The Future of Rural Broadband

Verizon Wireless "Rule the Air" Ad C...

Verizon Wireless “Rule the Air” Ad Campaign (Photo credit: Wikipedia)

There were several events this week that are telling rural subscribers the future of rural broadband. It is a bleak picture.

First, at a Goldman Sachs conference on Tuesday, the CEO of AT&T said that he hoped that the new FCC chairman Tom Wheeler would be receptive to AT&T’s desire to begin retiring its copper network in favor of its wireless network. At the end of last year AT&T had said in an FCC filing that they were going to be seeking to retire the copper plant from ‘millions of subscribers’.

In that filing AT&T had asked to move from the copper network to an all-wireless all-IP network. Stephenson said that cost savings from getting rid of the copper network would be dramatic.

On that same day, Verizon CEO Lowell McAdam said that the idea of offering unlimited data plans for wireless customers was not sustainable and defied the laws of physics. Earlier this year Verizon had ended all of its unlimited wireless data plans and now has caps on every plan.

Verizon already has a rural wireless-based landline surrogate product that it calls VzW. This uses the 4G network to deliver a landline phone and data anywhere that Verizon doesn’t have landline coverage. The base plan is $60 per month and includes voice and 10 gigabytes of data. Every extra gigabyte costs $10. There is an option to buy a $90 plan that includes 20 gigabytes or $120 for 30 gigabytes.

Finally, at the same Goldman Sachs conference mentioned above, the CFO of Time Warner said that they saw more room for increasing data rates.

So what does all of this mean for rural subscribers? First, it means that if you are served by a large incumbent like AT&T that they are going to be working hard to retire your copper and force you onto wireless. And we all know that the wireless data coverage in rural America is not particular fast when you can even get data. The data speeds delivered from a cell tower drop drastically with distance. In urban areas where towers are only a mile or less apart this doesn’t have much practical effect. But in a rural environment a mile is nothing and homes might be a mile apart. People lucky enough to live near to a cell tower can probably get okay data speeds, but those further away will not.

And even if you can get wireless data your usage is going to be capped. Rural landline data usage today may be slow, but it is unlimited. Customers have learned that if they put in WiFi routers that they can channel all of the data usage on their cell phones and tablets to their unlimited landline data connections. But once those connections are wireless, then every byte of data leaving your home, whether directly from a device or though the WiFi router, is going to count against the data caps. So rural America can expect a future where they will have data caps while people in urban areas will not.

Finally, one can expect the price of data to keep climbing. I have been predicting this for a decade. The large telcos and cable companies are facing a future where the old revenues streams of voice and cable TV are starting to decline. The only sustainable product they have is data. And so as voice and cable continue to tumble, expect incumbents to get into the habit of raising data prices every year to make up for those declines. Competition won’t help because the cell company data is already expensive, and both the incumbent cable and telcos will be raising data rates together.

This is not a pretty picture for a rural subscriber. Customers will be forced from copper to wireless. Speeds are not likely to get much faster. Data is going to be capped and prices will probably be increased year after year.

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