Today, most of rural America is several generations of technology behind the cities and there is no real expectation that this gap will ever close. A large portion of rural America is served by DOCSIS 2.0 cable modems and first generation DSL. These technologies are delivering anything from 1 Mbps up to maybe 5 Mbps to the average home and business in these communities. The incumbent carriers claim these areas are served by broadband, and they are always careful to claim that these communities have advertised speeds that are about the paltry 4 Mbps used by the FCC to define broadband.
But every community in this situation has now fallen on the wrong side of the new digital divide. The large telcos and cable companies are making big investments in the metropolitan areas. There are numerous affluent parts of the country that have broadband between 50 Mbps and 100 Mbps download if people are willing to pay a premium price. But in these markets even the slower cable modem products are already between 20 – 30 Mbps.
And I am not talking only about place where Verizon has built FiOS. The larger cable companies have upgraded to DOCSIS 3.0 in many large markets and now have fast speeds. AT&T has launched U-Verse using bonded pair DSL in many of these same markets with speeds of around 40 Mbps. And we are on the verge of AT&T and other copper providers having G.Fast which is going to increase speeds on copper to as much as several hundred Mbps. Even the cellular carriers have stepped up their game in the cities, and the latest version of 3.5 G is delivering speeds of 40 Mbps to 50 Mbps in short bursts.
But these new technology upgrades are not being brought to rural America and are unlikely to be brought there. The incumbent cable companies and telcos installed the current technology over a decade ago and have not upgraded it since. Meanwhile there has been several upgrades in the areas with good broadband.
The incumbents are not willing to make the needed upgrade investments in small markets. They aren’t going to get the same kind of returns they can make for the same investment in a big suburb. They have largely ignored the small markets for years and the wires are in bad shape compared to bigger markets. So I think we now on the verge of a permanent new digital divide defined by areas that keep getting new technology upgrades and areas that will be stuck in the past. And the gulf between these two areas is only going to grow.
There are real life repercussions of this gap. Homes on the wrong side of the digital divide can’t use broadband in their homes the same way that people in a City can. But much more importantly, businesses can’t get the same bandwidth that their competitors in the City have. In the long run this is going to squelch innovation in the rural areas. Areas on the wrong side of the digital divide are going to have a really hard time creating jobs that will let their kids stay in the area. The biggest fear in rural communities is that they are going to become economically irrelevant. They won’t be able to create jobs or keep jobs, their kids will move away and over a few decades the communities will die.