State grants to firms
We are analyzing the impacts of state grants provided to wired telecom firms (433) that support the purchase of infrastructure to expand broadband coverage. Our first thought was to run it as an industry spending pattern type. However, the value added and output, while positive, are less than the grant amount. I assume this is because direct effects are not calculated. So, I am looking for advice on the best course of action. A few thoughts on the matter.
1) Should I estimate direct effects using IMPLAN's excel template and add to the results obtained in the industry spending
2) Should I run the analysis as an Industry Impact Analysis (Detailed)? If so, would the grant be considered proprietor income or intermediate inputs? Also, should all other values be zeroed? For example, the grant only covered the purchase of supplies, equipment, etc, but did not fund any employee income, etc
3) Or would you suggest something entirely different
Industry Spending Pattern Events are intended to capture the Intermediate Input spending for a level of Industry production. Intermediate Inputs are purchases of non-durable goods and services that are used to produce other goods and services rather than for final consumption. This would be different than a capital expenditure, which is a one time investment that will not be consumed based on a level of production.
In your case, I would lean towards the capital investment because this is a one time purchase. In order to analyze these investments, if you have the line items included you can model individual purchases as Commodity Output Events. If you do not have this level of detail, I would suggest utilizing a general Investment Spending Pattern to analyze the capital purchases as Commodity Output Events.
Hope this helps!
Michael NealyComment actions
Thanks so much! A couple of follow-up questions. I do not have the itemized detail of exactly what was purchased, so I will need to use a spending pattern. You mentioned "investment spending pattern." From reviewing the linked documentation, it appears that I will need to follow these steps to create an investment spending pattern, can you please advise if this is correct?
1) Using event template V6.7 excel file, navigate to the commodity sheet, and enter the following values (let's assume the grants amount is $500,000)
2) Event name: "Investment Spending Pattern - Template", Commodity: "3433", Event value: "$500,000, Margins: "Producer" Local purchase: "100%"
3) Import using the "upload template" on the impacts screen
If this is correct, a few more questions
a) when I upload, I am presented with a dialogue that says "Please select the tabs that you would like to import." and a checked box next to the statement. However, I am not presented with a list of tabs to select, and Save is greyed out (I assume Id be looking to select the commodity tab, as that is what I used in the template file.
b) I have about 20 grants to evaluate on a statewide level (all grants were given to the telecom firms for infrastructure purchases to expand broadband accessibility). Should I enter each of these grants in a row (20 total) in the template file, or should I total the amount of the grants and enter only one row?
So you are a little off here. You will need to start with the Investment Spending Pattern file, which can be found in the article I had linked above. From there, go to the 'FFEOnly' tab and sort by 'IndustryTitle' - Telecommunications:
This breakout across 97 rows represents a broad distribution for how the Telecommunications Industry spends investment dollars. For your example, you can see that I multiplied the $500K grant by the investment rate for each of these Commodities to derive an Event Value. From here, all you would need to do is copy and paste the IMPLAN 546 Commodity index code, IMPLAN Descriptions (for Event Titles), and the Investment Rate * the dollar figure (for Event Values), into the Event Template to create 97 Commodity Output Events. Note that the sum of all investment rates is equal to 1, so the sum of all of the 97 Event Values will be $500K.
On your issue with the Event Template upload, this is most likely because the Event Template you uploaded was blank. Make sure to save the Template in excel before you attempt to upload into IMPLAN, but feel free to let me know if this issue persists!
Lastly, on the total grant values: are you running these all in the same year? i.e. 2022 Dollar Year. If so, you would be totally fine to utilize the investment rates on these Commodities with a total across all grants. However, if the Dollar Year is going to vary by grant, then you would want to repeat this process for each individual year you need.
Followup question - now that we have analyzed the investment(grants), we want to estimate the impact generated by new subscribers. Our primary question is should this be analyzed as industry output or commodity?
We feel that it should most likely be an industry output event with specification 433 telecom. The value would be the total estimated fees collected from subscribers in one year within the region. Do you agree or would you suggest something different? We know that consumers purchase broadband subscriptions directly directly from the telecom providers (who we assume are retailers in this case).
Also, do we need to specify "producer price." In reading the industry vs. commodity article it appears that we should, but the option ins greyed out in advanced fields.
I agree that you should treat this as Industry Output for Industry 433 - however, I do have a couple of clarifying remarks. First, make sure that your Event Value only includes the revenue generated from new subscribers that are signing up because of the infrastructure investments and coverage improvements. This is because if they are already subscribers, the investment into expanding broadband isn't creating any new impact to the Region from these customers. Secondly, this Industry 433 is not a retail Industry, as retailers typically do not manufacture their own goods for sale as this Industry does. When impacting a retail/wholesale Industry in IMPLAN, there are a few other considerations we have to make(outlined here), so I would caution against reporting Industry 433 as a retailer.
Great! thanks for the help. Correct, only new subscribers revenue will be included in the value. Good to know about advising against 433. It appears that wholesale 401 is most likely the closest in alignment with broadband service providers, therefore we would report as a wholesaler...would you agree?
It appears that you may have misinterpreted my last comment, apologies if I was not clear. From what I can tell, this should be modeled as Output in Industry 433, which includes NAICS 517311 - Internet service providers, using own operated wired telecommunications infrastructure. In my prior message, I only wanted to communicate that this Industry 433 is not a retail/wholesale sector, so you should not refer to it as such when reporting the results of your analysis.
Hope this helps!
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