• Joshua Dopkowski

Detroit Has No Internet

An alarming case study on the importance of infrastructure in business

The world was finally introduced to 5G cellular networks earlier this year, when both AT&T and Verizon began rolling out new products using the advanced network technology. 5G has been touted by many experts to be the most important thing that will happen to telecom since the cellphone, while some have gone so far to say that 5G will usher in the most important technological advancement in human history, ever.

While that might seem like a tall order, it is important to remember that 3G did, in fact, usher in the app revolution, while 4G went a step further and turned that revolution into global infrastructure. Keeping that in mind, it’s not all that difficult to imagine 5G having similar disruptive effects.

While proponents of 5G have made no effort to downplay expectations, few have discussed how the technology might actually substitute for fiber optics. While the debate about this rages on, the potential for 5G to even contend with hardline highspeed internet could mean that 5G could bring connectivity to many areas that are currently desperate for it.

Economists, business leaders, and policymakers may be well served to consider the case of Detroit, a major American city where internet connectivity currently eludes roughly 57% of the population.

A City in Crisis

The city of Detroit was once the fourth-largest city in the United States and the automotive capital of the world. Today, much of the city is in ruins and it is a hotbed of corruption that has allowed for criminal enterprise to flourish (Lendrum et al., 2017). In 1950, Detroit was a thriving city of 1.85 million people; today, the population is under 680,000, less than half of what it was at its peak. Detroit is the center of one of the largest metro areas in America, which is home to a population of over 4 million.

The Detroit metro area serves as one of the starkest examples of income inequality in America. The annual median household income in the city is roughly $26,000, while the number for the overall metro area is about $48,000. The reason for this difference is because residents in the adjacent communities outside of the city earn a much higher median income. For instance, neighboring Macomb County has a median income of $52,000, while, next door, Oakland County boasts an exceptionally high median income that exceeds $86,000.

While the central and downtown areas of the city of Detroit have experienced significant investment and new job growth over the past 10 years, overall the city still only offers 30 jobs per 100 residents. Furthermore, among the jobs that are inside of the city, only 51% pay more than $40,000. Worse yet, of those better-paying jobs, most tend to be held by workers who don’t actually live in Detroit and instead live in Oakland or Macomb counties.

On any given workday, an estimated 158,000 commuters travel from the suburbs into the city of Detroit, roughly 60% of whom work at jobs that pay more than $40,000 annually. Meanwhile, an estimated 112,000 residents of Detroit actually leave the city to travel to their lower-paying jobs in the suburbs, 36% of which pay less than $15,000 a year.

Only around 49,000 people, or 7% of the population, both live and work in Detroit. While job growth downtown is happening, residents of the city are in a worse economic situation today than they have been since the beginning of the 21st century.

Median household income in the city has actually fallen in inflation-adjusted terms across all racial demographics and shows no signs of turning around. The money pouring into the downtown area of the city is largely benefiting only people who live outside of the city.

Over the past several decades, Detroit has experienced severe budget shortfalls and an outright collapse of its infrastructure. In 2013, the city declared bankruptcy. As is to be expected with such an extreme situation, crime in Detroit has for long been a major issue, forcing many companies to invest heavily in private security to protect materials, property, and resources. This is one of the reasons why big telecom has not invested in many neighborhoods.

Worse yet, government and police corruption have been systemic in Detroit for nearly a lifetime. Since the early 1970s, corruption has run rampant and the city has been a hotbed for criminal enterprise. The police department of Detroit has, for decades, been rattled by scandal and corruption, and the problem continues with over 60 police officers being charged with criminal offenses in a two year period.

Small businesses are of vital importance to the economic engine of any city, and Detroit is no different. The situation in Detroit, however, is indeed grim. Thousands of residents and would-be small businesses do not have access to basic services, and many more do not have the ability to connect to high-speed internet. For much of the residential neighborhoods of the city, Detroit’s broadband infrastructure is in a perilous state.

There Is No Internet in Detroit

While being stuck without access to the internet is often thought of as a problem only for rural America, in Detroit a significant portion of the population simply cannot get online.

While the central downtown area offers internet access via fiber-optic cable, this does not extend to many residents who live in the neighborhoods around the city. Connectivity is indeed difficult to come by for many in Detroit, as 40% percent of the population in Detroit has no access to any type of internet, 57% lack a high-speed connection, and 70% of school-aged children have no connection at home.

Because of Detroit’s corruption, crime, and rampant poverty, large telecommunications companies simply haven’t invested in the city. As a result, many small businesses and entrepreneurs in Detroit have had to settle for makeshift informal cellular networks, created by informal groups who are quite limited in the resources that they can actually provide. Some Detroit residents have started a grassroots movement to build a connection to the internet themselves, and have installed high-speed internet that beams shared gigabit connections from an antenna on top of the tallest building in a neighborhood.

While this is a good example of human ingenuity, the lack of regulation and oversight creates a number of risks for anyone that dares use such underground connections, and the reliability of these connections is also questionable.

Bad for Business

The lack of internet creates a hardship for small business owners who must be part of a social network in order to transmit vital information about their enterprises to potential partners, regulatory agencies and customers (Granovetter 1985). Today, it is near impossible to access these social networks without the internet, and so many small businesses in Detroit simply cannot establish social capital and legitimacy, thus leading to a lack of resources and customers.

In other words, many entrepreneurs in Detroit cannot establish themselves as valid and valuable since they do not have access to the internet, and so for many, it is near impossible to survive as a small business in Detroit without breaking the law in some manner.

While affordability is an issue, for many the real issue regarding connectivity is that there simply is not an internet service offered. While the cost of high-speed internet is indeed prohibitive for many Detroit residents, many big telecom companies simply haven’t invested in expanding their network to many Detroit neighborhoods. Much of the city is filled with dark fiber optic cable that is not connected to any homes or businesses.

However, 5G may change all of this and benefit many businesses that can prosper from establishing a consistent high-speed connection to the internet.

5G as the Solution

The replacement of fiber optic cable is where this new technology becomes interesting for Detroit. Because 5G can be installed with small low-cost connection nodes, large telecom companies such as Verizon are finally going to invest in the largely neglected city of Detroit.

This much-welcome change in telecom infrastructure could be what finally gives many small businesses what they need to connect to legitimacy granting social networks, since it may provide them with the ability to directly access the internet on their own. It could also drastically change the situation for students and residents as well.

Where previously people depended on cable for connectivity, 5G will be able to easily reach anyone with a cell phone or cellular tablet.

Today, it is near impossible for a small business to be considered legitimate without an online presence, and therefore any business that cannot connect to the internet is at a serious disadvantage. 5G technology in Detroit may offer these businesses the ability to come out of the darkness, and finally, to let the world know that they exist.

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