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Broadband Infrastructure: Should Rural Investment Be a Priority?

By Howard Baldwin, Contributing Columnist

Sometimes those promoting extensive infrastructure projects — broadband or otherwise — exhibit a Field of Dreams mentality: “If you build it, they will come.” My own state of California is currently wrestling with such a project, a $68 billion high-speed rail line that opponents claim is too expensive and will never pay for itself. My attitude: come the day we have to evacuate San Francisco or Los Angeles after a major earthquake, people are going to be grateful it was built.

As we recently discussed in Broadband Backlash: Where It Comes From and How to Fix It, broadband deployments also have their detractors. Currently, one of the biggest areas of contention swirls around the value of rural broadband. There are really two sides of the story.

On the one hand, proponents of rural broadband argue that basic broadband provides the foundation for creating jobs and improving education in rural areas. On the other hand, opponents argue that without a “digital business ecosystem” — that is, the labor and customer base that fuels such growth — government funds could be more fruitfully directed at providing superior broadband in major cities. Their tech clusters are already established and the digital business ecosystem is vibrant.

British Member of Parliament Graham Jones, who represents a rural constituency, is – surprisingly – in the latter camp. He wrote in his May 29th blog post:

It is difficult to see how it will create jobs. I look around the Ribble Valley and parts of Wyre and see a large population of retirees and wealthy escapees. People whom it has to be said have made a choice to live away from urban areas, away from advantages of an urban area. There is no escaping the fact that these areas have vast numbers of wealthy people who will benefit enormously and who could afford to pay for SFRB [super fast rural broadband] themselves.

He cited the county council’s own bid proposal, which estimated that the effort would only create 25 new jobs and 20 new apprenticeships. “Even accepting the County Council’s own projections, it is difficult to see an economic case,” Jones wrote.

Further complicating the scenario: the frequent government demand that telecommunications carriers cannot take demographics into account when determining where to improve broadband. A densely populated area may benefit from fast broadband today, while a rural area may not benefit from fast broadband until many years in the future — yet they are given equal weight when it comes to determining current investment.

Not everyone shares Jones’ viewpoint. In a UK Telegraph article following up on Jones’ post, technology editor Matt Warman quoted Sarah Lee, Head of Policy for the Countryside Alliance, as saying, “Graham Jones has criminally missed the point of these plans. In a digital age the need for fast and reliable broadband is just as important as the need for gas, electricity and water.”

Similarly, in other countries with regions even more rural, proponents argue for the value of broadband. Colin Harkness is chair of a group called Broadband for the Tropics, in Townsville, Queensland, Australia.

In a video promoting that country’s National Broadband Network, he said, “We’re a regional area which is somewhat separated or isolated from most of Australia.

… It’s our job to encourage people to see the benefits and to understand the benefits, in advance of [italics added] when they’re actually going to be able to embrace them.”

The Infrastructure Investment Dichotomy

So who’s right? To adjudicate, we turned to Blair Levin, a Fellow at the Washington, D.C.-based think tank Aspen Institute – and up until April of 2010, director of the FCC’s National Broadband Plan (NBP). The problem, he said wisely, is that “one side is focusing on the benefits, and the other is focusing on the costs. If you only focus on one side of equation, that’s all you see.”

Even Levin agrees that when you only look at the cost of rural broadband, the figures are staggering. When he put together the NBP in late 2009, the cost of widely deploying broadband in the U.S. was $33 billion. Estimated revenues: $9 billion. The government subsidy: $24 billion. “Of that $24 billion, $14 billion were to serve 250,000 users, out of 7 million,” he says. That’s right: 3 percent of the homes represented more than 55 percent of the cost.

But he’s still bullish on the idea that government has to find a way to give as many people possible broadband access. “That’s part of what we need to do as a country. If we want our citizens to be productive in terms of social capital and economically, they have to be on the network. It doesn’t have to be 100 percent, but it has to be in the high 90s.”

So what’s the solution? For Levin, it’s establishing a strategy that accommodates shifting tactics. “Technology keeps moving,” he says. “You have to keep looking at the problem from the perspective of the technology. Instead of funding yesterday’s technology and yesterday’s business model, you want to get ahead of the curve.”

His recommendation: keep looking at how to solve the rural problem in ways that won’t cost as much and still delivers much faster speed, perhaps by combining fiber with wireless spectrum and new white-space technology. “We’ll never solve 100 percent of the problem. We should aspire to solving 80 percent of the problem with 10 percent of the resources. Then you look at the next 20 percent. If you don’t do anything unless you can solve 100 percent of the problem, that’s a recipe for a stalemate.”

Interestingly, attacking the issue in the incremental fashion Levin suggests may also be the key for solving deployment concerns in urban and suburban areas as well.

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20 Comments.


  1. David Deans

    The point that Ms. Lee made, broadband should be considered a basic utility, isn’t likely supported by the factual history of gas, electricity and water infrastructure in rural areas.
    As an example, the U.S. 2000 Census revealed that more than 1.7 million people in the United States, 670,986
    households, still lack basic plumbing facilities. See the whole story here http://www.rcap.org/stillwithoutbasics

       1 like

  2. A better understanding of metcalfe’s law and the need for smartphone coverage in rural areas will tie the value of rural broadband to urban demand. With data caps, the urban dog will wag the rural tail.

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    • David Deans

      @Michael, thanks for sharing your perspective.

      While I acknowledge it’s “possible” for some people in rural areas to pay for super-fast broadband access to the internet, if it were available, I believe that policymakers must focus first on the pressing needs in urban areas where subscription is more “probable.”
      See the latest update from the FCC http://usat.ly/O0VtoN — meanwhile, who is concerned that the entrepreneur founder of a technology start-up in the heart of New York City or London, England can’t gain access to the same caliber of broadband offering that their peers already have in the leading global markets — such as Hong Kong or Seoul?

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  3. Very interesting.
    For creating broadband infrastructure is rural areas, investment by a single entity is not justified. It needs to be done in a PPP mode wherein both Govt. and Industry invest and the Infrastructure thus created is shared by multiple service providers to exploit its full capacity in a sustainable manner. satya

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    • David Deans

      @Satyen, thanks for sharing those thoughts. Agreed, a public/private partnership is one approach that has worked in some rural scenarios.

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  4. Two of the biggest stumbling blocks for rural broadband are the cost of backhaul, and interconnect standards.
    Graham Jones is right to say that many people who live in rural areas can afford to put in their own broadband networks. Farmers and other businesses can set off the cost against taxes, villages could issue bonds and recover them from property rates over 10 years, etc.
    But they face massive challenges in connecting to backhaul networks because carriers generally want to monopolise local access in order to sell “value added services” to a captive market.
    The incumbents’ usual solution, GPON, is built on the old telephone infrastructure; a data network will likely have a different physical configuration, which may mean having to negotiate (or appropriate) new wayleaves or rights of way for the passive infrastructure.
    There is considerable merit reassessing the Australian National Broadband Network initiative, which regards broadband as a regulated utility that must sell its capacity through a network of resellers. (For a quick comparision of the NBN with the UK see http://br0kent3l3ph0n3.wordpress.com/)
    As with the US, it looks expensive, but it is petty cash compared to what governments have spent bailing out the banks, or propose to spend on high speed trains.
    The Australians expect a 7% ROI, excluding economic externalities such as lower input costs for net-based rural start-ups, lower travel costs, better access to global markets and prices, faster, cheaper access to more information, etc. Perhaps more important, it lowers the cost of access to firms that would like to sell to rural markets, but find the present cost of acquistion too high.

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  5. Well, it’s complicated issue! But it’s something to do the deployment by carier’s own initiatives.

    Question is the business case for carriers to which Eco system doesn’t guarantee economic result. However one of obligations given to them is universal service obligations that government shall and can protect the case from other parts of costs to spend for rural communities, any way.

    For carriers, it’s not 100 of lost as increase of number of subscriber can contribute to their income stream may not from direct sales but through their reputation too.

    Anyway it’s something governmenment body should take parts of cost for the service and subsidize to carrier is the easy way to do it.

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    • David Deans

      @Jo Jo, thank you for sharing that insight and opinion.
      Again, there is a very limited amount of government stimulus funding that is available to invest — so, given the most “probable” outcomes from a targeted investment, is it wise to focus on urban areas now, and when the economic indicators improve, then return to the rural communities later?

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  6. @David Deans, Urban v rural investment is a false debate. It stems from governments’ quasi-religious belief in universal service. If governments abandon this policy, the economics become much clearer, there is zero scope for carriers to game the system, and voters will live where they like, depending on their communications needs.
    What governments need to do then is to create a technical standard connection (such as Ofcom’s Active Line Access model (http://stakeholders.ofcom.org.uk/telecoms/policy/next-generation-access/ethernet-active-access/ethernet-active/) and oblige carriers to transport third party traffic that conforms to that standard.
    Invariably, someone in a community will find it worthwhile either to build towards the nearest point of presence, or pay the carrier to extend its network. (See http://bit.ly/PfvFeb) And there are always satellite operators for back-up and competition.
    We can debate the social value of universal service, but afaik, no country has 100% home penetration, and in practice, it’s a very expensive policy that is open to corruption or at least uneconomic application of funds.

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  7. Living in a rural area myself I think another part of the conversation needs to be how broad must the broadband be. I don’t see any reason that big pipes need be laid into the most rural areas.

    Yes, it is important for rural areas to have Internet access. Yet, the speeds available these days are so high it would be foolish to think that they are needed as a basic right.

    1mbps gives you freedom. Anything on top of that is just fun and games, in my opinion.

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    • David Deans

      @Carlton, point taken. There are likely differing needs where some equate to lowered expectations, but they still require an investment in infrastructure.

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      • @DavidDeans Or to put it another way, get up, and stay up.
        In rural areas, and I suspect most other places, reliability trumps speed any day of the the week.

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  8. @DavidDeans. You may be interested in this: a 1Gbps symmetric service opening in rural Oxfordshire (UK) this weekend http://www.gigaclear.com/about-us/events/ for less than £200/month (but read the small print).

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    • David Deans

      @Ian Grant, are you referring to this variable (mentioned in the “What does it mean” section)?
      “Yes, there is an installation fee that varies on the type of installation performed.”

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  9. @DavidDeans, I was actually thinking more of the pricing (100/100 reserved with 1G burst for £195/month plus £100 connection fee plus installation fees), but you’ve found more stuff that makes it really worthwhile to check the fine print ;-)

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  10. Getting broadband to rural areas is only half the battle. Getting electricity to the rural areas is a bigger and longer battle.

       1 like

  11. Australia is going through the process now of rolling out a National Broadband Network (NBN) with one of the key objectives being to provide broadband access to regional and rural areas. The arguments go that it will provide digital equality for all Australians, it will promote jobs in rural areas and rural/regional areas will have access to technology such as tele-medicine and video conferencing. I’m still in two minds as to whether the cities should be prioritized over regional areas or not.I can see the argument both ways.
    I’ve written a blog on the impact to business for those who are interested
    http://customtec.wordpress.com/2012/07/04/the-impact-of-the-nbn-on-australian-business/

    Mark Elliott
    CustomTec IT Support
    Sydney, Australia

       0 likes