Decades ago, I was lucky to have interviewed a number of rural people who told me what it was like when they finally got electricity. Almost every person I talked to mentioned how life-changing it was to brightly illuminate their homes with electric lightbulbs.
Other than that, everybody’s electricity story varied according to their economic circumstances and priorities. Wiring a home with electricity was a big expense for a lot of folks, and many got loans from their electric coop to help pay for wiring and appliances. Others introduced wiring gradually as their budget would allow. Farmers often lit their barns before their homes. The most valued and first appliances bought by many homes were washing machines and refrigerators.
People also told me about the frustration of waiting for decades to get electricity that was available in the county seat or other nearby towns. They said that most adult children left the farm, attracted by the lure and conveniences of electricity. They described how access to electricity clearly defined a world of haves and have-nots.
Rural electricity was largely funded by low-income loans to newly formed electric cooperatives. Electricity to the farm enabled the agricultural revolution that made the U.S. the breadbasket of the world. Rural electricity immediately raised the standard of living for rural residents and gave them the same opportunities as everybody else. I’m not sure how to do the math, but electrifying rural America was probably the best infrastructure investment that the U.S. Government ever made – rivaled perhaps only by the interstate highway system.
We took a different approach to stringing telephone copper in rural areas, with a mix of private and public investment. In 1900 there were over 3,000 telephone companies in the country – many of them in small towns and rural areas. Many of the rural networks were built and financed by farmers, but a huge amount of rural copper was also funded by government loans given to small telephone companies and newly formed rural telephone cooperatives.
Since it’s now clear that broadband is the newest utility that homes need to participate in today’s economy, the federal government naturally got involved in funding rural fiber networks. Some of this was funded with subsidized loans, but a lot more has been accomplished through federal grant programs like RDOF, ReConnect, and the Capital Projects Fund. The BEAD program was supposed to be the big grant program that filled in the final gaps in rural fiber – and many State Broadband Offices were well on the way to fulfilling that goal.
I’ve never understood why and how we lost the lessons we learned in the past. I am certain that a lot of rural America would already have fiber today if the federal government had offered 40- or 50-year loans at 1%. Electric and telephone cooperatives would have gladly taken that money to expand fiber networks across regions. Some of the big telcos would have taken the money. I am certain that new cooperatives would have been formed in areas where there were no logical recipients of the loans. Just like with electrification, the vast majority of these loans would be repaid, meaning there would be very little net cost to the government to fund rural fiber through loans.
Instead, the FCC chopped the rural landscape into Swiss cheese areas with the RDOF program, and other grant programs have tried to fit fiber projects around the messy jigsaw puzzle that was left over. I’m not sure that we could have designed a worse way to mess up the rural broadband landscape.
We’ve now suddenly decided that it’s too expensive to build rural fiber – even though we were near the finish line with BEAD. And to be fair to the critics of BEAD, it is expensive to give away billions in grants. But once we started down the grant pathway instead of the loan pathway, BEAD was the logical conclusion to the effort.
It’s sad we didn’t remember the lesson we learned from electrification. The best solution for stringing a wired network in rural areas is to loan the money to local companies who have a vested interest in making it work for the long haul.
The broadband gap between urban and rural areas exists all over the world, but the BEAD program was a unique (and expensive) opportunity to establish a near-universal access infrastructure for the long-term future of rural and tribal broadband users. Now this long process will not happen as initially envisioned, with a strong focus on fiber deployment. Blame it on the politicization of communications policy in the United States! Rural Americans will pay the price in the long run.
Great piece, Doug! Well worth the read!
Sharing this… It seems the lessons of the past elude us.
because these lessons are not the same as broadband. Most of these places actually do have internet access, and have for many years. Most of these places have enough service for a zoom call and all their day to day business. Many of them don’t have enough to watch netflix or download an xbox game ( or only enough to do one or the other)… except they do because starlink is a thing and there are multiple competitors to starlink coming soon.
There is no ‘communication’ digital divide in America. There’s a lack of capacity to put everything into one service.
Maybe they have that speed if the weather is right… Fixed wireless and Satellite is not a real broadband connection in many many places.
sorry, but that’s just an uninformed position. We have technology available that is unaffected by weather. We have fewer weather related outages than the local cableco does, our lines don’t get flooded out.
wireless ISPs have access to 2 different technology stacks that are exceptional weather resilient. Tarana and 5Gnr(and 4G..). The previous era of products had a dozen vendors with weather resilient tech.
This occurred because the policymakers allowed the large incumbent telephone companies set the narrative to “broadband” bandwidth instead of more broadly modernizing the copper to fiber.
That resulted in the hodge podge swiss cheese in less densely populated exurbia and rural America as shown by those splotcy “broadband maps” — that many see as the BS they are. That supports their agenda of incrementalism and delay that keeps capex obligations lower in order to meet shareholder expectations.
There’s is a bad concoction of ‘government funding’ and ‘shareholder expectations’.
When the phone lines were built, that was huge. realtime communications for the first time essentially. Then DSL arrives and can ride on that cable, awesome. Then the was a rather slow upgrade in DSL, the networks basically just milked for all they were worth. A few vendors and locations got VDSL/2 but it seems like that’s when the phone companies really started prioritizing short-term shareholders vs long term viability.
I’ve argued this before in this blog. There’s life left in the copper. The companies that run these networks should have been incrementally upgrading them. Getting fiber closer and closer to the DSLAM. After all, they have free passage on the right-of-ways, dramatically reduced regulatory blockades etc. They pocketed the money instead.
FWIW, in any low and high density area there should be fiber to the node, be that CMTS or DSLAM or whatever. Let the last few feet of that service sort itself out. Rural services should see fiber to the access point or DSLAM. This model would cost a fraction and impact MANY MANY more people that are underserved.
back on track here though, when the government funds the winner (singular) in a market, they create this arrangement that I described. Ready shovels on the first day but 10 years later it’s aging networks where shareholders/owners are milking for what they’re worth without much re-investment, low competiton pressure to do so, and the ‘need’ for the government to do a anyother round of funding which takes about 10 years to materialize. repeat.
You are providing a valuable and needed service in filling in the gaps with fixed wireless. But in a more optimal scenario, you would have been running a small telco or utility cooperative and building fiber to the prem with government backed loans as Doug has described.
‘loans’ I have no problem with, it’s ‘gifts’ that cause the problem. well, sort of, first-come, first-serve gifts. And I guess I’d apply that to loans as well if only one vendor gets it. The government designing monopolies is one of the core issues. The actual cost itself is another unbelievable issue, 70-200k per passing is crazy. and the pon model actually doesn’t support branching that out with population growth either, so that’s not ‘future proofed’ very well either.
A 40-50 year 1% loan is a gift, not a loan, thanks to inflation.
I wonder if the reduction the number of rural savings and loans, credit unions, banks, etc. has been taken into account.
Thank you for your perspective on this. I have been wondering why we lost those lessons also after doing some research into this on how electric adoption was handled and comparing it to broadband adoption. Specifically the “electric skills” and “digital skills” comparison and education that was provided to assist the rural areas in adopting electricity. The municipalities that I am working with that are stepping in and providing public investment would be happy to have a 1% loan over that 40-50 years versus the interest rates they are absorbing for a 20 year loan.
There is a big difference here (ideally….) between the power buildout and internet buildout.
From day 1 the power companies were meant to be monopolies. The public/private partnership came with mostly strong regulations. There are downsides to this, the US has a very fragile electric grid these days etc. that’s another coversation but it’s safe to say there are lessons in relation to the power grid.
Internet service isn’t supposed to be a monopoly. So unless it’s the express intent of the government to create internet monopolies then the public funding model that was used for power doesn’t work.
1% loans are a gift, and there’s a problem with that. Interest rates are supposed to be part of the balance of risk. It’s the reason low credit buyers get higher rates. 1% rates treats every internet provider as if they are destined to succeed and so there’s no risk at all. This simply isn’t the case. Fiber providers are going bankrupt and getting absorbed frequently because they overspent. This whole thing is a setup to either move us back into monopoly on internet access or cause a financial crisis in the sector.
Advanced telecom functions as a utility monopoly just as basic telecom (voice) did before it. Characterized by high time and resource costs to build delivery (and middle mile transmission) infrastructure that naturally limits competition. Just as with electric power infrastructure, when investor owned that concentrates capital investment where ROI is most favorable, leaving large less favorable areas bypassed as shown by the crazy quilt “broadband maps.”