Rural Telecom’s Future: A Widening Broadband Gap

According to new research from the Hudson Institute, not only is the broadband gap between rural and urban communities real, it will continue to grow. If not addressed, this gap will have negative impacts on both the national economy and rural communities.

Hanns Kuttner, a visiting fellow with the Hudson Institute, presented his findings at a roundtable recently in Washington, D.C. A panel of experts in rural telecommunications discussed his research and then cited the need for policy changes to counter this trend.

In his paper, “Broadband for Rural America, Economic Impacts and Economic Opportunities,” Kuttner noted that 100 percent of urban areas have access to 1.5 Mbps Internet service, compared with 95 percent of rural areas. However, that gap widens significantly as speeds increase. At 10 Mbps, about 98.7 of urban areas have access, while only 71.4 percent of rural areas do, a difference of 27.3 percent.

“Population density is the key factor impacting this gap,” said Kuttner, pointing out that India has a population density 10 times higher than that of the United States, and Europe’s population density is about five time higher. “For the most part, the United States is at the low end of the population density scale. It’s a peculiarly American problem.”

Higher Construction Costs

This low population density drives up the cost of broadband network deployments. The existing copper plant isn’t suitable for supporting broadband over the long distances needed in rural communities. Fiber is required, which in rural areas can run $10,000 to $30,000 a mile (in mostly labor costs), said Larry Thompson, CEO at Vantage Point Solutions, which performs engineering consulting for rural telecom companies. “There’s no way to economically do that from end user fees alone. How do you deploy in regions like that?”

In the past, financial mechanisms like the Universal Service Fund helped ensure that voice networks reached rural populations. Thompson, however, is pessimistic that such mechanisms as the FCC’s revamped Connect America Fund will keep pace with rural broadband needs.

“Public policy has to be focused on broadband, and there has to be a support mechanism in place,” Thompson added. “Because support is tied to voice service, we’ve been seeing a decline [in funding]. If we want to see the same success getting broadband out to everyone that we saw getting voice out to everyone…we need a support mechanism that’s comparable to historical levels.”

“The [funding] collection mechanism is completely broken,” concurred Harold Furchtgott-Roth, Hudson Institute senior fellow and director for Hudson’s Center for Economics of the Internet; he also is a former FCC commissioner. “The FCC should have addressed this years ago. Amazingly, they have come up with a more complicated mechanism for distribution, but not collection.”

Public/Private Partnerships

Greg Laudeman, past president of the Rural Telecom Congress and former executive director of the Tech Connect Initiative at the Georgia Tech Enterprise Innovation Institute, called for greater public/private partnerships. To lesson the rural broadband gap, there are “two key players sitting on sidelines that must be actively engaged” he said: technology companies and public universities.

Noting that technology companies like Google and Amazon are “hugely” invested in research and innovation, Laudeman called on them to educate rural communities about how to use technology to improve business opportunities.

“Technology companies need to engage with local leaders at the rural level to help them understand what this technology is and how to use it — whether in agriculture, services, or manufacturing — to economically transform how they operate,” Laudeman explained.

He also called for universities, particularly those with public outreach mandates like land grant colleges, to participate in this effort. “There’s a beautiful opportunity for collaboration to create community classrooms and laboratories to understand how we use these technologies and create competitive advantages from them,” Laudeman said. “If you gain that knowledge, you will create the demand and pull the technology much more efficiently into rural areas than if you are pushing it and taking a ‘build it, and they will come strategy.’”

Preparing for the Future

Vantage Point Solutions’ Thompson urged those building rural broadband networks to plan for higher speeds. “If by 2020, you don’t have 100 Mbps, you’ll probably be behind,” he said, pointing out that Google Fiber in Kansas City is expected to provide Internet connectivity of 1 Gbps. “Part of the problem is that what drives the bandwidth hasn’t been invented yet. If you wait to build until you see demand, especially in rural communities, you are too late. It’s a multiyear process for these companies because it’s so capital-intensive.”

— Jennifer Whalen