Lighting up broadband

Tobacco settlement pays for wider access in Virginia.

For Nancie Motley, the arrival of a high-speed network to Chatham, Va., (population 1,300) is bittersweet: It signals in part the demise of the tobacco farming industry that has sustained her tobacco auction business since the 1920s, but it also opens up a world of new opportunities for her cash-strapped rural community.

"We're sitting in a poverty area, with the loss of tobacco and textile jobs,'' says Motley, a 20-year tobacco industry veteran. "I can't see it being anything but positive to have better connectivity to the outside world. Hopefully, we can attract industry, which is what we need, or at least technology-oriented jobs.''

Nearly 1,000 miles of fiber-optic cable are being laid and lit in rural Virginia - with a projected total cost of $35 million or more - thanks to a windfall from an unexpected source: the tobacco industry.

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For Nancie Motley, the arrival of a high-speed network to Chatham, Va., (population 1,300) is bittersweet: It signals in part the demise of the tobacco farming industry that has sustained her tobacco auction business since the 1920s, but it also opens up a world of new opportunities for her cash-strapped rural community.

"We're sitting in a poverty area, with the loss of tobacco and textile jobs,'' says Motley, a 20-year tobacco industry veteran. "I can't see it being anything but positive to have better connectivity to the outside world. Hopefully, we can attract industry, which is what we need, or at least technology-oriented jobs.''

Nearly 1,000 miles of fiber-optic cable are being laid and lit in rural Virginia - with a projected total cost of $35 million or more - thanks to a windfall from an unexpected source: the tobacco industry.

Because of the settlement of several lawsuits in the late 1990s, the tobacco industry must make annual payments to all 50 states and several U.S. territories. These range from tens of millions to hundreds of millions of dollars per year, depending on the state's historic health spending.

From 2000 through 2003, the 50 states received a total of $37.5 billion in tobacco settlement revenue, according to the National Conference of State Legislatures (NCSL). Virginia alone received more than $577 million during that time, NCSL says.

Most states are spending their tobacco settlement revenue on healthcare services, smoking prevention programs, biomedical research and educational grants. Some states have used the tobacco funds to compensate for reduced state tax revenue during the recent economic downturn.

Virginia is the first state to earmark tobacco settlement funds for network infrastructure projects, observers say.

Arturo Perez, fiscal analyst with the NCSL, points out that it is difficult to track how some states such as Wisconsin or California are spending their tobacco money because it goes directly into their general funds.

"Tobacco funds were viewed as pennies from heaven,'' Perez says. "Some states have decided they will use [the money] not for recurring expenditures but for particular projects that would not otherwise have been funded.''

That's the strategy in Virginia, where state government officials and business leaders agree that broadband deployments would not have happened without the tobacco settlement windfall.

"If it made business sense, carriers would already have done it," says Carthan F. Currin, executive director of the Virginia Tobacco Indemnification and Community Revitalization Commission, which doles out funds from the tobacco settlement. "But I think of it as a public/private partnership comparable to what electric cooperatives did 60 or 70 years ago when they brought power to remote areas of Virginia.''

During the past year, Virginia's tobacco commission has invested just shy of $20 million in four broadband network build-outs. State government officials applied for and received an additional $7.6 million in federal matching grants to get these networks built.