By Ryan Knutson
In May, Kara Burke and Tom Cairns thought they had found their
ideal house: a nicely updated older three-bedroom home in
Worthington, Mass.
But they didn't make an offer because it didn't have high speed
Internet.
"We wouldn't choose a house that didn't have electricity," Ms.
Burke, 26 years old, said as she explained why. "It's right on par
with those things."
As the Internet becomes central to the way Americans work and
live, the digital divide is taking on greater economic
significance. Students without Internet access at home may struggle
to keep up with school assignments. Towns with less access find
themselves falling behind economically, researchers say. Now, the
availability of speedy Internet service is starting to affect
Americans' biggest purchase: their homes.
Real-estate agents across the country say more buyers like Ms.
Burke and Mr. Cairns are turning their noses up at homes without
fast Web access. Some studies suggest those buyers are having a
keen effect on home prices. A nationwide study released on Monday
by researchers at the University of Colorado and Carnegie Mellon
University finds fiber-optic connections, the fastest type of high
speed Internet available, can add $5,437 to the price of a $175,000
home--about as much as a fireplace, or half the value of a
bathroom.
David Mans, a real-estate agent outside Boulder, Colo., said
after he started noting in his online listings whether properties
had Internet availability, he got fewer calls about properties that
didn't have it. "I have situations where people won't even look at
it if it doesn't have broadband," Mr. Mans said.
What people want in a home can vary a lot, and values can depend
heavily on broader market forces. But real estate professionals say
there are certain features that can be a deciding factor--like an
extra bathroom or pool. And broadband is starting to figure into
that same calculus.
Telecom companies by law are required to make telephone service
available to every residence in their service areas, but the same
isn't true for all high speed Internet providers. Phone lines can
deliver DSL service, typically slower than 10 megabits a second.
Satellites service is usually even slower. Fiber and some cable can
deliver speeds of up to 1,000 megabits a second.
University of Colorado researchers compared more than 520,000
home sales between 2011 and 2013 against government data on the
type of Internet access available. It built on a 2013 study by the
same researchers that found a similar effect on home prices in New
York state. The researchers expanded their study with funding from
The Fiber to the Home Council Americas, a group made up of
municipalities, small telecom companies, and others like Google
Inc. that support the expansion of fiber networks.
The results mirrored the findings of a 2014 study by the
University of Wisconsin at Whitewater that found access to the
Internet could add $11,815 to the value of a $439,000 vacation
house in Door County, Wis.
The impact is most acute in rural areas, where Internet speeds
tend to drop dramatically. As of 2013, 92% of urban areas had high
speed Internet, compared with 47% of rural areas, according to the
most recent data from the Federal Communications Commission. The
FCC defines high speed as 25 megabits per second or more.
John Wilczak was getting wireless high speed Internet via
Verizon's cell towers at his home in Santa Ynez, Calif., a town of
about 4,400 near Santa Barbara. Cable and phone companies sell high
speed Internet downtown, but they hadn't built along his street.
Mr. Wilczak's Verizon service worked like a cellphone plan. Once
when friends brought their children for a week-long visit, the
children blew past his 50 gigabyte monthly cap and he was hit with
a more than $900 bill.
Mr. Wilczak recently moved to a new house and dropped Verizon in
favor of a local wireless Internet company without data caps. He
said at least half of the 40 people who considered buying his old
house weren't interested in part because it lacked reliable
Internet
Unreliable Internet almost derailed Adam Frost's online business
selling wooden toys made in European workshops. Mr. Frost tried
using satellite Internet when he first moved to New Salem, Mass.,
about seven years ago from a New York City suburb, where he was
paying about $60 a month for high speed Internet.
"We were told there was adequate Internet access when we got up
here, and then discovered there really isn't," Mr. Frost said. The
satellite service would go down during bad weather, and he
consistently went over his monthly data limit.
Mr. Frost decided to pay Verizon $600 a month to install a
dedicated copper wire to his house for more reliable service. But
it still isn't fast enough, especially as online services grow more
data intensive. Last year it took him 24 hours to download a
software update for his computer, and just as the download was
nearly finished, his connection crashed and he had to start all
over.
In Western Massachusetts, where Mr. Frost lives, local officials
are trying to solve the problem by building their own high speed
networks. To accomplish that they're borrowing a tactic developed a
century ago when the region was struggling to gain access to
electricity. More than 40 towns have formed a cooperative of
Municipal Lighting Plants, a type of public utility first invented
to build electricity infrastructure, and are raising funds to build
out fiber connections.
Monica Webb is the chairwoman of the cooperative, called
WiredWest. So far this year, 19 of those towns have passed bond
measures to fund construction. More than 40% of residents in 14 of
those towns have already paid a deposit for service.
"Some might call us a coalition of the desperate," Ms. Webb
said. "We're already feeling the negative impacts of not having
adequate broadband."
Ms. Burke and Mr. Cairns, who passed on the yellow three-bedroom
house in May, decided not to make any offers until they see which
towns commit to the project.
"After we looked at I think maybe 10 houses we were like, 'It
doesn't really matter. We can't pick a house because we don't know
which towns are doing this,' " Ms. Burke said. "The towns that
don't pass it we absolutely will rule out. It's not a
question."
Write to Ryan Knutson at ryan.knutson@wsj.com
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