vice chairman of Nasdaq who has researched the decline in small-company capital formation, has argued that the public markets are effectively closed to 80 percent of the companies that need them.

Wall Street to Main Street

Small businesses and startups are the backbone of the American economy, and according to a report done by Tim Kane for Kauffman Foundation:

[W]ithout startups, there would be no net job growth in the U.S. economy. This fact is true on average, but also is true for all but seven years for which the United States has data going back to 1977…. Startups create an average of 3 million new jobs annually. All other ages of firms, including companies in their first full years of existence up to firms established two centuries ago, are net job destroyers, losing 1 million jobs net combined per year.

As politicians go through the political drama of producing budgets, the truth of matter is that the only way to reduce the deficit is by reducing unemployment. According to an article written by Business Insider‘s executive editor Joe Weisenthal:

History is pretty clear on how you reduce the deficit: Get growth, and reduce unemployment.

We ran this chart earlier this week to show how nicely deficit/GDP and the unemployment rate correlated with each other. Throughout these decades tax and spending policies have changed a lot, but it clearly hasn’t mattered. When unemployment drops, deficit/GDP drops. When unemployment rises, deficit/GDP rises. Growth is the only deficit reduction policy that matters.

Unemployment vs. GDP chart

So what can local, state, and federal governments do to make it easier to start a business and to grow small businesses? We get an answer from Stacy Mitchell, Senior Researcher at the Institute for Local Self-Reliance. In an article she states the six steps that governments must take to support small businesses:
  1. Restructure the Banking System
  2. Close Corporate Tax Loopholes
  3. Extend Sales Taxes to Large Internet Retailers
  4. Get Corporate Money Out of Politics
  5. Cap Credit Card Swipe Fees
  6. Increase the Small Business Share of Government Purchasing
Why aren’t these steps being taken? Despite the talk, we must consider if politicians are really interested in economic development or is it more important for them to maintain the status quo? Aaron Renn addresses this issues in his post “Do Cities Really Want Economic Development?

Jane Jacobs once said that “Economic development, no matter when or where it occurs, is profoundly subversive of the status quo.” This, in a nutshell, is why policies and programs that might actually move the needle and generate economic development are not implemented. The politicians, power brokers, businessmen, non-profit executives, etc. all at some level benefit from the status quo. Anything that disrupts the status quo is a threat to them.

And as Michelle Long, Executive Director of BALLE in “The Incentive of Building Local” points out:

A recent New York Times special report described the squandered opportunities of economic development in local communities across America as tax incentives tallying more than $80 billion are handed out to oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains — usually with no concrete benefit, no jobs, no improved economic climate.

[Yet, b]uilding local economies from within — investing in the people and local businesses rooted right where they are — offers profound, long-term outcomes.

And the evidence is in: From Economic Development Quarterly to Harvard Business Review, communities with a higher density and diversity of local, independently owned businesses have more wealth, jobs, and resiliency than communities that rely on large corporations and big box retailers as “job creating” employers. Rather than funneling wealth into a few hands, strengthening local business ownership results in more wealth and jobs for more people, and greater personal accountability for the health of the natural and human communities of which we are a part.

study by the New York City Department of Transportation shows some additional ways to increase local business:

NYC DOT found that protected bikeways had a significant positive impact on local business strength. After the construction of a protected bicycle lane on 9th Avenue, local businesses saw a 49% increase in retail sales. In comparison, local businesses throughout Manhattan only saw a 3% increase in retail sales. Better walking infrastructure encourages retail strength, too.

In another example from NYC DOT’s study, retails sales increased a whopping 179% after the city converted an underused parking area in Brooklyn into a pedestrian plaza. Retail sales at businesses in the rest of the neighborhood only increased by 18%.


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