It is clear that the FCC prefers wireless as the broadband solution for rural areas. It seems like they badly want every rural household in the country to get some kind of broadband just so they can take this issue off their plate. Just about every bit of policy decided in the last few years has a bias towards wireless bias.
For instance, the historic Universal Service Fund which was used to promote rural telephony over copper has been transitioned into a new CAF fund that will instead promote high-speed data in rural areas. There are several aspects of the CAF that clearly will ensure that the funds will go mostly to wireless carriers. The bulk of the funding will eventually be distributed by a reverse auction. This is an auction where the broadband providers in a given area will be able to compete for the funding, and the one who bids for the lowest amount of subsidy per customer will receive the funds.
The first time I read the reverse auction rules my first thought was that this money is all going to wireless companies. The reverse auction rules strongly favor companies who can provide data over large areas. Any smaller company who wants to get CAF funds to help pay for a rural wired network can be undercut by the largest wireless companies. AT&T Wireless and Verizon Wireless are the two richest and most successful companies in the country. They pay many billions of dollars of dividends annually and they can afford to underbid any rural landline company for subsidy, simply because they do not need it. But of course, they will bid in the reverse auctions and take the subsidies because the rules allow them to.
There are also parts of the CAF that can be used to build new broadband infrastructure and these funds also favor wireless companies. The funds get distributed by complicated rules that have a bias to get broadband to customers at the lowest cost per subscriber. And of course, there is no cheaper way to cover a large rural footprint than with wireless. Wireless companies are also going to get a lot of this infrastructure funding.
Meanwhile, AT&T recently told the FCC that they were going to introduce a plan to drop the copper for ‘millions’ of rural subscribers. And if they are successful then their rural subscribers can expect to be told to get cell phones rather than landlines. And for voice telephony this might not be such a bad thing. But do we really want to relegate a large bunch of the US geography to only having cellular data?
Today there is clearly a broadband gap with some rural areas still stuck with dial-up Internet access. And so getting them some kind of faster data seems like a reasonable plan. The FCC has set the definition of broadband to be the capability of receiving 4 Mbps download. And it’s obvious that they set that limit with rural areas in mind.
And so over the next decade more and more of rural America will be getting cellular data that will meet, or come close to meeting the FCC’s definition of broadband. But meanwhile, the cities have already far surpassed those speeds. There are very few cities left where the average home can’t get speeds of between 10 Mbps and 20 Mbps. There are usually cheaper alternatives in the range of 5 Mbps to 7 Mbps, but the faster speeds are widely available. And many places have much faster speeds available.
The FCC itself has promoted the availability of gigabit bandwidth and companies are responding. Google is bringing this speed to Kansas City, Austin and Provo and AT&T has promised to match them in Austin. CenturyLink is bringing a gigabit to Omaha. And a number of smaller municipal and commercial providers have brought gigabit speeds to other towns and cities scattered across the country. And one can expect the gigabit movement to grow rapidly.
It’s universal knowledge that the household use of bandwidth has continued to grow and there is no end in sight for that growth. As networks can provide more data households find ways to use it. Video has been the recent reason for the explosion in data usage, and now we can see that the Internet of Things will probably be the next big bandwidth driver.
Have we really solved the rural bandwidth gap if people in those areas are going to have 4 Mbps data speeds while urban areas have a gigabit? Obviously the rural areas will continue to be left behind and they will fall further behind than today. Just a few years ago the rural areas had dial-up and the cities had maybe 5 Mbps. But a gap between a rural world at single digit megabit speeds with the cities at gigabit speeds is a much larger gap and the rural areas will not be able to share in the benefits that bandwidth will bring.
The only long-term solution is to build fiber to rural America. Obviously nobody is going to build fiber to single homes at the top of mountains or at the end of ten-mile dirt roads, but I have been working on business plans that show that fiber can make sense in the average rural county. But it is really hard to get rural fiber funding since such projects tend to jut pay for themselves and are not wildly profitable.
It’s possible that the FCC’s universal service plans will work and that a lot of the 19 million rural people without broadband will get some sort of rudimentary broadband. But meanwhile, the rest of the country will be getting faster and faster bandwidth. And so, before the FCC declares ‘mission accomplished’ I think we need to have more of a debate about the definition of broadband and what is acceptable. I hate to tell the FCC, but the rural broadband issue is not going to go away even after rural areas all have cellular data.